Singapore: MAS Guidelines on Individual Accountability and Conduct

    

The Monetary Authority of Singapore (MAS) released its guidance on the 10th September 2020 on the five high-level outcomes that financial institutions should achieve on individual accountability and conduct.

The guidance comes after a recent consultation period to the market, and has taken what other regulators like the Financial Conduct Authority (FCA) in the UK have released for their regulated entities, and expands it for Singapore. The Guidelines are accompanied by detailed Frequently asked QUestions (FAQs) on Guidelines on Individual Accountability and Conduct, as well as a number of Annexes describing the objectives.

The guidelines by the MAS focus on five high-level outcomes for financial institutions to promote ethical behaviour, responsible risk-taking, accountability of senior managers and reinforcement of good conduct among staff and business.

The MAS expects firms to review their measures to comply with the five outcomes on the recently published guidelines, the outcomes expected are:

  1. Outcome One - Senior managers’ responsibilities for managing and conducting the FI’s core functions are identified.
  2. Outcome Two - Senior managers are fit and proper for their roles and held responsible for the actions of their employees and the conduct of the business under their
  3. Outcome Three - The FI’s governance framework supports senior managers’ performance of their roles and responsibilities, with a clear and transparent management structure and reporting relationships.
  4. Outcome Four - Material risk personnel are fit and proper for their roles, and subject to effective risk governance, and appropriate incentive structures and standards of conduct.
  5. Outcome Five - The FI has a framework that promotes and sustains among all employees the desired conduct.

Source: MAS.gov.sg - Guidelines on Individual Accountability and Conduct

The regulator emphasizes that their aim is not to prescribe “one-size-fits-all” approach to achieve the outcomes. For this reason, the outcomes-based approach, gives flexibility on how each firm will set up their framework to promote a healthy culture, achieve the objectives and to meet the five outcomes overtime is recommended.

In addition, the MAS articulated their approach towards culture and conduct, what conduct risk looks like and an overview of the five outcomes on its information paper also published on the 10th September. The examples on the MAS information paper are a result of surveys and dialogue sessions conducted with banks, insurers and capital market intermediaries.

The information paper is a must-read to all financial institutions regulated by MAS. Read full information paper on MAS.gov.sg

On the paper, the regulator adds that in fact, rules and regulations are not enough to maintain a healthy culture. The MAS highlights that financial institutions should go “the extra mile” to promote a culture of ethical behaviour and compliance. And there are several actions that firms should take to monitor and access culture and conduct and only complying with regulatory requirements or internal rules is not enough.

After all, the guidelines aim to create a healthy culture and promote positive conduct in the financial sector in Singapore, as well as to guide firms that are facing challenges and having difficulties with implementation of the regime.

In a analysis paper recently published by Thomson Reuters Regulatory Intelligence, Niall Coburn describes positively the objectives of the guidelines: "The MAS guidelines are clearly written and will help financial institutions, senior management and employees to embed a strong culture of responsibility and ethical behaviour, thus ensuring better outcomes for customers and stakeholders while at the same time helping to preserve the longevity of the organisation". 


On-demand Webinar on MAS Guidelines on Individual Accountability and Conduct

Join Kelly-Ann this on-demand webinar with Niall Coburn and Nathan Lynch, discussing the new Singapore Accountability and Conduct Guidelines, how we got here, and where we see enforcement going thanks to the introduction of these regulations and guidelines. 

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MCO Conduct Risk solutions help financial services firms address the regulatory obligations of Senior Managers. MyComplianceOffice can assist with the co-ordination and management of your employees and Senior Managers Licenses, Continuous Education and request attestation about their Fitness & Propriety. 

Contact one of our experts to see how MCO can assist your organisation.


Deep Dive on the Monetary Authority of Singapore Guidelines on Individual Accountability and Conduct

What are the Singapore MAS defined Core Functions? 

The following functions have been defined as "Core Management Functions" as per the Guidelines and Annex B. 

Chief Executive Officer

Chief Financial Office / Head of Finance

Chief Risk Officer / Head of Risk

Chief Operating Officer / Head of Operations

Chief Information Officer / Chief Technology Officer / Head of Technology

Chief Information Security Officer / Head of Information Security

Chief Data Officer

Chief Regulatory Officer / Chief Compliance Officer

Head of Financial Crime Prevention Head of Compliance

Head of Human Resources

Head of Actuarial
Head of Business Function e.g. Head of Retail banking/Private Banking/Corporate Banking/Underwriting/Marketing/Investment etc Other Core Functions as needed

 

Outcome One - Senior managers responsible for managing and conducting the FI's core functions are clearly identified

The Board or Head Office should ensure that there is clear identification of senior managers who are responsible for functions that are core to the management of the financial institutions affairs, these individuals will be those that perform actual oversight responsibilities, have decision-making authority, and are not dependent on their location. The board must ensure that these individuals do indeed provide appropriate management oversight over all material aspects of the FI. It was also made clear that any Board Director who does also perform an executive function, they would also apply to being defined within this guideline, due to the nature of their role in day-to-day management. 

Outcome Two - Fit & Proper for their roles and held responsible for the actions of their employees

Singapore has extensive Fit and Proper Criteria which were updated on the 28th January 2020, it is implied within the Guidelines that these would apply to those Senior Managers that are performing Core Management Functions going forward. 

As part of assessing Fitness & propriety this must be conducted prior to their appointment and on an on-going basis (typically once-a-year and on any role change).

Outcome Three - Governance Framework must support senior managers' performance of their roles and responsibilities with a clear and transparent management structure and reporting relationships. 

Financial institutions should articulate the roles and responsibilities of its senior managers and the overall management structure, including any responsibilities within any management committees. This is usually defined within a Role Framework and a Job Description, the management structure and how the employee reports, must also be defined. Accurate and comprehensive records must be maintained. MAS isn't asking for a submission of these, however as part of their supervisory process, the hiring processes may be reviewed to ensure staff in CMF's are well screened as part of their hiring process, and to ensure the manager understands their area of responsibility. 

As part of this process, the senior manager must acknowledge (attest) to his or her roles, responsibilities and reporting lines. It is important that this information on the structure, management committees and senior roles is known and shared when there are changes approved by the board/head office. In addition, succession plans should also be regularly reviewed including the identification of potential future candidates. 

Furthermore, with regards to Management Committees (which must also be accountable), there must be clear Terms of Reference and reporting lines for these committees. Does your organisation have formal Terms of Reference? Do you know what are the key issues that should be raised to such committee? 


MyComplianceOffice is often used by our clients for sending out such custom questionnaires to senior managers on an annual basis. Attaching any relevant documentation on their Roles & Responsibilities, and referencing the mangers Authorisations, Continuous Education and Licenses. For more information on this, please see our Authorisations, registrations and Licenses Module.


Outcome Four - Material Risk Personnel must be fit & proper for their roles, and subject to effective risk governance, and appropriate incentive structures and standards of conduct

The Monetary Authority of Singapore Guidelines continue to Outcome Four, where they proceed to define "MRP's" aka Material risk personnel, those who have the authority to make decisions or conduct activities that can significantly impact the FI's safety and soundness, or cause harm to a significant segment of the FI's customers or other stakeholders. (See their Guidelines for more information!). These individuals could include Front, Middle or Back Office functions or any employee which has supervisory capacity over these functions, but don't fall within the previously defined Senior Managers. This would be particularly present in large, global organisations. 

The FI needs to define these MRP, and ensure they assess the fitness & propriety as per the MAS guidelines on fit-and-proper, both prior to their appointment and an on-going basis as per Outcome Two above. The guidelines continue to go on, specifically about the standards of conduct that apply to these individuals, ensuring they have commensurate risk limits and incentives aligned to the nature and time horizon of risks. 

Essentially, these individuals drive a lot of the business that an FI produces (either approving or being involved in transactions that may give rise to Credit, Market or Liquidity Risks.

Outcome Five - The Financial Institution has a framework that promotes and sustains among all employees the desired conduct. 

The final, and most broad, but yet important outcome, is that of ensuring the financial institution conducts its business and interacts with customers with values that uphold the market integrity and appropriate conduct/cultural standards the regulator expects. The Tone-from-the-top and extent this is reinforced by policies, procedures, controls, and all levels of management will be very important to meeting this overall outcome. The Monetary Authority of Singapore already has extensive legislation and guidelines with relation to conduct, such as the Licensing and Conduct of Business Regulations, Minimum Entry & Examination requirements for various regulated entities to name a couple. 

Training your employees on Conduct, Culture and the specific regulatory standards and expectations is not to be overlooked, and should include regular micro-training to reinforce the topics. This training could be the re-education after an incident, or educating staff in a particular location to consider other ways of doing business based on the outcomes you are seeing in that market. 


MyComplianceOffice recently hosted a webinar with Kate Miller of Standard Chartered Bank specifically on using Science based experimentation to improve the Conduct within Financial Institutions. Take a listen on all major Podcast solutions on the Risky Women Podcast.