IE Singapore has entered into an MOU with the Industrial and Commercial Bank of China (ICBC) to facilitate access ot China’s ‘One Belt, One Road’ infrastructure project. Meanwhile, MAS has proposed the formation of a “regulatory sandbox” for experimenting with financial technology (fintech) solutions. Also, S&P believes Singapore’s bond market boom is distorting credit costs
IE Singapore MOU to grant more local firms access to China’s “One Belt, One Road”
In a bid to capture infrastructure opportunities in China’s “One Belt, One Road” (OBOR), International Enterprise Singapore (IE Singapore) has entered into a Memorandum of Understanding (MOU) with the local branch of Industrial and Commercial Bank of China (ICBC).
As part of the MOU, ICBC will establish a Singapore team providing financing services and project structuring to support Singaporean enterprises, with the turnaround time on processing of loans expected to be shortened.
Commenting on this, Chua Taik Him, IE Singapore’s Deputy CEO, said, “China’s ‘One Belt, One Road’ initiative has opened up investment opportunities in infrastructure projects for Singapore companies. ICBC is a vital partner to work with as it has the clearing capacity for Renminbi and sound knowledge of Chinese companies.”
Alongside this, ICBC is establishing a pan-Asian infrastructure fund to invest in other infrastructure projects, as well as offering internship positions through the Infrastructure Development Internship (IDI) programme, in order to develop future talent. Previous MOUs undertaken by IE Singapore include partnerships with China Construction Bank and Bank of China in bids to deepen OBOR partnerships in Southeast Asia.
According to IE Singapore, the latest MOU is set to bring more than $90 billion worth of financing for OBOR projects.
MAS proposes ‘regulatory sandbox’ for fintech
The Monetary Authority of Singapore (MAS) is proposing a regulatory sandbox for fintech solutoins, which will see products or services provided to customers under a structured space and duration. MAS will also relax specific regulatory requirements which an applicant would otherwise be subjected to.
In a statement, MAS’ deputy managing director Jacqueline Loh said,”MAS aims to provide a responsive and forward-looking regulatory approach that will enable promising FinTech innovations to develop and flourish. The sandbox will help reduce regulatory friction and provide a safer environment for FinTech experiments. We believe this will give innovations a better chance to take root.”
The fintech market, which has seen significant expansion and the proliferation of a technological innovations and solutions, has led to MAS needing a framework to test and introduce the innovations while facilitating the protection of various stakeholders in the financial services and technology sector.
There are circumstances where ambiguity surrounds fintech solution in regards to compliance with regulatory compliance and the risks they pose. Already, Japan has introduced cryptocurrency regulations to regulate exchanges, while Singaporean institutions have been considering facilitative models of cryptocurrency regulation since 2014.
MAS’s decision to propose criteria for solutions to be tested, as well as determining the ability of applicants to deploy the solution in Singapore on a broad scale, as well as the benefit it provides to consumers, are all part of this and links to the future of blockchain regulations.
The public consultation with fintech ventures will open from 8 July 2016, with MAS encouraging interested firms to discuss their fintech solutions and how they can be deployed for testing in the sandbox.
Bond market mania in Singapore is disfiguring credit costs says S&P
A strong demand from investors for corporate bond offerings by Singapore’s biggest companies has created lowered borrowing costs to suit weaker borrowers, according to Standard &Poor’s Global Ratings.
Recent offerings from issuers like state investment firm Temasek Holdings, port operator PSA Corp and electricity distributor Singapore Power Ltd were saw significant over-subscription, amid a heightened risk of non-payments by riskier borrowers across Southeast Asia.
A Bloomberg report noted that banks have been supporting companies in the troubled oil services industry, with the easing of default pressures. Citing S&P analysts interviewed by email, Bloomberg shared: “In an environment of perceived rising risks, flight to quality has been a bit irrational. Issuance of highly creditworthy corporates and the frenzy they trigger do not revive the market but simply artificially adjust the cost of credit to the downside, as everyone raising bonds benchmarks their cost of funding against them.”
Singapore;s bond market has seen a series of defaults by large enterprises with operations across Southeast Asia, which has been coupled with a heightened incidence of debt failures across the region. Rising debt has been cited as a threat to regional economic stability in Southeast Asia, with companies in the region accruing a US$392 billion debt burden as of September 2015. In this, Singapore’s debt market is not anomalous.
With incidences of default increasing in domestic bond markets, according to analysts, “the market will gradually differentiate credit risk better by raising the funding costs for the more leveraged corporates.” the S&P analysts noted.