The Monetary Authority of Singapore and Public Consultation

Consulting the Public
19
The Monetary Authority of
Singapore and Public
Consultation
By Angelina Fernandez
When it comes to public consultation in
Singapore, the Monetary Authority of
Singapore (MAS) is one of the most
experienced government agencies. At the
Public Consultation Forum, it described its
consultation process and outlined some of
the benefits and costs of consultation. It also
discussed some of the lessons it has learned.
A summary of the main points is below.
Over the years, MAS has become a more
open and transparent organisation. We
realise that the veil of secrecy and
mystique that traditionally surrounds central bank
operations is not always appropriate. The industry
and the market need to understand the intent
behind our policies and we need to appreciate
the issues that industry players and market
participants face.
So we began consulting and collaborating with
our stakeholders through channels such as
discussions, committees and working groups, in
a variety of areas like financial sector development,
monetary policy formulation and consumer
financial education.
More than 60 financial sector players were
involved in the Economic Review Committee’s
working group in 1997 to review strategies to
develop Singapore’s financial centre.
With the MoneySENSE national financial
education programme launched by DPM Lee
Hsien Loong last year, we worked with various
public sector agencies, industry associations,
community bodies and the media to put together
a series of financial education programmes.
In the securities sector alone, we conducted more
than 38 consultations between 1998 and 2003.
We also sought inputs from the banking and
insurance sectors on changes affecting them.
Formalising the Process
To formalise this consultative approach, MAS
made public consultation on regulatory
changes a standard procedure and issued
a set of internal guidelines. The guidelines
require consultations to take the form of public
consultations.
Consultation with selected industry players is
discouraged as this could result in insiders
unduly influencing the regulatory framework.
However, there are legitimate instances where
we selectively consult. These would be where
the proposed change is market-sensitive, is
highly technical in nature or affects a small
segment of the industry. For instance we
consulted the Singapore Exchange and other
potential market operators, rather than the
public, on the proposed regulations for operators
of securities markets and futures markets given
the specificity of these regulations.
In certain limited areas, the requirement for
public or selective consultation is waived. These
include institution-specific or insignificant
regulatory changes and situations where
advance notice would adversely affect the
policy’s effectiveness.
Consultation is also not needed for measures
adopted to manage emergencies and for very
sensitive aspects like monetary policy and reserve
management practices.
MAS’ Consultation Guidelines
The MAS guidelines contain practices
benchmarked against those in the US, UK
and Australia. They detail the process
public consultations ought to take:
• Consultations need to take the form of an
open consultation with interested parties

20 Ethos, July 2004
invited to submit written comments. This can
be complemented by other consultation
modes like meeting or surveying affected
parties, forming committees with
representation from all affected parties, and
organising public meetings.
• Each consultation should be accompanied by
a consultation paper published on the MAS
website (www.mas.gov.sg).
• To facilitate considered and meaningful
responses, a consultation paper should
provide a concise rationale, explanation and
analysis of the proposed measures.
• It should contain a summary of proposals or
highlight the specific issues on which MAS
would like comments. Questions on specific
issues provide focus and prompt the reader
to react.
• The consultation period should be at least
30 days to give interested parties sufficient
time to respond. For substantial changes, the
period should be longer and the consultation
should be publicised through a press release.
• A consultation paper must list a snail mail
and email address for submissions, as well
as a contact person who can respond to
questions.
• We need to publish on the MAS website a
brief summary of submissions and our
responses at the time when the changes are
finalised and announced. This is to assure
respondents that their submissions have
been read and considered.
• To enhance transparency and ensure that
public submissions are meaningful and
responsible, the consultation papers state
that individual submissions may be made
public unless confidentiality is expressly
requested.
On One Hand...
Consultation improves the policy-making process
in several ways.
First, we can tap on market practitioners’
knowledge and understanding of the market to
validate and, where appropriate, refine our
policies. For instance, in our recent consultation
on the Securities and Futures Act amendments,
we wanted to allow collective investment
schemes, such as unit trusts, to be marketed to
institutional investors before the scheme’s
prospectus is registered. Practitioners commented
we need not differentiate between institutional
investors and sophisticated investors 1 . We agreed
with this and will permit pre-marketing to
both institutional investors and sophisticated
individuals.
Market players can also help us identify and
deal with implementation issues in advance. For
instance, they informed us that our requirement
for banks to divest their non-financial assets
would have significant tax implications. This
allowed us to work with the Inland Revenue
Authority of Singapore on a one-off tax concession
to facilitate the divestments.
Consultation also provides an avenue to explain
and garner support for our policies. We had
extensive discussions with the local banks
before introducing the banking liberalisation
programme in 1999. We explained the programme’s
rationale, and assured the banks that we would
calibrate the pace and extent of liberalisation to
encourage competition while allowing them to
strengthen and reposition themselves.
Making proposed policy changes known
beforehand helps provide greater certainty
and enables the affected parties to prepare
for the new policies. Institutions need time to
establish processes or reallocate resources for
new regulatory changes. Consultation provides
this ‘heads up’ which is clearly preferable to
introducing new requirements to unwitting
parties who may not be prepared to comply.
A more consultative and transparent approach to
policy formulation is consistent with Singapore’s
stature as an international financial centre. In
the recent IMF-World Bank Financial Sector
Assessment Programme, Singapore was evaluated
as having observed the IMF Code of Good Practices
on Transparency for our public consultation process.
1 A “sophisticated investor” is one who has sufficient knowledge and experience with investing to be able to evaluate the merits of an investment.
In Singapore, a sophisticated investor would include an individual with total net personal assets exceeding S$2 million or an annual income of
at least S$300,000.

Consulting the Public
21
On the Other Hand. . .
Greater consultation and transparency are not
without trade-offs for MAS and our stakeholders.
It lengthens the policy-making process. MAS
departments need to factor in time for consultation
when planning policy changes.
Greater consultation also requires more resources
from MAS and industry. Our staff need to devote
more time to prepare consultation papers, as
well as to analyse the feedback received. Likewise,
industry players and associations have to devote
resources to study the implications of the
proposed changes.
Consultation does not ensure that all parties will
agree with the outcome. It provides us with more
complete information to make a decision. Having
arrived at that decision, we then need to indicate
how we have dealt with the comments received
and acknowledge those who have taken the time
to provide feedback. Our consultation guidelines
require a summary of responses to be published
on the MAS website.
Managing Expectations
Giving due consideration to managing
public expectations and reactions can make
or break a policy review.
So rather than spring a surprise on the
market, we have found it helpful to alert
key stakeholders on forthcoming public
consultations. In some cases, we conduct
briefings for the relevant parties so that they
can understand our proposals better.
Sometimes, we discuss more preliminary
ideas with selected groups to gauge market
reaction before releasing the consultation
papers. We did this when we were revising
banks’ lending limits to the property sector.
The media plays a role too. By sharing our
perspectives and giving them information
about the subject under consultation, they
will be in a better position to report the
proposed changes in a balanced manner.
Overall, public consultation has been beneficial
both to MAS and the financial industry and is an
approach we will continue to enhance.