The Monetary Authority of Singapore and Public Consultation

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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.
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The Monetary Authority of Singapore and Public Consultation

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