Statute Details
- Title: Banking (Merchant Banks) Regulations 2021
- Act Code: BA1970-S472-2021
- Type: Subsidiary legislation (SL)
- Enacting / Authorising Act: Banking Act (Cap. 19)
- Authorising provisions: Sections 76A(1) and 78 of the Banking Act
- Commencement: 1 July 2021
- Current version status: Current version as at 26 Mar 2026
- Legislative structure: Part 1 (Preliminary) to Part 10 (Miscellaneous), plus First and Second Schedules
- Key definitions (extract): “Accounting Standards”, “group”, “major stake”, “merchant bank group”, and “wholly-owned subsidiary” (for these Regulations)
- Key section (extract): Section 2 (Definitions)
- Related legislation (as indicated): Banking Act, Companies Act, Protection Schemes Act (Deposit Insurance and Policy Owners’ Protection Schemes Act)
What Is This Legislation About?
The Banking (Merchant Banks) Regulations 2021 (“Merchant Banks Regulations”) are subsidiary legislation made under the Banking Act to regulate the conduct and risk profile of merchant banks in Singapore. In practical terms, the Regulations operationalise parts of the Banking Act that deal with how merchant banks may take certain risks, acquire or hold major stakes in other entities, and manage exposures—particularly where those exposures could affect financial stability or deposit-related confidence.
Merchant banks are a specialised category within Singapore’s banking framework. While they are not retail deposit-taking banks in the same way as full banks, they still operate within a regulated perimeter. The Regulations therefore focus on targeted restrictions and reporting requirements that are tailored to merchant banking activities—such as structured financing, investment-related holdings, and business models that may involve property-related exposures or complex corporate group structures.
Although the extract provided includes the Regulations’ table of contents and the opening provisions (including definitions), the overall structure indicates that the Regulations cover: (i) restrictions tied to acceptance of deposits and borrowing in Singapore dollars; (ii) prescribed “businesses” for certain Banking Act provisions; (iii) exemptions from approval requirements for major stakes; (iv) rules for computing major stakes; (v) limitations on mutual shareholdings; (vi) exposure limits relating to the immovable property sector; (vii) publication requirements for transfer/restructuring; (viii) deposit-liability classification; and (ix) governance and risk management requirements.
What Are the Key Provisions?
1) Preliminary framework and definitions (Part 1)
The Regulations begin with standard formalities: citation and commencement (1 July 2021) and a definitions section. Section 2 is critical because it anchors the meaning of terms used throughout the Regulations. The extract shows that “major stake” is defined by reference to the Banking Act (section 55ZF(2)), and “merchant bank group” is defined by reference to accounting consolidation principles under the Companies Act’s “Accounting Standards”. This matters for compliance because many obligations—such as stake computation, exposure measurement, and reporting—depend on whether an entity is treated as part of the merchant bank’s group for accounting purposes.
Notably, Section 2(1) defines “group” by reference to the Accounting Standards, and it also defines “liabilities” in relation to insurance funds by excluding certain levies under the Deposit Insurance and Policy Owners’ Protection Schemes Act. While that exclusion is specific, it signals that the Regulations are careful to align regulatory calculations with the accounting and statutory treatment of liabilities.
2) Prescribed businesses for Banking Act provisions (Part 3)
Part 3 is designed to specify which activities count as “prescribed businesses” under section 55V(1)(d) of the Banking Act. The table of contents lists multiple categories, including: property management and property enhancement; alternative financing; purchase and sale businesses (including spot price transactions); inter-bank purchase and sale; leasing; joint purchase and periodic sale; procurement; private equity or venture capital; and “related or complementary” businesses (including those that are non-revenue generating).
For practitioners, the significance is that the Banking Act likely contains a general rule with conditional carve-outs or tailored treatment depending on whether a merchant bank is carrying on one of these prescribed businesses. In other words, Part 3 helps determine the regulatory consequences of a merchant bank’s business model. If a merchant bank’s activity falls within a prescribed category, it may trigger specific permissions, exemptions, or compliance pathways; if it does not, the merchant bank may face stricter constraints.
3) Exemptions from approval for acquisition/holding of major stakes (Part 4)
Part 4 addresses when the Banking Act’s approval requirement for major stakes does not apply. The table of contents indicates three exemption mechanisms: (i) disapplication of section 32 of the Banking Act for an entity carrying on private equity or venture capital business; (ii) disapplication for an entity carrying on businesses under section 55V(1)(a), (b) or (c) of the Banking Act; and (iii) disapplication where a subsidiary is acquired or held to segregate risks from carrying on business in regulation 15 (which is listed under Part 3 as “prescribed related or complementary business that is non-revenue generating, etc.”).
These exemptions are legally and commercially important because major stake approval processes can be time-consuming and may impose conditions. By carving out certain entities and structures, the Regulations allow merchant banks (and their relevant group entities) to pursue investment and risk-segregation strategies without automatically triggering the approval regime. However, exemptions typically come with boundaries—practitioners should therefore treat the exemption provisions as requiring careful factual mapping to the prescribed business categories and the risk-segregation rationale.
4) Computation of major stakes and affiliated entities (Part 5)
Part 5 provides the mechanics for calculating “major stakes”. It includes definitions and rules for “affiliated entity” and how holdings by affiliated entities are treated. The table of contents indicates that holdings by an affiliated entity are treated as holdings by the merchant bank, and it also addresses affiliated entities over which the merchant bank has no effective control.
This is a classic compliance flashpoint: without clear computation rules, a merchant bank could structure shareholdings through affiliates to avoid thresholds. Part 5 closes that gap by aggregating holdings where appropriate, while still recognising that there are situations where the merchant bank lacks effective control. For legal counsel, this means that governance and control analysis (board rights, voting arrangements, contractual control, and other indicators of “effective control”) becomes central to determining whether a holding counts toward a major stake threshold.
5) Limitation of mutual shareholdings (Part 6)
Part 6 introduces restrictions on mutual shareholdings. The table of contents lists: definitions, a limitation rule, a category for “qualified major stake entity” over which the merchant bank has no effective control, offences/penalties/defences, and a grace period.
Mutual shareholding limitations are typically aimed at preventing circular ownership structures that can obscure true risk concentrations or entrench influence. The inclusion of offences, penalties and defences suggests that the Regulations are enforceable with meaningful consequences. The grace period indicates that existing structures may be allowed time to unwind or restructure to comply.
6) Exposure to the immovable property sector (Part 7)
Part 7 focuses on property sector exposure. It defines “property sector exposure”, sets a “property sector exposure limit”, and requires submission of returns. This implies a quantitative cap or risk-weighted limit on how much exposure a merchant bank may have to immovable property-related activities.
For practitioners, the key is that exposure limits are rarely self-executing. They require: (i) a definition of what counts as “property sector exposure”; (ii) a measurement methodology; and (iii) ongoing monitoring and reporting. The requirement to submit returns means that compliance is not only about staying under a limit at a point in time, but also about demonstrating compliance through periodic regulatory reporting.
7) Transfer of business and shares and restructuring (Part 8)
Part 8 requires publication of particulars (regulation 32). This suggests that when a merchant bank transfers business and shares or restructures, it must publish certain information. Publication requirements serve transparency goals and help stakeholders and regulators understand how risk and ownership have been reorganised.
8) Deposit liabilities classification (Parts 9 and 10)
Part 9 distinguishes which liabilities are included in “deposit liabilities” and which are not. This classification can affect regulatory treatment, including how deposit-related protections and capital/liquidity considerations apply. Part 10 then includes miscellaneous governance and risk management provisions, including prescribed appointments for merchant banks incorporated in Singapore and for branches/offices incorporated outside Singapore, maximum term of chairman, and risk management requirements.
Even though the extract does not reproduce the text of these later provisions, the headings show that the Regulations are designed to be comprehensive: they combine business-permission logic, ownership/stake computation, exposure limits, reporting, and governance/risk management.
How Is This Legislation Structured?
The Regulations are organised into ten Parts plus two Schedules. Part 1 contains preliminary matters (citation, commencement, and definitions). Part 2 sets restrictions relating to acceptance of deposits or borrowing money in Singapore dollars, by prescribing persons under a specific Banking Act provision. Part 3 lists prescribed businesses under section 55V(1)(d) and includes definitions and categories of businesses. Part 4 provides exemptions from approval requirements for acquisition or holding of major stakes in entities. Part 5 explains how major stakes are computed, including treatment of affiliated entities and effective control. Part 6 limits mutual shareholdings and includes enforcement provisions (offences, penalties, defences) and a grace period. Part 7 introduces property sector exposure definitions, limits, and reporting. Part 8 requires publication of particulars for transfers/restructuring. Part 9 clarifies what counts as deposit liabilities. Part 10 covers miscellaneous governance and risk management requirements. The First Schedule sets quarterly reporting information for merchant banks in Singapore, while the Second Schedule addresses annual reporting for a Banking Act provision as applied by section 55ZF(3).
Who Does This Legislation Apply To?
In general, the Regulations apply to merchant banks in Singapore and, through group-based definitions, to entities within the merchant bank’s group for accounting purposes. The “merchant bank group” definition in Section 2 is particularly important: it includes the merchant bank, its subsidiaries, its branches, and other entities treated as part of the group for accounting purposes under the Accounting Standards.
Additionally, the Regulations can apply indirectly to entities in which merchant banks hold major stakes and to affiliated entities whose holdings may be aggregated for major stake computation. The exemptions in Part 4 also indicate that the regulatory outcome depends on the nature of the entity’s business (for example, private equity or venture capital) and on structural features such as risk segregation through subsidiaries.
Why Is This Legislation Important?
The Merchant Banks Regulations are important because they translate broad statutory powers in the Banking Act into operational compliance rules. For a practitioner, the value lies in the Regulations’ specificity: they define what counts as prescribed businesses, how major stakes are calculated, when approval requirements are disapplied, and how property sector exposure is limited and reported.
From an enforcement and risk perspective, the Regulations address several systemic concerns. First, they manage ownership and influence risks through major stake and mutual shareholding rules. Second, they manage concentration risk through property sector exposure limits. Third, they manage transparency and accountability through publication and reporting schedules. Finally, they strengthen governance and risk management through prescribed appointments and risk management requirements.
In practical terms, these Regulations affect how merchant banks structure investments, organise group entities, document control and effective control, prepare regulatory returns, and plan restructurings. A lawyer advising a merchant bank should therefore treat the Regulations as a compliance blueprint that must be integrated into corporate structuring, investment documentation, and ongoing monitoring.
Related Legislation
- Banking Act (Cap. 19)
- Companies Act (Cap. 50) (Accounting Standards reference)
- Deposit Insurance and Policy Owners’ Protection Schemes Act (Cap. 77B) (liabilities definition context)
Source Documents
This article provides an overview of the Banking (Merchant Banks) Regulations 2021 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.