SINGAPORE Law and Practice Contributed by: Lee Xin Mei, Cheryl Tan, Eugene Lee and Benjamin Liew, Rajah & Tann Singapore LLP
required to comply with regulations, guidelines and notices issued by the MAS under the SFA. Additionally, the MAS has prescribed a Code of Conduct for Credit Rating Agencies (the “Code”) under Section 321 of the SFA which applies to CMS licensees who provide CR services. The Code, which is based largely on the IOSCO credit rating agencies code, seeks to: • promote quality and integrity of the rating process; • strengthen rating agencies’ (RA) independ - ence and avoidance of conflicts of interest; • ensure timely disclosures to investors on rat - ing and the procedures, methodologies and assumptions; and • promote procedures and mechanisms to protect non-public information from prema - ture disclosure or by use unrelated to a RA’s rating. The Code is non-statutory in nature. A failure by any person to comply with any requirement in the Code shall not of itself render that person liable to criminal proceedings. However, a failure by an RA to comply with the Code will be taken into account by the MAS in determining whether an RA satisfies the requirement that it is fit and proper to remain licensed and whether to revoke or suspend the RA’s licence under Section 95 of the SFA. 4.6 Treatment of Securitisation in Financial Entities The MAS administers the international Basel III regulatory framework in Singapore and provides requirements for the capital treatment that finan - cial institutions in Singapore can give to securiti - sation positions taken, as well as circumstances in which capital relief can be obtained when such financial institutions undertake a securitisation.
In connection with securitisation transactions, Singapore-incorporated banks are required to comply with the regulatory capital adequacy requirements set out under MAS Notice 637. Separately, outside the scope of this guide, there is a separate framework for the issuance of insurance-linked securities set out in the Insur - ance (General Provisions and Exemptions for Special Purpose Reinsurance Vehicles) Regula - tions 2018. In particular, there are separate capi - tal adequacy requirements for special purpose reinsurance vehicles (SPRV), which are set out in the Regulations. An SPRV is an insurer licensed under the Insurance Act 1966 of Singapore as a reinsurer to carry on life or general business or both classes of business and: • is created for the sole purpose of entering into contracts of reinsurance with one or more ceding insurers; and • at all times fully funds its obligations under the contracts of reinsurance with the ceding insurer or insurers (mentioned in the para - graph above) through insurance securitisa - tion. 4.7 Use of Derivatives The SPE may enter into derivatives with a swap provider to hedge certain exposures. There are no specific laws or regulations that apply to the use of derivatives in securitisations or with regard to SPEs. However, the separa - tion requirements in the MAS Notice 628 con - template that any transaction (including interest rate swaps and currency swaps) entered into between the SPE and the bank in Singapore which the notice applies to must be conducted at arm’s length and on market terms and condi - tions. Regulatory requirements for OTC deriva -
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