Removal of Singapore’s DBU-ACU divide

On 30 June 2015, Deputy Prime Minister and Chairman of Monetary Authority of Singapore (MAS), Mr Tharman Shanmugaratnam announced the removal of ACU-DBU divide during his keynote address at the Annual Dinner of the Association of Banks in Singapore (ABS). Banks in Singapore can operate in one of the two accounting units – the domestic banking unit “DBU” under which accounting book, banks are allowed to deal with any currency and the Asian currency unit “ACU” under which banks can deal in any currency except for SGD. Effectively, the DBU-ACU split within a bank is purely in accounting terms i.e. separate accounting books are maintained. Quoting the DBU-ACU divide as a practice losing relevance in terms of Singapore’s economic climate, it was announced that the MAS will be removing the divide in its banking regulations. The implications of the removal are far and wide reaching, impacting at least 13 current notices or regulations. Consultation is ongoing for MAS to obtain public opinion.

Most financial institutions are grappling with the potential change this regulation may bring about in existing infrastructure and processes. As with most if not all of the post global financial crisis mandates, regulations are expected to be rolled out within the defined and often stringent timelines, in parallel to each other. There is usually not much room for negotiating timelines for effectivity of such notices and most banks need the additional pat on the back from consulting firms, fintech partners and other cardinal forces to help see to a smooth transition from present state to a more strategic standing in the future. Such regulatory changes are only the beginning and will not show any signs of ebbing in the near or mid-term future thus making it imperative for financial institutions to rethink their modus operandi and move away from a responsive approach towards prospective approaches. Assuming that regulatory reporting for a firm sits within one single platform integrated with data management, governance and reporting capabilities, a change such as the ACU-DBU removal should be palpable within the suggested timelines as per MAS but such an assumption can be easily invalidated with a quick look around town.

This paper examines how the rise of the Asian dollar market amongst other market forces have compelled the regulator to herald in such a massive change laterally with other, equally significant changes like in the Notice 610.

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