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Unsecured credit rules

In 2006, the Monetary Authority of Singapore (MAS) and the Ministry of Law launched a joint public consultation on the proposed changes to the unsecured credit rules and the proposed application of these rules (with appropriate modifications) to moneylenders. In 2007, the MAS conducted another consultation on exemption for financial institutions from the maximum credit limit when granting credit to individuals with greater financial means. Following feedback received from the public, the MAS and the Ministry of Law published draft legislations for unsecured credit rules for financial institutions and unsecured lending rules for moneylenders respectively in the Consultation Paper (December 2007) for public comment.

Under the draft rules, financial institutions will be allowed to provide securities financing schemes for initial public offerings (IPOs) without complying with the unsecured credit rules. The exemption is offered on the condition that reasonable steps are taken by the financial institutions to ensure that the aggregate amount of the securities financing obtained by the borrower (inclusive of any other loans, discounts, rebates or other benefits offered by the lender and other persons) does not exceed 80% of the value of the shares at the time the loan is committed. Holders of capital market service licences must also ensure that the total amount of the securities financing for all IPOs does not exceed 20% of its financial resources or average adjusted net capital.

Under the draft rules for moneylenders, they are allowed to provide unsecured loans to the borrower without complying with the unsecured lending rules if the total income of the borrower for a period of 12 months immediately before the date of the loan application is at least S$20,000 ($15,000) or their total net personal assets as of that date exceed S$2 million.

Cecilia Law

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