Trade and Project Financing in Singapore

A Hot Tip about Banking and Finance in Singapore

Posted on: 23 Feb 2010

How Do I Get Paid (Methods of Payment)

Singapore has a well-developed financial system, which offers a full range of export finance instruments. Shipments are generally made under letters of credit and sight drafts (or bills of exchange), depending on the exporter's preference and the extent of past dealings with the purchaser. Standard credit terms are generally 30 to 90 days and they are allocated on market terms. Quotations are generally made on a C.I.F. basis. Prices given in U.S. dollars should be clearly stated as such to avoid confusion with the Singapore dollar. Exporters making quotations in Singapore dollars should consult their banks for the prevailing exchange rate. Singapore uses the metric system, so it is often beneficial for price/quantity quotations to be prepared accordingly.


How Does the Banking System Operate

Singapore is a reputable international financial center. It is a leading world foreign exchange trading center and trader in derivatives. There are about 900 local and foreign banking and financial institutions in Singapore that provide services relating to trade financing, foreign exchange, derivatives products, capital markets activities, loan syndication, underwriting, mergers and acquisitions, asset management, securities trading, financial advisory services and specialized insurance services.


The Monetary Authority of Singapore (MAS) performs all the functions of a central bank including the issuance of currency. The unit of legal tender is the Singapore dollar. The MAS is a wholly owned and controlled statutory board under the Ministry of Finance; it is responsible for all matters relating to banks and financial institutions. Besides regulating financial institutions, the MAS has a Financial Sector Promotion Department that promotes new financial activities, develops IT infrastructure and manpower resources for the financial sector, and designs appropriate incentives to attract international financial firms to conduct activities in Singapore.


Singapore has a deposit insurance program following the enactment of the Deposit Insurance Act in 2005. The program compensates individuals and charities for the first S$20,000 (about US$12,800) of their Singapore dollar deposits in standard savings, current and fixed deposit accounts, net of liabilities, in the event that their bank or finance company fails. The program compensates depositors through a fund built up from contributions by full banks and finance companies. Full banks and finance companies paid their first premium contributions into the fund two days after the program took effect on April 1, 2006.


In the worst case scenario where a bank or insurance company fails, especially in view of the current global financial crisis, a safety net is provided by deposit insurance and the policy owners' protection fund respectively. Deposit insurance, which is an explicit guarantee on deposits, provides a payout of up to S$20,000 to each individual depositor per bank. For deposits in excess of the payout, individual depositors can also claim from assets of the failed bank. Depositors and policyholders, in the case of an insurance company, would rank ahead of unsecured creditors and shareholders in their claims. The MAS, together with the Singapore Deposit Insurance Corporation (SDIC) that administers the deposit insurance scheme, will review the coverage limit regularly, taking into consideration the objectives of the scheme and international norms.


In Oct 2008, the Singapore government temporarily guaranteed all Singapore dollar and foreign currency deposits of individuals and non-bank customers in banks, finance companies and merchant banks licensed and supervised by the MAS. This guarantee expires at the end of 2010.


The MAS is known and respected as an effective regulator/supervisor of the financial services sector. The MAS currently requires branches of foreign banks operating in Singapore to meet the minimum BIS capital adequacy ratio (CAR) of 6.0%, but locally incorporated banks meet a more stringent ratio of 10.0%. Financial statements are in compliance with international standards and internationally recognized accounting firms perform audits. In October 2008, total assets/liabilities of Singapore's domestic banking sector amounted to US$300 billion, which is an increase from the previous year.


Foreign-Exchange Controls

Singapore has no significant restrictions on remittances, foreign exchange transactions and capital movements. It also does not restrict reinvestment or repatriation of earnings and capital. In addition, The U.S.-Singapore FTA underpins the shared commitment of the United States and Singapore to the free transfer of capital, unimpeded by regulatory restrictions.


U.S. Banks and Local Correspondent Banks

As of December 2008, there were 26 foreign full service licensees, 42 wholesale licensees, and 40 offshore licensees operating in Singapore. Of the 24 foreign full service licensees, the government has granted "qualifying full bank" (QFB) licenses to six foreign banks, including one U.S. bank. Except in retail banking, Singapore laws do not distinguish operationally between foreign and domestic banks. The four U.S. banks with a license to provide full banking services are: American Express Bank, Bank of America, Citibank and JPMorgan Chase Bank. The MAS maintains a full directory of local and foreign banks and financial institutions (including U.S.-headquartered entities) that operate in Singapore.


Project Financing

Singapore is considered a developed country and does not receive development assistance from multilateral institutions.


U.S. government agencies such as the Export-Import Bank of the United States and the U.S. Department of Agriculture, OPIC, as well as state and local bodies (e.g., Small Business Administration) offer a variety of programs to assist exporters with their financing and insurance needs.



Read the full market research report

Posted: 23 February 2010

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