Bank System in Singapore
Being dubbed the “Switzerland of Asia”, Singapore is a powerful banking hub that caters for not only domestic finances but also a monetary activity of the whole Asia-Pacific. Being heartened by the country’s stable political and economic climate, effective legislation and taxation, law enforcement against fraud and money crimes, Singaporean banking system is among the most competitive in the world. Embracing over 117 overseas banks and 6 local establishments, Singapore is Asia’s third-biggest Financial Centre (after Hong Kong and Japan) that offers various services from consumer credits to investment operations and insurance.
Features and Trends of Banking in Singapore
- The dominance of foreign banks drew Singapore into the global banking scene making it a major competitive player. Constant competition on the local banking arena inspired the development of unique financial products and set conducive pricing policy. Merging helps local banks to make their way to the regional scene. After 6 local banking groups consolidated into 3 (UOB, DBS, OCBC), it resulted in expanding their activities and capabilities and turning into “one-stop” banks that are able to satisfy every possible financial need.
- Liberalisation in banking sector made in 1999 resulted in issuing full banking licenses to overseas banks, giving offshore banks more freedom in SGD wholesale operations, reconsidering corporate governance, lifting the limit of foreign shareholding in local banks, and re-classification of restricted banks and allowing them to wholesale operations.
- Singapore turned into a competitive investment hub due to intense government’s efforts, establishing approved bonds, and success of Singapore Exchange that lured hordes of foreign companies. Investment banks cater for the investors’ needs through underwriting, mediating between the issuer and investor, and corporate re-organisation services (mergers, acquisitions, and so on).
- Deviating from the consumer banking and developing smarter corporate banking services increased influence of many Singaporean trend-making banks.
- Rigorous secrecy laws (Banking Act, section 47) and tailor-made private-banking services attracted crowds of wealthy personalities to Singaporean banks. Swiss UBS and Credit Suisse Group worked as magnets for big money from Asia and Europe. Singapore is among the few financial offshore centres that haven’t signed the EU Tax Directive (2005) that would oblige Singapore to disclose some private information about its foreign depositors/investors. For such faithfulness to the interests of its clients, Singapore got its nickname “the Switzerland of Asia”. High-net-worth personalities who entrusted Singapore with their money are offered lots of advanced wealth management services here: tax/state planning, protection of assets, investment strategizing, credits, lifestyle/wealth advisory, and so on.
- Attention to the SME sector helped Singaporean banks win the repute of reliable business partners. Small to medium businesses in Singapore have access to premium bespoke financial, insurance, investment and loan products as well as to management and trade services. The government meets SMEs halfway offering them comfortable schemes for expanding and upgrading their financial operations.
- Singapore frees you from paying the deposit and capital gain taxes from incomes earned abroad.
Types of Banks in Singapore
Depending on the key clients we can roughly divide all banks into 3 groups:
- commercial banks (serving corporations);
- consumer banks (serving both local and foreign average individuals);
- private banks (serving high-net-worth individuals).
Depending on localisation and specialisation, all Singapore-based banks can be classified this way:
Local Banks
(there are 6 banks in total, but we will overview 3 flagship banking groups):
United Overseas Bank (UOB), one of Asia-Pacific’s leaders, operates since 1935 holding assets worth over 180 billion SGD. Dubbed as the Singapore’s “Best Overall Fund Group”.
Development Bank of Singapore (DBS) is the country’s biggest consumer bank dominating not only in SG but also in Hong Kong and serving over 4 and 1 million consumers accordingly. Having over 80 branches all over Singapore, back in 2008, DBS was the 14th among 200 Asia’s banks (according to the ranking by Banker).
Oversea-Chinese Banking Corporation (OCBC) operates since 1912 boasting assets worth over 190 billion SGD. In 2008, it was acclaimed as the best regional bank by the Asia Risk End-User Research.
Overseas Banks
(117 in total) can be divided into such categories:
Full Banks – one-stop establishments providing all possible sorts of banking services to both corporate clients and individuals. The best are Citibank, HSBC, Standard Chartered, BNP Paribas, and Maybank.
Offshore Banks – are branches/subsidiaries of Asian overseas banks that can transact their banking activity using overseas currency units. SGD operations are transacted through the Domestic Banking unit, but they are slightly limited in comparison with wholesale banks. Examples of offshore banks are Korea Development Bank, Bank of New Zealand, Bank of Taiwan, and so on.
Wholesale Banks – are branches of overseas banks that provide all kinds of banking services, but aren’t allowed to the SGD retail activity sphere. Examples are National Australia Bank, Deutsche Bank, or ING Bank.
Merchant Banks – cater to the corporate bodies’ needs through managing corporate finances, underwriting (subscription to bonds and shares for further offering them to investors), investment strategising, mergers of companies and other business/investment related services. Merchant banks work with different Asian currency units, but in case with Domestic Banking Unit, these banks can borrow or accept deposits only from banks, financial establishments or corporate bodies run by shareholders. Examples of such banks are Barclays Merchant Bank Singapore Ltd or Credit Suisse Singapore Ltd.
Financial Companies are licensed institutions authorised to give or extend loans for buying cars or real estate. They have restrictions in accepting deposits and aren’t recommended to give unsecured loans worth over 5k SGD or handle transactions in foreign currency, precious metals, or stock in foreign currency (exceptions can be made for companies with paid-up capital of over 10 million SGD). There are only 3 financial companies in SG: Singapura Finance Ltd, Hong Leong Finance Limited, and Sing Investments and Finance Limited.
Bank Legislation
- The authority that governs the banking sector – the Monetary Authority of Singapore – defines the country’s financial policy, manages banks/financial establishments, and issues local currency – the Singaporean Dollar. The banking sector is governed by relevant Acts, common law, and equity rules:
Banking Act
- Banking Act is the main legal document that outlines the country’s banking principles and allowed banking activities (non-financial activities are banned from 2001);
- Securities and Futures Act;
- Regulations against money laundering;
- Financial Advisors Act.
Facts Foreigners Should Know About Banks in Singapore
- Foreign individuals working in Singapore on working visas can benefit from advanced local banking services such as internet banking, multi-currency accounts, and credit cards. It is wise to choose an international bank that is working in your home country: it eases transferring money overseas. But still choose the bank that caters to your “Singaporean” needs and has lots of ATMs in the location you work and live in (DBS is the leader for ATM locations in Singapore).
- English is Singapore’s administrative language, so foreigners usually face no difficulties while managing their finances using Singapore-based banks.
- Some banks (like, for example, DBS or UOB) offer expat packages – a set of services that cater to the needs of foreigners temporarily working in Singapore. Such package supports transactions between SGD and wide range of foreign currency units, remittance services, and NETS cashless payment system.
- Since transferring money to the home country is one of the major ways how expats use banking in Singapore, you should know that all banks impose their fee for such transferring. The fee varies from bank to bank, but you have an opportunity to stamp it out. For example, if you have Citibank’s accounts both in Singapore and in your home country, the transaction fee would be only 10 SGD or even 0 SGD if you participate in their Citigold system.
- To open a local bank account (current or savings), an overseas expat needs to provide the copy of his/her passport and working visa as well as to have funds for a minimum deposit. The procedure usually takes a single day. After the account is set, the foreigner gets the ATM card and a security ring for a safe Internet banking.
- Keep in mind that some banks require you to maintain a standard amount on your account, and failing to follow this rule may result in being imposed additional monthly costs or even closing the account. This minimum amount varies from bank to bank.
- Trustworthy foreigners looking for buying property (condo) in Singapore can expect to get a loan from the bank if they are able to afford the 20% of the down payment. However, such service isn’t guaranteed.
- Obtaining a credit card can be challenging for some foreigners, as despite such option is advertised, it is not guaranteed. Your annual income must satisfy the bank’s criteria.
Bank Account and Other Services for Foreign Company
- Newly incorporated foreign companies can open bank accounts and enjoy hassle-free money transferring between countries. Before choosing the bank, compare its account’s features with the same services offered by other banks in order to find the most comfortable solution for your business.
- Most Singaporean banks require new company’s directors (or other empowered signatories) to be present in the country for signing bank account documentation. Some banks that have branches in the country where the directors reside can accept documents in this foreign office. Please ask about the “presence” requirement of the bank you have chosen. Nevertheless, keep in mind that physical presence helps to avoid any delays and shortens the procedure.
- The fee for opening the SGD account varies from bank to bank (from 50 SGD in Standard Chartered Bank or OCBC to 150 SGD for some kinds of bank account services in HSBC). The fee may depend on the type of the company’s legal entity and the sector of its activity. Foreign currency accounts are also supported by major Singaporean banks.
- Initial deposit is mandatory and its amount varies from bank to bank (30k SGD/30k USD in Standard Chartered or 300k SGD/100k USD in HSBC). Citibank doesn’t require the initial deposit in foreign currency. Local banks have much lower benchmarks: from 1k SGD/1k USD in UOB to 8k SGD/1k USD in DBS.
- The service of the ATM card in SGD is provided not by all banks (for example, HSBC issues it while Standard Chartered and Citibank don’t). The daily limit is also applicable. ATM cards in foreign currency aren’t available.
- Cheque books in SGD are provided by all banks. Obtain more accurate information about USD cheque books from the considered bank.
- When it comes to credit cards, banks usually have a custom solution for every corporate client both for local and foreign currency. For example, Standard Chartered and OCBC support only debit cards; Citibank, DBS, UOB, or HSBC do issue credit cards (both local and foreign currency) but under specific conditions.
- Internet banking with local and foreign payments is available in all banks but under bespoke conditions.
- Necessary documents that must be submitted are:
- Completed forms for opening a corporate bank account signed by directors/signatories;
- Resolution issued on the board of directors that sanctions opening of such account;
- Certified copy of the above-mentioned resolution (some banks can offer you their own form for signing);
- Certified copy of the incorporation certificate (signed by the director and the secretary);
- Certified copy of the firm’s business profile (from ACRA) – signed by the director and the secretary;
- Certified copy of the M&A signed by the director and the secretary;
- Certified copies of passports/Singapore ICs of the directors/signatories.
- Banks consider giving business loans to companies under certain conditions such as firm’s track record, a number of employees, share capital, and so on.
Banking in Singapore has lots of other benefits that weren’t described in this guide but still are answers to someone’s financial need. Whether you run a company with ambitions to grow or work in Singapore in order to support your family overseas, Singapore’s local and international banks will overwhelm you with high-end and reliable services and won’t disappoint in quality.
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