Singapore and UK strengthen cooperation in financial services

This article is produced by CMS Holborn Asia, a Formal Law Alliance between CMS Singapore and Holborn Law LLC.

Introduction

On 30 June 2021, Singapore and the UK entered into a landmark partnership for cooperation on financial services (Financial Partnership) at the sixth UK-Singapore Financial Dialogue (Financial Dialogue).[1] The Financial Partnership, which follows shortly after the Joint Political Statement on the Singapore-UK Partnership for the Future on 4 March 2021,[2] is supported by a new Memorandum of Understanding (FS MoU). The FS MoU reaffirms both countries’ commitment to the annual Financial Dialogue, and aims to support increased financial services activities between both countries, facilitate closer regulatory cooperation and boost jobs, trade and investment in the sector. The FS MoU may be accessed here.

Three areas of joint interest were discussed and agreed as part of the Financial Partnership at the Financial Dialogue: (i) the importance of green finance and the development of carbon markets; (ii) cooperation on the regulation of and information sharing with respect to fintech, stablecoins and other technological developments; and (iii) enhanced cooperation in the cross-border regulation of financial services.Alongside the Financial Partnership, the UK and Singapore also signed a memorandum of understanding to increase collaboration in cybersecurity, including the sharing of cyber-related information.

Green finance and carbon markets

Green finance has become increasingly significant as financial instruments and tools brighten the spotlight on sustainable products and production methods, as well as investments in sustainable alternatives.[3] In this regard, both countries have committed to:

• identifying compatible and interoperable taxonomy (classification) principles and metrics for green and transitional activities;
• supporting mandatory climate-related financial disclosures and sustainability reporting that is aligned with international standards and recommendations;
• exploring collaboration on a biodiversity pilot study addressing how nature-related risks affect the financial system; and
• supporting the development of carbon markets, in line with operationalising and implementing the provisions of the Paris Agreement.

In Singapore, several initiatives have already been undertaken. The Green Finance Industry Taskforce (GFIT) convened by the Monetary Authority of Singapore (MAS) aims to accelerate the development of green finance through: (i) developing a taxonomy; (ii) enhancing the environmental risk management practices of financial institutions; (iii) improving disclosures; and (iv) fostering green finance solutions.[4] The GFIT has launched several initiatives in May 2021, to accelerate green finance in Singapore, including detailed implementation guides for climate-related disclosures by financial institutions, frameworks for the evaluation of green trade finance transactions, a white paper on scaling green finance in different sectors, as well as plans for future workshops and online modules for corporates and financial institutions to build green finance capacity.[5]

As Singapore and the UK are both major financial centres, a plan to increase support and investment in projects that promote positive and sustainable outcomes will not only contribute greatly to tackling the current issues of global warming and climate change, but also to much needed economic growth.

FinTech and stablecoins

Technological advancements in the areas of fintech and stablecoins were discussed during the Financial Dialogue and alongside their impact on each country’s regulatory regime. Both countries agreed to share updates on their approaches to regulate these burgeoning fields, continue working together through the Global Financial Innovation Network, and explore further opportunities to collaborate through the Bank for International Settlements Innovation Hubs in each country.

Such cross-border collaboration underscores Singapore’s efforts to keep abreast of the developments in the global fintech and digital payments landscape. This is in line with Singapore’s efforts to enhance existing regulatory frameworks under the Singapore Payment Services Act 2019 (PS Act), as reflected in the public consultations on proposed amendments to the PS Act to address issues and risks associated with fintech and stablecoins, such as anti-money laundering and countering the financing of terrorism,[6] and the scope and regulation of e-money and digital payment tokens.[7]

Regulatory cooperation

The partnership between Singapore and the UK was also reinforced with both countries reaffirming their commitment to cooperate and collaborate on a broad range of financial services[8] in order to maintain safe and open financial markets. This encompasses, among others, working towards developing compatible regulatory and supervisory frameworks for financial services to reduce unnecessarily burdensome or duplicative regulatory requirements, mutually exchanging information and consulting one another on relevant financial services regulatory initiatives.[9]

Concluding remarks

Aside from the Financial Partnership, regulatory cooperation is expected to progress further with the commencement of negotiations on the Digital Economy Agreement (UKDEA) between Singapore and the UK on 28 June 2021. The UKDEA seeks to open up digital trade channels, create more opportunities for businesses in both countries to deliver their products and services and expand into high-tech markets, as well as ensure more efficient trade through interoperable digital technology and transactions.

The strengthened cooperation under the Financial Partnership and the UKDEA are timely given the accelerated transformation of the financial services landscape globally. In upholding standards and boosting collaboration in key areas of mutual interest, such as sustainability and digital payments, businesses in both countries should expect a more robust yet compatible regulatory environment that encourages nascent financial services innovations whilst effectively managing novel risks.

With thanks to Jay Prakash.

[1] UK and Singapore mark a new era of Financial Services Cooperation; UK and Singapore mark a new era of Financial Services Cooperation

[2] Newsroom/Press-Statements-Transcripts-and-Photos-JPS-SG-UK

[3] Why is Green Finance important; What is green finance

[4] Industry Guidelines Taxonomy Public Consultation

[5] News/media-releases/2021/accelerating-green-finance

[6] Consultation on the Payment Services Act 2019: Proposed Amendments to the Act.pdf

[7] Consultation on the Payment Services Act 2019: Scope of E-money and Digital Payment Tokens.pdf

[8] UK Singapore Regulatory Cooperation.pdf, paragraph 3

[9] UK Singapore Regulatory Cooperation.pdf, paragraph 4