Ravi Menon: Remarks on the MAS Annual Report 2022/2023
Remarks by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore,
at the MAS Annual Report 2022/2023 Media Conference, Singapore, 5 July 2023.
* * *
Good morning and thank you for joining us today for the release of the MAS Annual
Report and the MAS Sustainability Report for FY 2022/23.
I will focus my remarks this morning on four issues:
What is the balance of risk between inflation and growth?
Why did MAS record a financial loss and is it cause for concern?
How is MAS harnessing the benefits and addressing the risks of wealth inflows?
How is MAS safeguarding the Official Foreign Reserves against climate risk?
WHAT IS THE BALANCE OF RISK BETWEEN INFLATION AND GROWTH?
Let me begin with the balance of risk between inflation and growth.
A material slowdown in global economic activity in the later part of this year
looks increasingly likely.
Global growth held up strongly in Q1 2023, on the back of strong consumer
demand for services, supportive labour market conditions, and China's reopening.
But the restraining effects of monetary policy tightening is expected to bear down
more heavily on consumer demand in the US and Eurozone.
In China, the boost from reopening is expected to ease over the next few quarters
as household spending normalises and sluggish external demand weighs on
exports.
Inflation appears to have peaked globally though there is uncertainty over how
quickly inflation will return to targets.
Central banks have responded decisively to the inflation threat, with the most
synchronised and rapid tightening of monetary policy in decades.
Headline inflation in most economies has eased from its multi-decade highs.
Global supply chain bottlenecks have been largely resolved.
Oil and commodity prices have come down significantly.
But core inflation is persistent, especially in the advanced economies.
Services inflation has yet to show a sustained moderation given ongoing
strength in demand and tight labour markets.
It will take time for labour market imbalances to be resolved even as tighter
monetary conditions gradually cool consumer demand.
In Singapore, growth prospects have dimmed and the economy will operate
slightly below its underlying capacity.
Growth has perceptibly slowed in recent quarters.
The Singapore economy was within a hair's breadth of a technical recession, with
sequential growth in Q4 2022 at 0.1% and in Q1 2023 at -0.4%.
The two growth engines of the economy in the last three years - manufacturing
and financial services - have stalled in recent quarters.
Manufacturing is in recession and financial services has stopped growing in
sequential terms since the middle of last year.
The economy has been supported, however, by the domestic facing industries,
including those benefiting from increased travel-related and tourism activity.
Growth will remain weak in the near term.
Manufacturing and financial services are expected to remain in the doldrums amid
the weaker external outlook.
Growth in the domestic facing sectors is likely to taper, as consumer demand
slows in the face of higher interest rates and more moderate wage increases.
Singapore's GDP growth for 2023 is expected to slow to a below-trend pace
within MTI's current forecast range.
Consequently, the output gap is estimated to turn mildly negative, to around
-0.5%, from the positive 0.6% recorded last year.
Inflation in Singapore has clearly peaked and has discernibly moderated.
In assessing inflation trends, it is instructive to focus on month-on-month
momentum and price trends going forward rather than year-ago averages.
Core inflation on a month-on-month seasonally adjusted annualised basis has
come down sharply, to 3.6% in May 2023 from a peak of 9.1% in June 2022.
The disinflation has been broad-based across most components in the core CPI
basket.
Notably, imported inflation has turned negative, reflecting the decline in global
energy and food prices and the effects of a stronger Singapore Dollar.
Even excluding oil, whose prices have fallen most sharply, imported inflation
was minus 1.2% in May this year.
The fall in inflation momentum is gradually translating to lower year-on-year
inflation.
Core inflation on a year-on-year basis moderated to 4.8% in Apr-May from
5.4% in Q1.
Headline inflation slowed to 5.4% from 6.1% over the same period.
Singapore should see further reductions in inflation by the end of the year.
One, imported inflation should remain negative over the rest of the year.
The decline in global energy and food prices should weigh on the costs of
intermediate and final consumer goods.
The strengthening Singapore Dollar will further dampen imported inflation.
Two, the domestic labour market is showing early signs of cooling off.
A recovery in the non-resident workforce is helping to alleviate labour
shortages in sectors such as health & social services and transport &
storage.
Labour demand is easing, especially in sectors most exposed to slower
global demand such as manufacturing and ICT services.
Easing in labour market tightness should mitigate wage pressures.
Three, the pace of cost pass-through into prices should moderate as the strength
of domestic demand wanes.
Core inflation is expected to end the year significantly lower, at 2.5 - 3.0%
yearon-year.
In MAS' April Monetary Policy Statement, we had said that core inflation would
end the year at around 2.5% year-on-year.
We have applied a small range above this, to reflect the potential impact of
stronger than expected outturns in some travel-related CPI components, such as
airfares and holiday expenses.
Excluding the impact of the GST hike, year-end core inflation would be closer to
2%.
For the year as a whole, core inflation is forecast at 3.5 - 4.5% but this reflects
mostly higher inflation in the first half that is behind us.
MAS is lowering the forecast range for CPI-All Items inflation to 4.5 - 5.5% for
2023, down from 5.5 - 6.5% previously.
The downgrade reflects the sharper-than-expected decline in inflation in car prices
and accommodation costs in the first five months of the year.
The announced increases in the supply of rental units and Certificates of
Entitlement (COEs) should help secure a moderating inflation profile in these
components in the year ahead.
The relatively benign inflation outlook is of course premised on no new shocks to
global supply and no reversal in domestic wage momentum.
MAS' monetary policy has been proactive and progressive, positioning the
economy well in light of shifts in the balance of risks between growth and
inflation.
Being proactive in tightening monetary policy has allowed us to keep pace with
an accelerating inflation momentum.
We began tightening monetary policy in October 2021 when core inflation
averaged just 1.1% in the preceding quarter.
We did not foresee the war in Ukraine or the surge in global food and energy
prices but we assessed that inflation was beginning to climb in the aftermath of
the pandemic and sought to position monetary policy more appropriately.
Starting early has allowed us to take a pause - as we did in April 2023 - to
monitor how the Singapore economy evolves and assess whether the disinflation
trend continues.
Our progressive tightening of monetary policy has helped to arrest the
momentum of price increases and facilitated a gradual decline in inflation.
Monetary policy was tightened five times within the space of a year - between
October 2021 and October 2022 - even in the face of increasing growth
uncertainties.
The trade-weighted exchange rate of the Singapore Dollar has appreciated by
8.3% since the beginning of October 2021, helping to dampen imported inflation
and domestic cost pressures.
But the fight against inflation is not over and the monetary policy stance remains
tight relative to the business cycle.
The most recent monetary policy decision to maintain the prevailing rate of
appreciation of the trade-weighted Singapore Dollar means that the exchange rate
will continue to exert a dampening effect on inflation.
The continuous tightening of monetary policy imparted by the upward slope of the
exchange rate policy band is unique to Singapore's exchange-rate centred
monetary policy framework.
In countries whose monetary policy is centered on interest rates, the policy rate is
set at a specific value and will not tighten further unless the central bank makes a
fresh policy decision.
The impact of this appreciating path as well as our previous policy moves will
therefore continue to flow through the economy and dampen inflation.
About one-third of the cumulative restraining effects of the previous five moves
remains in the pipeline.
MAS is not switching from "inflation-fighting mode" to "growth-supporting
mode".
We are closely monitoring the evolving growth-inflation dynamics and remain
vigilant to risks on either side.
We stand ready to adjust monetary policy as needed, especially if inflation
momentum were to re-accelerate.
For now, we affirm the monetary policy stance announced in the April Monetary
Policy Statement.
WHY DID MAS RECORD A FINANCIAL LOSS AND IS IT CAUSE FOR CONCERN?
I now turn to MAS' financial results. Let me start with the headline.
MAS recorded a net loss of S$30.8 billion for FY22/23, reflecting the effects of
monetary policy tightening to bring down inflation. This is the largest loss MAS
has ever recorded.
The loss was due to two factors:
negative currency translation effects of a stronger Singapore Dollar; and
high interest expenses from mopping up excess liquidity in the banking
system.
I will explain these two factors in detail and address some pertinent questions:
Is the loss cause for concern for MAS?
Could the loss have been avoided or minimised?
Does the loss affect the Government Budget?
Let me start with currency translation effects.
About 70% of the net loss or S$21.4 billion was due to the negative currency
translation effects of a stronger Singapore Dollar.
As we have explained on many past occasions, currency translation effects arise
when MAS' Official Foreign Reserves (OFR) which are held in foreign currencies
are reported in Singapore Dollars.
If the Singapore Dollar weakens against the foreign currencies maintained in
MAS' OFR, we will experience positive currency translation effects. Conversely, if
the Singapore Dollar strengthens against the respective foreign currencies, we will
experience negative currency translation effects.
The Singapore Dollar appreciated significantly during FY22/23 as MAS tightened
monetary policy to dampen inflationary pressures.
As you know, Singapore's monetary policy is centred on managing the exchange
rate of the Singapore Dollar against a trade-weighted basket of currencies.
MAS tightened exchange rate policy three times during FY22/23 amid rising
inflation.
The trade-weighted exchange rate of the Singapore Dollar strengthened by 6.5%
over FY22/23 -the highest rate of appreciation in the last 10 years.
Negative currency translation effects are not cause for concern. They do not
affect the external purchasing power of the OFR. Thus, they do not affect MAS' ability
to conduct monetary policy or support financial stability.
The OFR are meant to be used in foreign currency -
to support the Singapore Dollar in times of currency weakness; or
to provide US Dollar funding to the banking system in times of financial
stress.
A negative currency translation effect in the OFR when expressed in Singapore
Dollars therefore does not affect MAS' ability to carry out its functions.
Market players understand this, and this has never been an issue for MAS.
In 10 out of the last 15 FYs, MAS recorded negative currency translation effects -
not surprising given that the Singapore Dollar has generally been strengthening
against other currencies.
It does not make sense to try to avoid such negative currency translation effects.
For example, if MAS wanted to hedge against such negative currency translation
effects, we would have to sell US Dollars from the OFR and buy Singapore
Dollars.
That would negate our interventions in the foreign exchange market to implement
monetary policy and cause the Singapore Dollar to appreciate much more,
thereby harming the economy and, not to mention, depleting the OFR.
The remaining 30% of the loss, or S$9.0 billion, was due to net interest expenses
from MAS' money market operations to mop up excess liquidity in the banking
system.
Money market operations are part and parcel of MAS' monetary policy function.
Like most central banks, MAS carries out money market operations to manage
the level of liquidity in the banking system.
In Singapore, money market operations are also a complement to our foreign
exchange intervention operations.
In general, there are strong appreciation pressures on the trade-weighted
Singapore Dollar due to heavy capital inflows. MAS has to periodically intervene
in the foreign exchange market by selling Singapore Dollars and buying US
Dollars to dampen these pressures and keep the trade-weighted exchange rate
within the policy band.
When MAS does this, it accumulates OFR and injects Singapore Dollar liquidity
into the banking system. MAS then conducts money market operations to
withdraw any excess liquidity.
There are a variety of money market instruments MAS uses to withdraw liquidity
but they all incur an interest cost.
For example, when MAS issues MAS bills to mop up excess liquidity, it has to pay
interest on these bills.
Likewise, when MAS removes Singapore Dollar liquidity by borrowing from the
banks or doing repurchase agreements.
In short, whenever a central bank withdraws liquidity from the banking system, it
cannot avoid paying interest on the liquidity withdrawn.
In FY22/23, the interest expense incurred on MAS' money market operations was
unusually large due to two factors: the large volume of operations and high
interest rates.
Money market operations in FY22/23 were very large because foreign exchange
intervention operations were very large.
Although the Singapore Dollar was on an appreciating trend in line with MAS'
tighter monetary policy, capital inflows into Singapore were so large that the
exchange rate would have appreciated even more if the MAS had not intervened
in the foreign exchange market.
MAS purchased a net US$73 billion through foreign exchange intervention in
calendar year 2022, more than 2.5 times the US$29 billion purchased in 2021.
Consequently, the amount of money market operations MAS had to undertake to
remove excess liquidity from the system also grew by a very large amount.
Over FY22/23, the average stock of interest-bearing money market instruments
was S$437 billion, 24% larger than in FY21/22.
The sharp spike in interest rates was an even bigger contributor to the increase
in MAS' interest expense in FY22/23.
To combat inflation, the major central banks raised interest rates at an
unprecedented pace. In FY22/23, the US Federal Reserve raised the target
range for its policy rate by a total of 4.5% points.
Singapore Dollar interest rates also increased sharply. The Singapore Overnight
Rate Average (SORA) rose by 3% points during this period.
MAS could not have avoided this interest expense. Doing so would have
undermined exchange rate policy and domestic market functioning.
If MAS had not intervened in the foreign exchange market, the exchange rate
would have appreciated even more, and this would have severely hurt the export
sector and economic growth.
If MAS had not mopped up the excess liquidity created by this intervention, the
market mechanism for determining interest rates and allocating capital would
have broken down. This in turn would have created financial vulnerabilities such
as excessive credit growth and inflated asset prices.
The negative currency translation effects and interest expenses reflect the
consequential cost of carrying out MAS' function as a central bank - which is to
conduct monetary policy conducive to sustained non-inflationary economic
growth.
The relevant measure of MAS' financial performance is not currency translation
effects or interest expenses but how well its investments have done.
MAS made a small gain of S$0.6 billion on its investment portfolio amidst a
depressed market environment.
Last year was an unusual year for financial markets, with both equity and bond
markets performing poorly.
The rapid increase in policy rates by global central banks, elevated inflation and
slowing economic growth adversely affected both bond and equity prices.
Most of these losses were unrealised, and we made valuation provisions against
them.
MAS accounts for its investments on a lower of cost and market value (LOCOM)
basis. This is a conservative approach as we fully provide for any unrealised
valuation losses below cost but we do not recognise any unrealised valuation
gains.
MAS' investment performance has to be viewed from a longer-term perspective
given the year-to-year volatility in financial markets.
Since the 2008 Global Financial Crisis, MAS' investment portfolio had benefited
from a period of low inflation and low interest rates.
Including this latest year, MAS recorded an annual average investment gain of
S$11.7 billion in the last 15 years.
The key question MAS focuses on is not whether the negative currency
translation effects or interest expenses persist but whether the investment
performance will recover.
We expect financial markets to remain challenging for at least the next two to
three years, as the effects of restrictive monetary policies continue to work their
way through the global economy and financial markets.
MAS will continue to focus on keeping the portfolio resilient through this period of
economic uncertainty as financial markets return to their long-term trajectory.
Several major central banks were also negatively impacted by one or more of the
factors that affected MAS.
Central banks which hiked interest rates to dampen inflation, like the US Federal
Reserve, and the European Central Bank, also experienced higher costs on their
monetary policy operations.
Central banks whose currencies appreciated, like the Swiss National Bank (SNB),
recorded negative currency translation effects.
Central banks with large investment portfolios, like the SNB, Hong Kong Monetary
Authority, and Norges Bank, were negatively impacted by the sell-off in global
bond and equity markets.
Notwithstanding the financial loss, MAS' OFR position remains strong and we
transferred S$191 billion of excess OFR to the Government in this financial year.
MAS transfers OFR above what it needs to conduct monetary policy and support
financial stability, to the Government for longer-term management by GIC.
In FY22/23, MAS transferred a total of S$191 billion of OFR to the Government.
Even after the transfer, the OFR stood at S$441 billion (or US$326 billion) as at
end May 2023. This is over two-thirds of GDP, much higher than in almost any
other country.
How does the loss recorded by MAS affect the Government Budget?
First, MAS will not accrue a contribution to the Government's Consolidated Fund
in FY22/23 but will make a contribution of S$0.4 billion based on past profits.
Like other statutory boards, MAS makes a contribution to the Consolidated Fund
based on 17% of the net profit for the year, after offsetting cumulative losses from
previous financial years.
In the case of MAS, as our net profits vary considerably from year to year, our
annual contributions to the Consolidated Fund are paid in equal proportions over
three years, so as to smoothen Government's revenue volatility.
Given the loss in FY22/23, no contribution will be accrued but the Government will
still receive S$0.4 billion this FY, based on the contribution accrued for FY20/21
when MAS recorded net profits.
However, MAS is unlikely to be able to contribute to the Consolidated Fund over
the next few years. We will need to generate future profits exceeding the
cumulative losses in the latest two FYs of S$38.2 billion, before we can resume
contributions to the Consolidated Fund.
Second, the loss recorded by MAS will not affect the Government's ability to
spend up to 50% of the expected long-term real returns on the net assets
invested by MAS.
As with GIC and Temasek, up to 50% of the expected long-term real returns on
the net assets invested by MAS are available for spending by the Government
under the Net Investment Returns framework.
Under this framework, the expected long-term real rate of return on MAS' net
assets is not affected by any single year's investment performance. This rate of
return is reviewed annually and is subject to the President's concurrence.
To ensure that MAS remains well-capitalised relative to its assets, MAS increased
its issued and paid-up capital by S$25 billion to S$50 billion in FY22/23.
The last time that MAS' capital was increased was in FY11/12, from S$17 billion
to S$25 billion.
As a fully owned subsidiary of the Government, MAS returns a portion of its net
profits from time to time, taking into account its capital and reserves.
In the 11 FYs since the last recapitalisation, MAS returned a total of S$58 billion
to the Government, more than two times the amount of the latest increase in
capital.
In sum, the S$30.8 billion net loss is not cause for concern though the investment
performance bears close watching.
The loss does not impair MAS' ability to carry out its functions. More importantly,
it does not change how we will conduct monetary policy.
The loss does not result in a draw on MAS' past reserves.
The OFR position remains healthy even after MAS transferred S$191 billion of
excess OFR to the Government.
But the investment performance is likely to remain weak amid a challenging
macroeconomic and financial market environment.
A return to profitability and ability to contribute again to the Government's
Consolidated Fund will take some time.
HOW IS MAS HARNESSING THE BENEFITS AND ADDRESSING THE RISKS OF
WEALTH INFLOWS?
I will now move on to the topic of wealth flows into Singapore. This issue has attracted
much media and public interest. MAS has focused on harnessing the benefits of these
wealth inflows while addressing their risks. But before explaining how we do this, let
me try to set the wealth inflows in context.
First, as a trusted, vibrant, and well-regulated international financial centre,
Singapore has attracted large inflows of wealth to be managed here.
Assets under management (AUM) have grown an annual average of 15% during
2017 to 2021.
A broad range of investors have contributed to this growth: global and regional
institutional investors as well as individual investors.
Family offices are one particular category of individual investment. The number of
Single Family Offices (SFOs) awarded tax incentives by MAS increased to 1,100
as of end-2022, up from 700 in 2021.
Second, contrary to popular perception, the bulk of the wealth flows into
Singapore come from institutional investors and not family offices or high net
worth individuals.
Non-retail individual clients - which includes family offices, clients of external
asset managers, private trusts, and high net worth individuals - made up only
20% of the increase in total assets managed in Singapore from 2017 to 2021.
SFOs that apply for and are granted tax incentives by MAS managed about S$90
billion of assets as at 2021, less than 2% of the S$5.4 trillion total assets
managed in Singapore.
Third, wealth inflows into Singapore have little effect on the exchange rate,
domestic inflation, property prices or car prices.
The reason for this is simple: while the wealth is managed here, most of it is
invested outside Singapore.
This means that the wealth inflows typically remain in foreign currencies and have
little or no effect on the Singapore Dollar exchange rate. Singapore is just an
intermediary for these flows.
As for inflation, it has little to do with wealth inflows into Singapore, let alone the
portion due to SFOs. The step-up in inflation since late 2021 was mainly due to
sharp increases in global energy and food prices, and stronger domestic wage
growth.
As for private residential properties, purchases by all foreigners have accounted
for a low share of transaction volume over the last three years, averaging about
4%. There were no purchases by SFOs in the last three years, and their foreign
employees accounted for an insignificant number within this 4%.
Likewise, SFOs and their foreign employees account for a tiny proportion of car
purchases in Singapore.
Instead, the key risk that MAS is focused on with respect to wealth inflows into
Singapore is potential money laundering.
Be it high net worth individuals, or SFOs, MAS expects financial institutions
servicing them to apply stringent anti-money laundering controls.
Financial institutions are expected to conduct additional due diligence such as
corroborating the customers' source of wealth.
Where doubts or suspicions are flagged as part of their due diligence, financial
institutions have to take appropriate risk mitigation measures. These include not
onboarding the customer or discontinuing the relationship. If there is suspicion of
criminal activity, they have to file a Suspicious Transaction Report.
MAS has been carrying out several onsite inspections to ensure that financial
institutions' controls in the wealth management area continue to keep pace with
money laundering/terrorism financing risks.
In March this year, we issued a circular, telling financial institutions to be alert to
additional money laundering/terrorism financing risks when dealing with legal
persons and arrangements which are used for wealth management purposes,
including family offices.
Family offices in Singapore are already substantially covered for money
laundering risks.
Multi Family Offices, which manage third-party funds and are licensed by MAS,
are already subject to the same anti-money laundering controls that we apply on
all regulated financial institutions.
Likewise, the majority of SFOs in Singapore - which are granted tax incentives by
MAS - are required to have an account with a bank in Singapore, and are thus
subject to the anti-money laundering controls applied by our banks.
The remaining SFOs are likely to have engaged the services of other financial
institutions or professional services entities such as lawyers or corporate service
providers in Singapore who are similarly required to apply suitable anti-money
laundering measures on their clients.
MAS will take additional measures to strengthen surveillance and defence
against money laundering risks in the SFO sector.
Specifically, we will require all SFOs to:
notify MAS when they commence operations and also annually; and
maintain a business relationship with an MAS-regulated financial institution
that would perform anti-money laundering checks on these SFOs.
MAS will soon release a public consultation paper on these proposals.
Even as we manage the risks posed by wealth inflows, it is important that the
management of this wealth benefits Singapore and serves a larger purpose.
Private banks in Singapore, for instance, hire more than 15,000 professionals, of
which about 85% are locals.
They also generate business for other firms such as fund management
companies when their clients invest in funds managed by those companies.
Similarly, family offices create demand for external service providers such as
legal, custody, fund administration, and tax firms.
MAS has been providing tax incentives to the SFO sector to help create jobs,
generate demand for domestic service providers, and channel capital to
enterprises in Singapore.
Our incentive schemes exempt from tax qualifying SFOs' income derived from
investments managed in Singapore.
In return, the SFOs commit to manage assets, hire employees here and incur
business spending.
Specifically, SFOs applying for our tax incentives are required to:
employ a minimum of 2 to 3 investment professionals;
incur business spending of S$200,000 to S$1 million, depending on the size
of the SFO's funds; and
invest at least S$10 million or 10% of their AUM, whichever is lower, in
Singapore equities, bonds, funds, or Singapore operating companies.
As outlined by MAS Chairman Tharman Shanmugaratnam two weeks ago, MAS will be
adjusting the tax incentives for SFOs to encourage them to:
deploy their capital more purposefully to benefit Singapore and the region;
and
increase contributions towards environmental and social causes.
We will make enhancements in five areas.
First, we will encourage SFOs to participate in blended finance structures,
including those which support the region's transition to net zero. We will
introduce three new features.
One, we will broaden the scope of eligible investments to include blended finance
structures in which financial institutions in Singapore have been substantially
involved.
Two, we will give more recognition to concessional capital invested in such
blended finance structures. Concessional capital is capital that accepts lower
returns or higher risks, compared to other investors, and can help catalyse
commercial capital into worthwhile but less attractive green and transition
projects.
The ability to crowd in capital from other investors is why we want to
encourage and give extra recognition to concessional capital.
Hence, for every dollar of concessional capital invested, we will recognise it
as equivalent to up to $2 of investments for the purpose of assessing if the
SFO has met its investment requirement.
Three, we will recognise grants that SFOs give to support such blended finance
structures. Grants have no expectation of income or return of principal.
Given its deeply concessional nature, we will recognise as $2 for every
dollar of grant given to blended finance structures.
Second, we will encourage SFOs to invest in climate-related projects.
For the purpose of assessing if the SFO has met its investment requirement, we
will recognise its climate-related investments - anywhere in the world, and not
limited to Singapore.
Climate change is a global problem that is not bounded by national borders. As a
low-lying island state, Singapore is particularly vulnerable to climate change. We
should thus recognise all efforts made to address climate change issues.
Third, we will also encourage SFOs to invest in Singapore companies and the
local equity market. We will make two enhancements.
One, the scope of the tax incentive will be expanded to recognise all investments
in non-listed Singapore operating companies (including private credit), and not
just private equity investments as is the case today.
Two, we will recognise twice the amount invested in Singapore-listed equities, and
in eligible Exchange Traded Funds (ETFs) and unlisted funds which invest
primarily in Singapore-listed equities, for purposes of meeting the SFO's
investment requirement.
Fourth, we will encourage SFOs to contribute more to job creation and value
creation for the Singapore ecosystem. We will make two enhancements:
One, we will now require that at least one of the investment professionals that
SFO applicants currently need to hire is a non-family member. This will expand
the pool of available jobs for professionals in Singapore.
Two, all new SFO applicants will have to now meet the business spending
requirement solely from spending locally unlike previously when this could be met
with overseas spending. This will help channel greater benefits to
Singaporebased businesses and service providers.
Fifth, we will encourage SFOs to conduct philanthropic activities through
We will make two enhancements.
Singapore, both locally and overseas.
One, to encourage giving locally, we will recognise donations to local charities
alongside normal business spending.
Two, to encourage giving overseas using Singapore family offices as a base, we
will launch today the Philanthropy Tax Incentive Scheme (PTIS) for family offices.
The PTIS, which was announced in Budget 2023 and will go live on 1
January 2024, will allow qualifying donors in Singapore to claim 100% tax
deduction, capped at 40% of the donor's statutory income, for overseas
1
donations made through qualifying local intermediaries.
We hope the introduction of PTIS will encourage philanthropic giving to
become a regular, professional feature of family offices here.
HOW IS MAS SAFEGUARDING THE OFFICIAL FOREIGN RESERVES AGAINST
CLIMATE RISKS?
Let me say a few quick words about our 2023 Sustainability Report which we are
releasing today alongside our Annual Report. The Report gives a good account of how
sustainability is integrated across MAS' various functions:
as a central bank safeguarding Singapore's OFR against climate risk;
as a financial regula