Ban on loans by e-wallet firms will benefit local banks: Moody's
Local banks will benefit from the impending move by the Monetary Authority of Singapore (MAS) to bar larger electronic wallet operators from lending their wallet funds, according to Moody's, a credit ratings agency.
The legal requirements that MAS is seeking to impose are "credit positive" for deposit-taking banks, including OCBC Bank, United Overseas Bank and DBS Bank, Moody's said in a report yesterday.
"The regulatory barrier will protect incumbent banks' lending margins and support revenue streams amid growing competition from fintech players," its analysts said.
STABILITY
The regulation and oversight of e-wallet operators will also keep their business growth and associated risks in check, benefiting the stability of the financial sector, the report added.
Earlier this month, The Business Times reported that larger e-wallet operators here will be required to ringfence their wallet funds under the new Payment Services Bill, slated to come into force next year.
The move is expected to apply to operators with an average daily electronic money float of over $5 million. They will have to fully secure and safeguard the funds.
Mr Ravi Menon, MAS managing director, told BT that the move is to prevent payment start-ups from straying into shadow banking .
The Moody's report added that the restrictions will help Singapore avoid the aggressive lending practices that new fintech players could potentially adopt since they face lighter regulation compared with banks.
It will also allow fintech companies to "compete rigorously to remain viable in Singapore's rapidly growing but fragmented electronic payments space", the report added.
- THE STRAITS TIMES
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