MAS consults on tiered governance rules for banks and insurers

Introduction

On 30 September 2026, the Monetary Authority of Singapore (MAS) announced that it has published a consultation paper proposing targeted amendments to existing corporate governance regulations for (i) banks, (ii) insurers, and (iii) designated holding companies which have either a bank or insurer subsidiary (or both) (i.e., designated financial holding companies). This client brief will focus on banks and insurers as there are very few financial holding companies designated by the MAS.

At a high level, the amendments seek to:

1. Refine the criteria for determining whether a director is independent from management, business relationships, or substantial shareholders. This will affect whether a director is qualified to be treated as an independent director for the purposes of board and committee composition requirements.
2. Increase the minimum board size and the minimum proportion of independent directors for banks and insurers with higher systemic importance to strengthen board oversight and increase the breadth of expertise available.
3. Extend prior approval requirements for persons holding certain key appointments in banks and insurers which have higher systemic importance and remove prior approval requirements for other board and senior management appointments in entities with lower systemic importance or those with limited retail reach. 

Interested parties should provide feedback to the MAS by 9 December 2026.

Changes to criteria for assessing directors’ independence

Banks and insurers (other than marine mutual insurers) which are incorporated in Singapore (locally incorporated financial institutions (FIs)) are subject to director independence rules, under which independence is assessed across different criteria. The MAS proposes to refine the assessment criteria as follows:

1. Independence from management relationships: A locally incorporated FI currently assesses whether a director has a management relationship with the locally incorporated FI itself or with any of its subsidiaries. The MAS proposes extending this assessment to cover the employment roles (which come with management responsibility) of (1) the director with the locally incorporated FI’s related corporations and (2) the director’s immediate family members with the locally incorporated FI, its subsidiaries, and its related corporations.
2. Independence from business relationships: A locally incorporated FI currently assesses whether a director has a business relationship with the locally incorporated FI itself or any of its subsidiaries. The MAS proposes extending this assessment to cover the locally incorporated FI’s related corporations but limiting the scope of relationships through a materiality threshold. This means:
   1. In addition to considering whether a director has a business interest in entities which have made payments to or received payments from the locally incorporated FI or its subsidiaries, a locally incorporated FI must take into account such dealings (1) between the director and the locally incorporated FI’s related corporations and (2) between the director’s immediate family members and the locally incorporated FI, its subsidiaries, and its related corporations.
   2. The criteria will be limited to significant payments. The intention is to carve out routine payments in the ordinary course of business on an arm’s length basis (e.g., credit card fees, insurance premiums paid by the entity to the locally incorporated FI). The determination of what constitutes a “significant payment” will be made by the Nominating Committee (NC), based on factors such as the amount, nature and materiality of the payments. 
3. Independence from substantial shareholder: Currently, a director will not be considered independent from a substantial shareholder if they are “connected” to that substantial shareholder (e.g., by being a director or employee of the substantial shareholder or its affiliate). 
   1. There is a carve-out where a director can still be considered independent notwithstanding a “connection” to a locally incorporated parent company carrying on the same banking or insurance business (i.e., where the locally incorporated FI is a bank and they are a director or employee of another locally incorporated bank which is its parent).
   2. The MAS proposes expanding this carve-out to include parent companies which (1) carry on the other type of financial business (i.e., where a locally incorporated bank owns a locally incorporated insurer) or (2) are holding companies which do not carry on any business (and which are not designated by the MAS). However, this carve-out will be limited to parent companies which wholly own the locally incorporated FI.
4. Nine-year tenure limit: Currently, a director who has served on the board for nine continuous years or more cannot be deemed independent. 
   1. The MAS proposes to limit this requirement to an aggregate period of nine years, meaning that a break in between appointments does not reset the nine-year count.
   2. In addition, the MAS proposes to apply the nine-year tenure limit to cases where the existing corporate governance regulations only require directors to be independent from management and business relationships. This is particularly relevant to board and committee requirements for locally incorporated FIs with a majority substantial shareholder. 

Changes to composition requirements for boards and committees

The MAS also proposes to refine board and committee composition requirements for locally incorporated FIs, as follows:

1. Banks other than domestically systemically important banks (DSIBs) will be required to have a minimum of five directors, regardless of whether they are locally or foreign owned. DSIBs will be required to have a minimum of seven directors. All insurers will be required to have a minimum of five directors except for Tier 2 insurers (which will remain subject to the existing minimum of three directors).
2. All full banks (including DSIBs) and domestically systemically important insurers (DSIIs) must ensure that a majority of both the board and its Executive Committee (EXCO) are fully independent (i.e., are independent from management, business relationships, and substantial shareholders and meet the nine-year tenure limit), regardless of whether there is any majority substantial shareholder. For wholesale banks and Tier 1 insurers (other than DSIIs) with a majority substantial shareholder, a majority of both the board and its EXCO must not only be independent from management and business relationships but also meet the nine-year tenure limit.
3. Banks and insurers (except Tier 2 insurers) which are subsidiaries of another bank or insurer will not only be required to establish an Audit Committee (AC), but also a Risk Management Committee (RMC). For such banks and insurers, a dedicated NC and Remuneration Committee (RC) continue to be non-mandatory, subject to certain conditions.
4. Other proposals include changes to the minimum number of directors within the NC and the proportion of independent directors within the NC, RC, and RMC, which will apply differently depending on the degree of systemic importance of the locally incorporated FI. The MAS will also expressly set out the key responsibilities of the board and refine the scope of responsibilities of the various committees.

Changes to requirements for approval of key appointments

The MAS has also proposed the following changes to the existing requirements to seek approval for key appointments.

1. With the exception of DSIBs, all locally incorporated banks will only need to obtain prior approval for the appointment of the NC chairman, instead of all members of the NC. The same applies to Tier 1 insurers other than DSIIs. NC chairmen of both DSIBs and DSIIs must seek two separate approvals for their role as chairmen and as NC members.
2. All DSIBs and their branches must seek approval for the appointment of a Chief Information Officer. The existing requirement for DSIBs to seek approval for the appointment of a Chief Financial Officer and Chief Risk Officer will apply not only to the Singapore head office, but also to their branches. 
3. With the exception of DSIBs, all other banks and merchant banks (including Singapore branches of foreign-incorporated banks or merchant banks) will no longer be required to seek approval for the appointment of the Head of Treasury.

Other key changes

These include the following:

1. For locally incorporated banks:
   1. Applying to the EXCO the same local representation requirements which apply to the board (i.e., regarding the proportion of Singapore citizens or permanent residents).
   2. Relaxing the prohibition on individuals employed in a management role with the bank being concurrently employed by or holding a management role in a parent company (other than a bank or holding company) or upstream group entities. The MAS proposes to limit the prohibition to individuals who are concurrently employed by a non-financial entity in the group (i.e., carrying on unregulated business), but will require the NC to assess any proposed appointments for conflicts of interest and the bank to notify the MAS of such concurrent appointment (including measures to mitigate conflicts of interest).
2. For locally incorporated insurers:
   1. Changes to how Tier 1 and Tier 2 insurers are defined. The total asset threshold for a direct life insurer to fall within Tier 1 will be increased from SGD 5 billion to SGD 10 billion, and the gross premium threshold for a reinsurer to fall within Tier 1 will be increased from SGD 500 million to SGD 2 billion. There are no changes to how a Tier 1 direct general insurer is defined.
   2. Appointments of directors for all insurers (except Tier 2 insurers) are limited to three years. This is in line with existing requirements for locally incorporated banks.

Separately, the MAS is also seeking views on whether the requirement for locally incorporated FIs to publicly disclose their material related party transactions should be retained. 

Transitional period

While the MAS has indicated a two-year transitional period, this does not apply to proposals which it considers to be either (i) already in line with current practices (e.g., the nine-year limit applying on an aggregate basis and updates to the responsibilities of the board and its committees) or (ii) a relaxation of existing requirements. Proposals in these two categories will take effect immediately when the revised corporate governance regulations come into effect.

Conclusion

The proposals build upon earlier revisions made in 2021 to the Guidelines on Corporate Governance, which apply to locally incorporated FIs and serve to further strengthen corporate governance practices and safeguards while applying more stringent requirements on a risk-appropriate basis to FIs with greater systemic importance or retail reach. 

The proposed changes also clarify and calibrate existing requirements to better reflect the MAS’ regulatory intent, while reducing its supervisory burden by limiting the requirements which apply to FIs which operate at a smaller scale or serve a non-retail customer base.

For FIs expected to be subject to the more stringent requirements, it is advisable to take immediate action, especially for changes which are not covered by the two-year transitional period. FIs should also review their board composition and refresh their assessment of director independence by taking into account relationships and dealings involving directors and their related corporations.

Please contact the authors or your regular Reed Smith contact if you would like to discuss.

Client Alert 2026-198