MAS Proposes Amendments to Related Party Transaction Requirements for Banks to Enhance Oversight and Address Conflicts of Interest

Executive Summary

On 14 October 2025, the Monetary Authority of Singapore (“MAS“) issued the “Consultation Paper on Proposed Amendments to Related Party Transaction Requirements for Banks” (“Consultation Paper“). It proposes changes to MAS’ requirements on banks’ transactions with related parties (“RPTs“) to enhance oversight of RPTs, address conflicts of interest, and align with international standards including the updated Core Principles for Effective Banking Supervision (“BCPs“) issued by the Basel Committee on Banking Supervision, in light of banks’ increasingly complex structures and expanded partnerships to deliver broader financial and digital services. The consultation period ends on 14 November 2025.  

The current Requirements on RPTs are set out in the Banking Act 1970 (“BA“), MAS Notice 643 Transactions with Related Parties (“Notice 643“), MAS Notice 643A Exposures and Credit Facilities to Related Concerns (“Notice 634A“), and MAS Notice 656 Exposures to Single Counterparty Groups for Banks Incorporated in Singapore (“Notice 656“).

This Update provides a summary of the key proposed changes:

1. Expansion of the definition of “related parties” to capture sources of influence not fully addressed by the current framework;

2. Narrowed intragroup exclusion from RPT governance requirements;

3. Consolidation of the RPT requirements by moving existing limits on a Singapore-incorporated bank’s exposures to a substantial shareholder group and major stake entity group under Notice 656 to Notice 643 for greater clarity that these limits are meant to address RPT risks; and

4. Impose limits on exposures to additional related party groups.

Implementation is targeted for 30 November 2026, or at least six months after issuance of the revised Notice 643, whichever is later.

Key Objectives of the RPT Regime

1. Mitigate the risks arising from conflicts of interest in RPTs where related parties could use their influence to enter into transactions with the bank that serve to advance their interest at the expense of the bank and its stakeholders (including depositors, creditors and shareholders).

2. Manage financial risks of exposures to related parties by (i) requiring banks to report exposures and credit facilities to related parties, and (ii) imposing limits on Singapore-incorporated banks’ exposure to counterparties which include related parties.

Key Proposed Changes

1. Expanding the definition of “related parties“

Currently, Notice 643 defines a bank’s related parties as persons in the bank’s director group, key credit approver group, major stake entity group, related corporation group, senior management group and substantial shareholder group, as well as persons with conflicting interests with the bank as determined by the bank or MAS.

The proposed revision intends to capture sources of influence not fully addressed by the current framework through: 

• creating an “extended senior management group” and an “extended director group” to include persons who can exert significant influence over executive officers and directors, in addition to those whom these officers and directors themselves can influence.
• introducing a new “indirect controller group” as an additional related party group for Singapore‑incorporated banks, leveraging the existing BA definition of indirect controller to capture persons who are able to exercise control or influence over the bank beyond formal voting interests.

2. Narrowing the scope of intragroup transactions excluded from RPT governance requirements

Currently, Notice 643 excludes intragroup transactions (i.e. transactions between a bank in Singapore (or its bank group entities) and any entity in its related corporation group) from certain RPT governance requirements:

• intragroup transactions that arise from a central risk or liquidity management function or pertain to centrally coordinated services are excluded from all RPT governance requirements; and
• all intragroup write-offs and material transactions are excluded from the requirement to obtain approval of a special majority of three-fourths of the bank’s board.

MAS proposes to tighten the scope of the exclusions so that they apply only to entities within the bank group, parent bank group, or holding company group, provided that the holding company is subject to minimum prudential standards and supervision on a consolidated basis by a bank regulatory agency. This will then mean that RPT governance requirements will apply to transactions with related parties that sit outside the prudentially supervised group structure.

3. Consolidating the RPT requirements

Presently, limits on exposures to related parties under Notice 656 complement the RPT governance requirements under Notice 643, by preventing over-concentration of exposures and limiting potential losses from RPTs. However, these two sets of requirements meant to address RPT risks are currently set out in different Notices.

MAS proposes to streamline regulations relating to RPTs by moving existing limits on a Singapore-incorporated bank’s exposures to a substantial shareholder group and major stake entity group from Notice 656 to Notice 643. In addition, as the existing limits under Notice 656 do not apply on exposure to all the related party groups defined under Notice 643, MAS proposes to enhance the limit framework to more comprehensively capture and limit potential losses from each of these related party groups going forward, as further detailed below.

4. Impose limits on exposures to additional related party groups

In view of the foregoing, MAS proposes to enhance the limit framework under Notice 656. A Singapore-incorporated bank will be required to ensure its exposures to each of the related party groups does not exceed 25% of Tier 1 capital (“related party exposure limit“), where the new related party groups and expanded related party groups under Notice 643 will include:  

• Indirect Controller Group;
• Extended Director Group;
• Extended Senior Management Group; and
• Connected Related Party Group (a new related party group comprising persons specified by MAS by written notice to be a related party, and such other persons connected through a control relationship or economic dependence.

Substantial shareholder groups and major stake entity groups will continue to be subject to existing limits under Notice 656 and which will be incorporated into Notice 643. The Key Credit Approver Group (which is an existing related party group defined under Notice 643) will be subject to new related party exposure limits under Notice 643. 

In line with the proposals above, consequential amendments will be made to Notice 643A and Notice 656. MAS also clarified that the large exposure limits imposed on Singapore incorporated banks’ exposures to any individual counterparties or connected counterparty groups under Notice 656 remain.

For details on the amendments to the MAS Notices, please refer to the Consultation Paper and its Annexes, available on the MAS website here.

If you have any queries on the above, please reach out to our Team members set out on this page or KM at [email protected].