The Monetary Authority of Singapore, the central bank, on Thursday, Sept 8, brought into force regulations requiring financial institutions incorporated in the city-state to have independent directors making up at least a third of their boards.

The new rules also forbade the same person from holding the post of both chairman and chief executive.

"The standards of corporate governance for banks and direct insurers need to be higher than the other commercial entities, to take into account the unique roles they play in the financial system and the economy," Heng Swee Keat, managing director of the central bank, said Thursday.

"MAS will continue to review and update these standards, to ensure that they continue to remain relevant." The regulator is fine-tuning regulations to protect the island's financial-services industry, which makes up 12 percent of the $107 billion economy and which employs about 5 percent of the work force.

Shares of DBS Group Holdings, United Overseas Bank and Oversea-Chinese Banking, the top three Singaporean lenders, account for almost a third of the weighting on the benchmark Straits Times index. In the insurance sector, the rules apply only to locally incorporated direct insurers with at least S$5 billion, or $3 billion, in assets.

Those covered include Great Eastern Holdings, Prudential Assurance and NTUC Income Insurance Cooperative.

The MAS said that at least a majority of directors should have no business or management relationship with the institution and must be independent of any single substantial shareholder. Institutions that failed to respect the requirements would be fined up to $25,000 dollars, and up to $2500 a day additionally should the offense continue, the central bank said.

The regulator also said that Singapore-incorporated banks should have a nominating committee, charged with ensuring that directors appointed met requirements, and remuneration and audit committees.

Banks and insurers will have until 2007 to comply with the changes and those that are listed on the city's stock exchange should disclose their corporate governance practices and explain any deviations from guidelines, also fine-tuned and released today, in their annual reports starting January 2007.

Non-listed companies must make similar disclosures on their Web sites, the central bank said.

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