MERCHANT BANKING IN SINGAPORE

Abstract

Since the launching of the Asian Dollar Market in 1968, Singapore has grown into a respectable international financial centre. In addition to the established commercial banks which are providing traditional trade finance, there has been an influx of new types of institutions including merchant banks into Singapore since the early 1970s. While the merchant banks are collectively registered under the Companies Act and subject to strict supervision by the Monetary Authority of Singapore, it is indeed rare to find two or more of these financial institutions performing the exact functions. These merchant banks, ranging from the pure breed to the thoroughly mixed bred, individually adds to greater depth and breadth of Singapore's financial centre. In the face of changes in the world economic structure, some factors that contributed to the advent of merchant banks into Singapore may no longer seem valid. However, the maturity of this industry should continue to boost Singapore as a formidable financial centre in Southeast Asia. Chapter two defines a merchant bank and describes its services and functions. It also shows the structure and organization of a merchant bank. As most of the merchant banks in Singapore are foreign owned, it is possible that each merchant bank will function differently, according to the shareholders' concept of merchant banking. Here, the functional differences between merchant banks owned by different countries are examined. This chapter ends with a brief description of merchant banks in East Asia. Chapter three deals with the advantages that merchant banks strategic in Singapore location enjoy. Some are natural advantages, for example, while others are the government's movements to encourage Singapore's development into a financial centre. This chapter also examines the regulatory unfavourable regional events which affect their performance. Chapter four focuses on the role of merchant banks in Singapore. One area examined is how merchant banks in Singapore may be able to use their expertise to help the neglected small and medium-sized enterprises. Finally, the problem of the merchant banks' future is dealt with. This chapter centres on two aspects of merchant banking: domestic and international. Within Singapore. the performance of the merchant banks in the last fifteen years is compared to that of commercial banks and finance companies. This is one possible way of predicting the future performance of merchant banks. On an international 'front, the regional role of merchant banks in Singapore is also discussed. This mini thesis ends with a discussion of the qualities that merchant banks in Singapore must capitalize on in order to thrive.