THE COMPETITION LAW AND POLICY IN SINGAPORE : THE BANKING INDUSTRY

Abstract

Law and economics are intimately related and in essence inseparable. By imposing rules of conduct which are binding on individual members of society, law seeks to maintain social order and promote the harmonious and safe coexistence of individuals, thereby ensuring the welfare of society. Economics, on the other hand analyses the implications of such laws and policy on the welfare of individuals and society, and access the efficacy of imposing such restraints. One aspect of law and economics that is of great interest is the competition law and policy imposed on industries. Competition policy are laws are that govern business conduct and practices so as to encourage competitive behaviour in the banking sector. It involves policies that would in general affect the market structure of the banking sector and ensure equal business opportunities. This study examines such policy in the banking industry of Singapore and evaluates the implications on the level of competition as a result. The central body governing the banking institutions in Singapore is the Monetary Authority of Singapore. It supervises the banking institutions under the guidance of the Banking Act 1983 and other various legal publications. Unfortunately, many of the written laws are not explicit and hence do not quite reflect the policy implications. Upon examinations of empirical data and comparative study of Singapore's policy vis-a-vis a liberal banking system like the United Kingdom, it is found that the banking policy in Singapore does not quite encourage competition. Specifically, it protects domestic banks from international competition by indirectly favouring the domestic banks. Consequently, high levels of market concentration exists in the banking industry caused by market dominance of the Big Four.