Pestle Analysis of Banks in Singapore

Both internal and external benefits enjoyed by the banks derived from advanced technological infrastructure provided in Singapore. To add testament to the fact, Singapore was ranked #2 globally for World Class Technological Infrastructure in 2013 by the ‘Global Pestle Analysis of Banks in Singapore By mahatma Technology Report’ [World Economic Forum, 2 Political To explain what the political landscape of the banking industry in Singapore, it means to what extend does the Government controls the economy tariffs , Labor Law, Environmental Law, Trade Restrictions, and Tax Policy.

All of these political factors implemented by the government affect the banking industry indirectly or directly and banks have to adhere to the rules and regulations set by the government whether if it is for good or bad consequences. It would be too technical to go into those details and we would look at an overview on Singapore government, on whether it is beneficial to the banking industry or is a hindrance to it. In terms of the political scene in Singapore, there are few political refulgence and negative images this is due to the efficient and transparent government.

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The government is also ranked 2nd in the world for ‘Global Competitiveness Report for year 2012-2013 [World Economic Forum, 2013]. Basically, the ranking is based on a comprehensive list of criteria such as corruption, tax rates, trades, foreign exchange controls etc. By being ranked the 2nd, it says much about the government stability, its taxation policy and trade policy. To link some of these points back to the banking industry, the government has attractive corporate tax rates of 17% where banks will receive a 30% corporate income tax rebate per year.

And the government was ranked as 5th least corrupt in the MID World Competitiveness Report from 2009. Overall, all these fugues mean that there is less tax regimes and investors are not subjected to capital tax gains, dividend tax and foreign exchange controls. These points mentioned makes the country very attractive to foreign banks who potentially want to set up branches on the shores of Singapore. Social Change in lifestyle, as Singapore is a developed country with low unemployment.

Most of its citizens are demanding high class products to spend their money on this means that their wants and needs are ever increasing at a fast pace and that they are and have the spending power to purchase more luxury goods including expensive financial products especially in the private banking sector. With the influx of foreign talents either for work purposes or to become new citizens, these people who are usually already wealthy, together with Singapore citizens actually provide opportunities for the banking industry to capitalist on these changes.

With an increase in population and wealth, people would require the services of the banks to rate accounts or do fund transfer which includes both personnel and business usage. As Singapore is a well developed country, the literacy rate is low. This means a positive impact on the banks as people would have market information at their fingertips to buy stocks, bonds and mutual funds, basically know what financial products to purchase and commit to. This means that there is a larger customer base for banks as compared to countries with high literacy rates.

According to a 2013 report produced by The World Bank, Singapore ranked 1st for ease of setting up and exiting a business. Doing Business, 2013]. This is an attractive point for businesses not only banks who consider Singapore as another location to set up their businesses. Economic The economic environment in Singapore is one of the most open and thus competitive in the world. However by being an open economy, this means that Singapore is vulnerable to global external shocks which can disrupt the economy. For example the Financial Crisis in 2008 badly affected Singapore economy.

Another external shock that affects the Singapore economy is slower than expected growth in China and prolonged US economy recovery. Singapore Business Review, 2013] This is a double edged sword for banks as they cannot control the external economic factors and are dependent on it whether it’s a strong or weak economy. Legal Monetary Authority of Singapore(MASS) is the nation’s central bank and financial regulatory authority, it oversees the administration of various statutes in the financial sector. It basically takes care of the banking regulation acts imposed by the parliament including other laws on banking.

MASS also supplies money in the economy and will change the amount of money injected into the economy to influence the level of economic activity that ultimately affects the general prices of the economy. Therefore, banks in Singapore have to adhere to the rules and regulations set by the MASS and do not have the free will to act on their own accord. This means that banks cannot manipulate certain criteria that can affect the economy in a bad way, this is another way to protect the interest of the economy. Environmental In general, banks do not directly affect the natural environment with their activities.

Even if they do affect it is insignificant. However, certain banks in Singapore are undertaking measures in sustainable development, environmental management environmental protection and even disaster relief. For example DB’S bank runs green initiatives in their offices to encourage its employees to save energy and recycle used materials. Another programmer rolled out by DB’S bank was disaster relief where the bank made generous cash contributions to charitable agencies to assist relief efforts in China earthquake and snowstorms and cyclone that occurred in Manner.

HASH in Singapore launched a Care for Nature programmer in 1989, this is a environmental conservation and education project. With their efforts they have ‘adopted’ several nature reserves in Singapore and sponsored for its upkeep and maintenance. There is no compulsory rule for banks in Singapore to have leave a green footprint in their environment. However banks with proper corporate responsibility and ethics would care about their environment. And it gives a good image to the community especially to those who are concerned with the environment.

Discussion and Evaluation By analyzing the PESTLE, the business environment of Singapore is extremely conducive for a bank to operate in. With the aid of first class technological infrastructure, banks can easily implement IT solutions to strengthen their business processes. With the strong political scene in Singapore, banks can rely on the government to have successful operations as the government is transparent and not corrupted, banks will be sure to have a fair environment to operate in without any threats from a political nature and can focus on expanding their business operations.

The social environment is favorable too for banks as customers are wealthy and banks can expand their products for instance, insurance products apart from financial products like stock and bonds. However, banks must be sure to have the right products mix together with strong marketing to attract consumers as many other banks will identify this opportunity. Legal factors are beyond the banks control and they have to adhere to the rules and regulations set by the MASS.

For environmental factors banks do not have a obligation to follow but will be strongly encouraged to do so to have a good reputation to show to the public. Furthermore, Singapore is known as the garden city and having a bank which identifies to this image will only be beneficial for itself. The only downside being found from the PESTLE is economic factor. As Singapore is a open market, it is influenced by external factors. And banks have to adapt to this scenario to do well and should have the ability to forecast global economic downturn to minimize their loss before it strikes.