From my perspective, there is a combination of factors:
1) Singapore govt wants to provide the impression that Singaporeans are given an opportunity to excel in Singapore. Hence, the pressure for Banks & FIs to have more Singaporeans on the top management. Don't forget, when is the next election. Its all about strategic planning.
2) Similar to (1), the Singapore govt is keen to bring back talents to Singapore. If you look around, there are very few excellent locals who can do a CEO or CFO job. There is also the perception that, because they are locals, they will get lower salary, compared to an expat who is doing the same role in Singapore. It will take some time, before a truly qualified Singaporean get paid the same kind of money an expat CEO/CFO is earning. Steps have to be put in place to move towards this direction.
3) While it is easy to say, if Singapore make itself less attractive or less business-friendly, banks/FIs can always take their business overseas. But, this is not what MAS is trying to do. They are merely "suggesting" and "encouraging". But, lets be realistic here. Whenever MAS issued a guidelines, you better have strong justifications if you don't plan to fully implement it, even though it is only a "guidelines". In reality, there are a lot of factors ranging from licensing, existing team in Singapore, relocating the entire business, clients, etc.
Essentially, the MAS is not saying, everyone must be Singaporean. However, there should be more Singaporeans. The question is of course, how many more" is considered sufficient. This will definitely be revolving, and it is also dependent on the size of the organizations as well. If there are 10 members on the Board, all expats currently, the question that will be asked would be, "Is it worthwhile to consider having 1 or 2 members who are Singaporean?"
If the business is large enough, it might be worthwhile to make this change. Now, the MAS would say, you can start with 1 or 2. In 5 years time, they would say the organization had done well with a few Singaporeans, maybe its time to have more Singaporeans on the Board. Again... this is done slowly and strategically.