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MAS dismisses talk of Singapore banking crisis

Deputy MD notes that industrywide stress tests last year show that the banking system remains resilient
Thursday, February 25, 2016 - 05:50

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Singapore's banking system remains well-capitalised and diversified, said the Monetary Authority of Singapore (MAS) on Wednesday, dismissing market talk of a banking crisis building up.

Singapore

SINGAPORE'S banking system remains well-capitalised and diversified, said the Monetary Authority of Singapore (MAS) on Wednesday, dismissing market talk of a banking crisis building up.

MAS deputy managing director Jacqueline Loh said: "Local banks' capital adequacy positions are well above regulatory minimums, and liquidity positions are strong.

"I would also add that the overall asset quality of loans in the banking system remains healthy, despite NPLs (non-performing loans) having picked up in recent quarters."

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She noted that NPL ratios remained at under 2 per cent as at end-December 2015, and that classified loans arising from the commodities sector continued to be "manageable".

"Banks have importantly enhanced their monitoring of commodity prices and exposures to better manage their asset quality."

She noted that MAS conducts regular industrywide stress tests, with the 2015 exercise indicating that Singapore's banking system "remains resilient to a range of adverse outcomes that we use in our stress tests".

Her remarks come on the back of fears that a banking meltdown could take place - a perception that all three local banks have been fighting hard to debunk.

DBS chief executive Piyush Gupta said this week: "The charitable view is that people are misinformed. The less charitable view is that people have an axe to grind."

The quarterly Economic Survey of Singapore report by the Ministry of Trade and Industry (MTI), released on Wednesday, said that the finance & insurance sector grew by 2.4 per cent year on year in the fourth quarter - down from the 4.6 per cent expansion in the previous quarter.

Ms Loh said that the sector's more muted performance reflected, at least in part, concerns over slowing growth in the region and the sustainability of corporate debt levels amid rising interest rates. "Notably, offshore non-bank lending fell by 5.9 per cent year on year in the fourth quarter, with credit extended to East Asia registering the largest decline."

For the year as a whole, the finance & insurance sector expanded by 5.3 per cent. While this was slower than 2014's 9.1 per cent growth, she stressed that the sector's 2015 expansion outpaced the rest of the economy.

"From time to time, heightened bouts of volatility can impact the more sentiment-sensitive sectors such as fund management, but the structural factors (such as the rise of wealth in the region), we think, will continue to keep these sectors well supported."

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