THE Monetary Authority of Singapore (MAS) on Thursday published its framework for identifying and supervising "domestic systemically important banks" (D-SIBs) in Singapore. It also unveiled its inaugural list of such banks: DBS, OCBC Bank, United Overseas Bank, Citibank, Standard Chartered, Maybank and HSBC.
These banks will face additional supervisory measures, MAS said. For one thing, banks with a significant retail presence in Singapore will have to locally incorporate their retail operations. Maybank and HSBC are the only two on the list yet to have done so.
Locally incorporated D-SIBs will also need to meet higher capital requirements - a minimum Common Equity Tier 1 capital adequacy ratio (CAR) of 6.5 per cent, a Tier 1 CAR of 8 per cent and a Total CAR of 10 per cent - more stringent than the Basel III minimum requirements of 4.5 per cent, 6 per cent and 8 per cent respectively.
Other measures such as recovery and resolution planning, liquidity coverage ratio (LCR) requirements and enhanced disclosures will also apply, depending on the bank's operating model and structure, MAS said.
The LCR ratio, which is part of Basel III regulations, seeks to ensure that banks hold enough high-quality liquid assets to match their total net cash outflows over a 30-day period. This will tide them through market shocks which may cause short-term credit freezes.
MAS will allow a transition period for affected banks to comply with the requirements that are currently not in effect, such as the local incorporation requirement.
When contacted, Maybank said: "We have had ongoing consultations with MAS on the incorporation of our operations in Singapore and reaffirm our commitment to this. Maybank sees Singapore as a key market, and an important gateway to the rest of the region . . . Singapore is an important part of the bank's strategy to continue growing its international business."
An HSBC spokesperson said it will also be working towards locally incorporating its retail and wealth management operations in Singapore. "HSBC is committed to the Singapore market and we aim to continue growing our business and presence here in a responsible and sustainable way," the spokesperson said.
MAS deputy managing director Ong Chong Tee said: "It is important that D-SIBs . . . are able to withstand various risks and shocks. These measures will also help to insulate against negative spillovers should a D-SIB fail."
These seven banks were found to have a significant impact on the stability of the financial system and proper functioning of the broader economy here.
MAS's framework is aligned with the principles set out by the Basel Committee on Banking Supervision for determining global systemically important banks such as JPMorgan, Barclays, BNP Paribas and Deutsche Bank.
DBS chief financial officer Chng Sok Hui said that the bank "is very well-positioned to meet the requirements, with our capital ratios today already comfortably above what is prescribed under the framework".
Neeraj Swaroop, chief executive of Standard Chartered Singapore, said that the bank supports policies that help to safeguard the interests of its clients. The bank locally incorporated its retail-clients business in 2013.
Citigroup did so in 2005.
Incorporating the consumer banking business ringfences the business here and protects local monies from a global operation collapse.