Singapore banking system sound, resilient to external shocks: MAS

SINGAPORE'S financial markets have remained stable through 2014, but banks will have to be watchful of liquidity and credit risks, the Monetary Authority of Singapore (MAS) said in its annual Financial Stability Review on Thursday.

According to the report by the central bank's Macroeconomic Surveillance Department, Singapore's banking system is sound and remains resilient to external shocks. Asset quality is healthy. The local banks' capital adequacy positions are well above regulatory requirements, and their liquidity positions are sound.

The results of MAS' industry-wide stress test also indicate that banks would be able to meet regulatory capital requirements even under severe stress conditions.

"The banking system is self-sufficient in funding domestic borrowing needs. Nonetheless, a potential tightening in foreign currency funding and liquidity could pose risks that bear close monitoring,'' MAS said.

It added that banks should continue to maintain good credit underwriting practices and ensure that provisioning is prudent and robust to counter potential stress conditions. They should also continue to monitor and address risks arising from stresses to foreign currency funding and liquidity

"As global monetary conditions continue to evolve, MAS will continue to assess risks to the banking system from rising cross-border exposures, refining both quantitative and qualitative indicators and taking action where necessary,'' MAS said.