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SINGAPORE households and corporates are facing stronger instability risks from the financial markets and the political arena - but are holding up against the central bank's stress tests - said the Monetary Authority of Singapore (MAS) in its financial stability report released on Tuesday.
"External headwinds continue to grow," said MAS. "Prolonged weak growth and low interest rates have heightened global financial stability concerns. Rising political risks could impede effective policy-making."
MAS noted that while some industry sectors face headwinds, the overall corporate sector remains resilient. Households have also continued to deleverage.
"Companies should take steps to reduce balance sheet vulnerabilities, especially if they have significant leverage or foreign currency risks. Firms should also maintain clear communication with investors by providing simple and succinct financial disclosures," MAS said. "Households should stay financially prudent and manage their debt obligations with a view to retirement adequacy."
MAS's comments come at a time of rising anti-globalisation sentiment. Low growth is also biting, which could hurt corporates' debt servicing abilities, and as a result, weigh on banks' asset quality.
"Bank lending to the domestic economy continues to be healthy. Nonetheless, there has been a slowdown in lending - particularly in cross-border loans - and emerging risks to asset quality, given the challenging economic backdrop," MAS said in its report.
"Banks should continue to maintain prudent credit underwriting standards, monitor their credit portfolios actively and maintain adequate provisioning."