Local banks have adequate buffers to withstand stresses in credit portfolio: MAS

THE Monetary Authority of Singapore said on Thursday that local banks have adequate buffers in place to withstand stresses in their credit portfolio amid concerns over rising bad debts.

"As part of our supervision, MAS checks banks' credit underwriting and risk management practices, as well as provisioning standards to ensure they remain prudent," said a MAS spokeswoman.

"The local banks undertake regular portfolio reviews and stress tests, and have adequate buffers in place to withstand stresses in their credit portfolio," she said.

The MAS was responding to The Business Times queries on the banks' oil and gas non-performing loans (NPL) which is expected to rise further.

DBS Group Holdings, OCBC Bank and United Overseas Bank will report Q4 2016 results later this month and the spotlight is expected be on how they are managing the deterioration in asset quality. All three reported lower profits for the first nine months of 2016 due to huge jumps in NPLs mainly related to the oil and gas sector.

Analysts note that the broader economy has been sluggish and this will hurt bank earnings, not just their exposure to the struggling oil and gas sector though banks' profits will be helped by rising interest rates.

Singapore grew an estimated 1.8 per cent last year and Standard & Poor's forecast growth to remain unchanged at 1.8 per cent for 2017.

"Notwithstanding the macroeconomic outlook and slowdown in the oil and gas sector which has resulted in some asset quality deterioration, the local banks continue to have strong financial positions and remain well capitalised," said the MAS spokeswoman.

A banker said the local banks have been meeting with MAS over their NPLs and these discussions have become more intensive after the unexpected collapse of Swiber, an offshore services firm in July.