Singapore’s bank reforms, while largely
compliant with Basel III, focus on protecting its local
Although the city-state is vying to become
Asia’s financial centre, the Monetary Authority of
Singapore (MAS) has put local depositors first by requiring
some foreign banks to comply with domestic capital requirements
under Basel III.
It follows other countries
such as the US in requiring foreign banks with a
significant presence to locally incorporate.
Yap Wai Ming, director at Stamford Law, stressed that the US
and Singapore regimes are quite different. This is tailored for
Singapore’s needs, but is consistent with all
international requirements, he said.
proposed framework requires banks with over three percent
of market share with more than 150,000 small depositors to
locally incorporate. Unlike the US regulations they do not
affect financial institutions focused on investment banking
Yap believes that local incorporation of foreign banks is
necessary because these banks have an important place in the
market. "They collect a fair amount of deposits from Singapore
residents," he said.
They will be designated as domestic systemically important
banks (D-Sibs). Other D-Sibs include Singaporean banks DBS,
Oversea-Chinese Banking Corporation (OCBC) and United Overseas
- Singapore will require banks with over a three
percent market share and 150,000 small depositors to locally
- Those banks will follow Singapore’s
bank resolutions although there may be some flexibility on a
- Singapore, like other Asian jurisdictions, is
focused on crisis prevention rather than
Those domestic subsidiaries must follow local regulations,
albeit with some flexibility.
For example, in its
August consultation on liquidity coverage ratios (LCRs),
MAS noted that maintaining liquid assets by foreign bank
branches at each location was inefficient for group liquidity
management. It said that it was prepared to vary the
requirement under certain conditions and on a case-by-case
Smaller domestic and foreign banks will also be permitted to
continue using the previous liquidity framework.
Singapore has one of the region’s strongest
banking systems. According to a
Moody’s overview on global Basel III
implementation, it will require financial institutions to
hold a minimum capital adequacy ratio (CAR) plus
countercyclical buffer of 12.5% - well above Basel
III’s required 10.5%.
Only two other jurisdictions in Asia match or exceed that
ratio – the Philippines also requires 12.5%, while
Korea mandates 13%.
"We have a lot of proactive measures that the government
puts in place to ensure that we have a very robust banking
system," said Yap.
This is a politically charged issue, and it’s
not surprising that the MAS prioritises protecting its
residents’ deposits. Its focus on
banks’ deposit-taking business also means that
much of the criticism directed at the US Dodd-Frank Act, which
requires all banks with more than $50 billion of assets in the
US to incorporate locally.
Questions remain about what would happen in a global
crisis, especially how regulators would work together across
borders in which most would face similar political
" They collect a fair amount
of deposits from Singapore residents "
Singapore and other Asian jurisdictions are
aiming to stop crises before they start. A
July Moody’s compendium on bank resolution and
bail-in regimes noted that Asia-Pacific regulators have
focused on prevention rather than resolution. In particular
Singapore has no record of bank failures in the past, the
ratings agency said.
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