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    MAS Consults on Operational Risk and Leverage Ratio Requirements

    December 17, 2020

    MAS launched a consultation on the draft standards for operational risk capital and leverage ratio requirements for banks incorporated in Singapore; these standards will be covered in the MAS Notice 637 on risk-based capital adequacy requirements. Also published were the associated proposed reporting schedules for operational risk capital and leverage ratio requirements. The comment period on this consultation ends on January 21, 2021. In addition, MAS published its response to the feedback received on the May 2019 proposals on operational risk capital and leverage ratio requirements. MAS plans to consult on the draft MAS Notice 637 provisions for other areas of the Basel III reforms at a later date.

    MAS seeks comments on the draft provisions of MAS Notice 637 for definitions related to operational risk capital and leverage ratio requirements (Part II), scope of application (Part III), capital adequacy ratios and leverage ratio (Part IV), credit risk (Part VII), operational risk (Part IX), and reporting schedules (Part XII). The draft provisions in MAS Notice 637 take into account final Basel III reforms published by BCBS, namely the consolidated Basel framework (published in December 2019) and the Basel framework frequently asked questions (published in June 2020). Annex B of the consultation paper contains the draft MAS Notice 637 provisions, including the reporting forms. As announced earlier, MAS will implement the revised standards for operational risk capital and leverage ratio requirements from January 01, 2023. MAS will consult on the following at a later date:

    • Definition of commitments, including the exemption from the definition of commitments under a national discretion in the final Basel III reforms, which would also apply to the leverage ratio requirements. MAS will consult on the other elements of Part II for other areas of the Basel III reforms at a later date.
    • Recognition of commitments, and credit conversion factors for progressive disbursal loans, which would also apply to the leverage ratio requirements. MAS will consult on certain elements of Part IV for other areas of the Basel III reforms at a later date.

     

    Comment Due Date: January 21, 2021

    Keywords: Asia Pacific, Singapore, Banking, Basel, Reporting, Operational Risk, Leverage Ratio, Regulatory Capital, MAS

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