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July 27, 2018

IMF published its staff report under the 2018 Article IV consultation with Singapore. Directors noted that the financial sector remains healthy, with adequate buffers and strong balance sheets for banks. Directors welcomed the efforts of the authorities to strengthen the regulatory framework in line with Basel III principles and to enhance the anti-money laundering/countering the financing of terrorism (AML/CFT) framework.

The report reveals that staff welcomes the authorities’ efforts to strengthen the regulatory framework in line with Basel III principles. The authorities implemented a leverage ratio requirement of 3% and revised securitization framework from January 2018, along with the adoption of liquidity requirements. All domestic systemically important banks are required to meet the Net Stable Funding Ratio requirements on all currency level since January 2018, in addition to the Liquidity Coverage Ratio requirements. Moreover, in July 2017, enhancements to the resolution regime was introduced, including statutory bail-in, recovery and resolution planning, and creditor compensation framework. Overall, the asset quality of the banking system has improved and provisioning buffers remain adequate. Industry-wide stress tests show that the banking system is resilient to a significant deterioration in external and domestic conditions and sector-specific shocks. The authorities, however, consider that banks’ liquidity management warrants closer monitoring. They also noted that banks’ diversified funding sources and liquid assets, which are well above the regulatory minimum, are important mitigating factors. It is also recommended that the authorities should closely monitor the banking system’s rising foreign currency loan-to-deposit ratio for non-bank exposures. 

Additionally, the report highlights that Singapore is a financial hub with global innovation aspirations. MAS appropriately supports development of a fintech ecosystem while adapting financial regulations to the changing landscape. Risks associated with fintech developments are closely monitored and increasingly integrated in the supervisory agenda. Risks related to ML/TF, cyber-security, and consumer protection are also carefully being monitored. MAS has been at the forefront of cross-border regulatory cooperation: it has established a regional industry sandbox in partnership with International Finance Corporation and ASEAN Bankers Association and has put in place information-sharing arrangements on fintech developments. Staff also welcomed the authorities’ support of the industry’s development of potential technological solutions to AML/CFT risks using regulatory technology (regtech) and supervisory technology (suptech), including the launch of the AML/CFT Industry Partnership (ACIP) Work Group on data analytics.

Moreover, the Directors encouraged the authorities to continue to support the development of a fintech ecosystem while regulations would require adaptation to emerging risks. Directors also noted that the upcoming 2019 FSAP intends to examine the financial sector issues in detail and will follow up on the emerging risks, including fintech-related risks and their implications for the banking sector. 

 

Related Link: Staff Report

Keywords: Asia Pacific, Singapore, Banking, Article IV, Basel III, Fintech, Regtech, Suptech, IMF

 

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