MAS Sets Out Credit Review and Provisioning Requirements for Banks
MAS published Notices 612, 612A, 1005, and 1005A that set out requirements for maintaining credit files and the basic information required for objective credit assessment, grading of credit facilities, and recognizing allowance for expected credit losses; the Notices shall take effect on March 16, 2021. Notice 612 also sets out requirements specific to locally incorporated domestic systemically important banks in Singapore, including a minimum level of credit loss allowances and the setting up of regulatory loss allowance reserves. Notices 612 and 612A apply to all banks in Singapore while Notices 1005 and 1005A apply to merchant banks in Singapore.
The updated Notices 612 and 1005 cover amendments to the December 2017 version of the respective notices and, among others, address requirements for recognition of credit loss allowance in financial statements of banks, under the Singapore Financial Reporting Standard (FRS) 109 on Financial Instruments. In addition, Notices 612A and 1005A set out the credit grading treatment for the credit facilities granted support measures by banks and merchant banks, respectively, in response to the COVID-19 outbreak. Notices 612A and 1005A cover treatment of pandemic-related measures for the period beginning on January 01, 2021 and ending on December 31, 2021. In this period of disruption, banks and merchant banks have granted certain borrowers extended loan repayment moratoria. In conjunction with the extraordinary fiscal support measures for households and corporates, a longer adjustment period for creditworthy borrowers would be helpful toward the broader economic recovery and overall loan quality. Notices 612A and 1005A set out the requirements for classifying a credit facility in the context of the unique environment that banks, merchant banks, and their customers currently operate in. Notices 612A and 1005A clarify that, for the stipulated time period, a bank or merchant bank is not required to adversely classify the credit facility of a borrower just because the borrower is granted extended credit support measures. Banks and merchant banks should instead holistically assess a borrower’s ability to fully repay its credit facilities, considering the impact of the support provided to the borrower in response to the COVID-19 pandemic, either through standardized relief programs or other support measures offered by the respective banks.
Effective Date: March 16, 2021
Keywords: Asia Pacific, Singapore, Banking, COVID-19, Credit Risk, Regulatory Capital, D-SIBs, Notice 612, Notice 1005, Loan Moratorium, Loan Repayment, IFRS 9, ECL, FRS 109, Financial Instruments, MAS
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Scott Dietz
Scott is a Director in the Regulatory and Accounting Solutions team responsible for providing accounting expertise across solutions, products, and services offered by Moody’s Analytics in the US. He has over 15 years of experience leading auditing, consulting and accounting policy initiatives for financial institutions.
Previous Article
FI Publishes Reporting Updates for Banks and Investment FirmsRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.