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    MAS Consults on Capital and Reporting Requirements for Market Risk

    September 13, 2021

    The Monetary Authority of Singapore (MAS) launched a consultation on the standards for market risk capital and the associated reporting requirements for banks incorporated in Singapore. The comment period for this consultation ends on October 13, 2021. The draft standards are a part of the MAS Notice 637 on risk-based capital adequacy requirements for banks incorporated in Singapore. Also published were the proposed reporting schedules and transitional arrangements associated with the draft standards. Earlier, in May 2019, MAS had launched a consultation with respect to the market risk capital requirements and it has now also published its response to the feedback received on that consultation.

    The amendments proposed in the current consultation consider the feedback received on the May 2019 consultation as well as the MAS response to feedback on the May 2019 proposals on market risk capital requirements. The May 2019 consultation had proposed revisions to implement the final Basel III reforms published by Basel Committee on Banking Supervision (BCBS), covering the minimum capital requirements for market risk (published in January 2019) and the revised standards for credit risk, credit valuation adjustment, operational risk, output floor, and the leverage ratio (published in December 2017). In its response to the feedback received on the May 2019 consultation, MAS has agreed to permit banks that maintain small and simple market risk portfolios to use the Simplified Standardized Approach for Market Risk, also known as SSA(MR), for calculating market risk capital requirements, subject to approval by MAS. To assess whether a bank’s market risk portfolio is small as part of the determination of whether to grant approval to a bank to use the SSA(MR), MAS will consider the size of a bank’s risk-weighted assets (RWA) for market risk, in absolute terms and as a proportion of the bank’s total RWA. MAS will generally consider a bank’s market risk portfolio to be small if its RWA for market risk (excluding CVA RWA) using the SSA(MR) is SGD 200 million or less, or is 2% or less of the bank’s total RWA. 

    The current consultation on market risk capital requirements sets out, in Annex B, the draft MAS Notice 637 provisions for the market risk capital and capital reporting requirements. MAS is seeking comments on the draft provisions for market risk capital requirements in Part II (Definitions), Part V (Output Floor), Part VI (Definition of Capital), Part VIII (Market Risk), and Part XII (Reporting Schedules) of the MAS Notice 637. In short, MAS has proposed draft provisions related to the following:

    • Transitional arrangements for market risk capital requirements
    • Requirements and illustrative examples for the calculation of market risk capital requirements under the standardized approach to market risk
    • Requirements for the calculation of market risk capital requirements under the internal models approach
    • Requirements for the calculation of credit valuation adjustment (CVA) capital requirements

    The proposed Part XII on reporting requirements and schedules replaces Part XII of the existing MAS Notice 637. A reporting bank must submit information related to the capital adequacy, calculated according to the requirements of Notice 637 in the format of the reporting schedules set out in Annexes 12A to 12F and such other reporting schedules as MAS may specify. The proposed Part XII sets out the scope and frequency of reporting, the transitional arrangements, and the table that summarizes the reporting schedules in Annexes 12A to 12F. MAS had earlier announced that it will implement the revised standards for market risk capital for supervisory reporting purposes, from January 01, 2023, and for compliance with capital adequacy and disclosure requirements, from January 01, 2023 or later. MAS plans to consult on the draft standards for public disclosure requirements related to the Basel III reforms at a later date.

     

    Comment Due Date: October 13, 2021

    Keywords: Asia Pacific, Singapore, Banking, Basel, Reporting, Regulatory Capital, Market Risk, Notice 637, Transitional Arrangements, Standardized Approach, Internal Model Approach, CVA, Output Floor, Simplified Standardized Approach, MAS

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