IMF published a report presenting results of the Financial System Stability Assessment (FSSA) of Singapore. Additional reports that were published include a staff report under the 2019 Article IV consultation as well as four technical notes and a report on the detailed assessment of observance (DAO) of CPSS-IOSCO principles for financial market infrastructures (FMIs) under the Financial Sector Assessment Program (FSAP). The technical notes cover implications of fintech for regulation and supervision of financial sector; financial stability analysis and stress testing; crisis management and resolution; and developments in macro-prudential policy. MAS published a statement welcoming the positive assessment of financial system in the country, highlighting that it will review the IMF recommendations within the reports and undertake appropriate measures to further strengthen financial oversight.
The FSSA report highlights that main parts of the financial system appear resilient, even under adverse scenarios. The financial health of major banks in Singapore—particularly their sizable capital buffers and strong profitability—allows them to absorb the sharp increase in credit losses in severe but plausible scenarios of the solvency stress tests of FSAP. Similarly, insurance companies have strong capital positions, though stress tests point to vulnerabilities in parts of the sector. However, banks’ overall liquidity position is mixed—domestic currency liquidity is comfortable, but U.S. dollar liquidity is vulnerable to stress conditions. Banks prudently rely mostly on deposits for funding. Results of the FSAP cash-flow stress tests confirm the vulnerability in U.S. dollar liquidity. Given the importance of dollar funding and liquidity for banks and economy in Singapore, strengthening foreign exchange liquidity of banks should be a priority.
Through the proactive use of macro-prudential policy, MAS has demonstrated its ability and willingness to act to suppress emerging threats to financial stability. More broadly, the strong framework for financial oversight has been enhanced further in recent years. The FSAP assesses the soundness and resilience of financial system in Singapore, with a focus on cross-border linkages and financial technology. The 2013 FSAP undertook a comprehensive and detailed assessment of the financial system and its oversight in Singapore and found the MAS supervision and regulation to be very strong. The 2019 FSAP follows up on the findings and recommendations of the 2013 FSAP and takes a deep look at risks related to the cross-border links of the financial system and the challenges posed by the current and prospective financial innovation. MAS and government of Singapore have implemented many reforms to address the recommendations of the 2013 FSAP.
Some important reforms include the adoption of the new International Financial Reporting Standards, the implementation of Basel III capital and liquidity requirements and enhancements to the framework for crisis resolution and safety nets. Building on this progress in financial sector reform, the next steps should focus on enhancing the resolution framework, including by extending the new bail-in powers to senior unsecured creditors, strengthening the MAS’ Resolution Unit, and by developing guidelines and playbooks for the new resolution tools. It would be important to ensure more resources for the oversight of the New MAS Electronic Payments and Book Entry System (MEPS+).
MAS has managed to strike a good balance between promoting financial innovation and preserving financial stability, investor protection, and financial integrity; however, this is a challenge that will require continued vigilance, not least to minimize potential reputational risk. One area where the balance between supervision and the promotion of financial innovation could be improved is in the requirement of pre-notification of material outsourcing arrangements if MAS is not satisfied that a bank has managed its outsourcing risk adequately. Financial innovation has amplified the risk of cyber events and MAS is at the forefront in international efforts to reinforce cyber resilience.
- FSSA Report
- Staff Report
- Note on Fintech
- Note on Stress Testing
- Note on Crisis Management and Resolution
- Note on Macro-Prudential Policy
- DAO on CPSS-IOSCO Principles for FMIs
Keywords: Asia Pacific, Singapore, Banking, Insurance, Securities, FSSA, Article IV, FSAP, Technical Notes, Basel III, Stress Testing, Macro-Prudential Policy, Financial Stability, Resolution, Fintech, IMF
PRA published a statement that explains when to expect further information on the PRA approach to transposing the Capital Requirements Directive (CRD5), including its approach to revisions to the definition of capital for Pillar 2A.
SRB published the work program for 2021-2023, setting out a roadmap to further operationalize the Single Resolution Fund and to achieve robust resolvability of banks under its remit over the next three years.
EIOPA is consulting on the relevant ratios to be mandatorily disclosed by insurers and reinsurers falling within the scope of the Non-Financial Reporting Directive as well as on the methodologies to build these ratios.
ECB finalized guidance on the way it expects banks to prudently manage and transparently disclose climate and other environmental risks under the current prudential rules.
BCBS published a technical amendment to the capital treatment of securitizations of non-performing loans by banks.
BoE announced that the Data and Statistics Division is planning to move collection of statistical data to the BoE Electronic Data Submission (BEEDS) portal.
APRA published the updated reporting standards and guidance for the collection of Economic and Financial Statistics (EFS), following a consultation process. Also published was a response letter to the feedback received on the proposal for amending the EFS reporting standards and guidance.
EC is consulting on a draft delegated regulation to supplement the Taxonomy Regulation (2020/852) by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as environmentally sustainable.
The IFRS Foundation published material highlighting the ways in which existing requirements in IFRS standards require companies to consider climate-related matters when their effect is material to the financial statements.
FSB published a progress report on the implementation of reforms to major interest rate benchmarks, including the London Inter-bank Offered Rate (LIBOR) benchmark.