MAS Revises Notice on Risk-Based Capital Adequacy Requirements
The Monetary Authority of Singapore (MAS) decided to cancel Notice 606 on the provision for and writing off of bad debts with effect from July 21, 2022. Notice 606 had set out the requirements for all banks in Singapore to maintain adequate provisions for bad and doubtful debts as well as requirements to seek MAS approval before writing off bad debts to certain related parties. Additionally, MAS revised notice 637 on risk-based capital adequacy requirements for locally incorporated full and wholesale banks. The revised Notice 637 will take effect on January 01, 2023.
Notice 637 sets out the capital adequacy ratio and leverage ratio requirements for a locally incorporated banks, along with the methodology and process for calculating these ratios. The notice sets out the internal capital adequacy assessment process requirements as well as public disclosure requirements for a bank in relation to its capital adequacy and risk exposures. The MAS Notice 637 (Amendment) 2022 reflects changes to the MAS Notice 637 to:
- implement the revised Pillar 3 disclosure requirements for the interest rate risk in the banking book (IRRBB) that have been published by the Basel Committee on Banking Supervision
- implement a -100bps interest rate floor on the post-shock interest rates under the standardized interest rate shock scenarios set out in Annex 10C of MAS Notice 637
- provide additional clarity on the application of interest rate floors, interest rate caps, and pass-through rates when computing IRRBB under the standardized interest rate shock scenarios
- implement various other technical revisions
Keywords: Asia Pacific, Singapore, Banking, Reporting, Basel, Regulatory Capital, Notice 637, Notice 606, Credit Risk, Leverage Ratio, Pillar 3, Disclosures, IRRBB, ICAAP, MAS
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