MAS Revises Capital Adequacy Requirements for Banks in Singapore

By Regulatory News

June 10, 2019

Basel III

MAS issued amendments to the Notice 637 on risk-based capital adequacy requirements for banks incorporated in Singapore. The document reflects amendments to allow the recognition of on-balance sheet netting agreements for loans and deposits for credit risk mitigation purposes, introduce proportionality for disclosure requirements, revise certain disclosure templates, and implement other technical revisions. The amendments reflected in this document shall take effect from June 30, 2019.

The information to be provided by a third party seeking authorization to assess the compliance of securitizations with the STS criteria provided for in Securitization Regulation should enable a competent authority to evaluate whether and, to what extent, the applicant meets the conditions of Article 28(1) of the Securitization Regulation. An authorized third party will be able to provide STS assessment services across EU. The application for authorization should, therefore, comprehensively identify that third party, any group to which this third party belongs, and the scope of its activities. With regard to the STS assessment services to be provided, the application should include the envisaged scope of the services to be provided as well as their geographical scope, particularly the following:

To facilitate effective use of the authorization resources of a competent authority, each application for authorization should include a table clearly identifying each submitted document and its relevance to the conditions that must be met for authorization.
To enable the competent authority to assess whether the fees charged by the third party are non-discriminatory and are sufficient and appropriate to cover the costs for the provision of the STS assessment services, as required by Article 28(1)(a) of Securitization Regulation, the third party should provide comprehensive information on pricing policies, pricing criteria, fee structures, and fee schedules.
To enable the competent authority to assess whether the third party is able to ensure the integrity and independence of the STS assessment process, that third party should provide information on the structure of those internal controls. Furthermore, the third party should provide comprehensive information on the composition of the management body and on the qualifications and repute of each of its members.
To enable the competent authority to assess whether the third party has sufficient operational safeguards and internal processes to assess STS compliance, the third party should provide information on its procedures relating to the required qualification of its staff. The third party should also demonstrate that its STS assessment methodology is sensitive to the type of securitization and that specifies separate procedures and safeguards for asset-backed commercial paper (ABCP) transactions/programs and non-ABCP securitizations.

The use of outsourcing arrangements and a reliance on the use of external experts can raise concerns about the robustness of operational safeguards and internal processes. The application should, therefore, contain specific information about the nature and scope of any such outsourcing arrangements or use of external experts as well as the third party's governance over those arrangements. Regulation (EU) 2019/885 is based on the draft regulatory technical standards submitted by ESMA to EC.

Related Links

Effective Date: June 18, 2019

Press Release

Proposed Rule 1

Proposed Rule 2

Proposed Rule 3

Presentation on Regulatory Framework (PDF)

Presentation on Resolution Plan Rules (PDF)

In the event of discrepancies between the amendments in this document and the published version of MAS Notice 637 revised on June 10, 2019 (with effect from June 30, 2019), the published version of MAS Notice 637 shall prevail. Notice 637 establishes the minimum capital adequacy ratios for a reporting bank and the methodology a reporting bank shall use for calculating ratios under Pillar 1 of Basel. In addition to complying with the minimum regulatory capital requirements in this Notice, a reporting bank shall consider whether it has adequate capital to cover its exposure to all risks. This Notice sets out the MAS expectations in respect of the internal capital adequacy assessment process of a reporting bank under the supervisory review process, under the Pillar 2 of Basel standards. This Notice also specifies the minimum disclosure requirements for a reporting bank in relation to its capital adequacy, with a view to enhancing market discipline, which is part of the Pillar 3 under Basel standards. In addition, this Notice sets out the data submission and disclosure requirements for assessing global systemically important banks.

Effective Date: June 30, 2019

Keywords: Asia Pacific, Banking, Singapore, Basel III, Capital Adequacy, Notice 637, Disclosures, Reporting, Proportionality, MAS

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