MAS Amends Notices on Risk-Based Capital Adequacy Requirements
MAS revised Notices 637 and 1111 on the risk-based capital adequacy requirements, along with Notice 656 on the exposures to single counterparty groups for banks incorporated in Singapore. The revised notices will be effective from July 01, 2021. MAS also announced that Notice 639 on exposures to single counterparty groups dated June 06, 2007 has been cancelled, with effect from July 01, 2021.
The MAS Notice 637 (Amendment) 2021 reflects amendments to the Notice 637 and specifies that the transitional arrangements for adoption of the standardized approach for counterparty credit risk (SA-CCR) and the revised capital requirements for bank exposures to central counterparties will cease on December 31, 2021. The MAS Notice 637 (Amendment) 2021 also reflects amendments that set out an alternative treatment for the measurement of derivative exposures for leverage ratio calculation, using a modified version of SA-CCR, and amendments to implement other technical revisions to the credit risk framework. The Notice 637 applies to locally incorporated banks and sets out the capital adequacy ratio and leverage ratio requirements, along with the methodology and process for calculating these ratios. The notice also sets out requirements for the internal capital adequacy assessment process, public disclosure requirements in relation to the capital adequacy and risk exposures, and data submission and disclosure requirements on the indicators for assessing the systemic importance of global banks.
Another notice that MAS revised is Notice 1111, which sets out the capital adequacy ratio requirements for a locally incorporated merchant bank, along with the methodology and process for calculating this ratio. The reporting merchant banks shall submit information on their capital adequacy requirement, calculated according to the requirements and guidelines of the notices in the format of the reporting schedules set out in Annexes and such other reporting schedules as MAS may specify.
Finally, the MAS Notice 656 (Amendment) 2021 makes changes to Notice 656 to reflect the development that the transitional arrangements for adoption of the standardized approach for credit risk under Notice 637 will cease on December 31, 2021. MAS Notice 656 (Amendment) 2021 also reflects amendments to Notice 656 to refine the definitions of “counterparty, covered bonds, multilateral development bank, and mortgage institution.” In addition, the amendments clarify the treatment for an exempt exposure that is secured by eligible financial collateral or eligible credit protection and set out other technical and editorial revisions. Notice 656 sets out limits on exposures of a locally incorporated bank to a single counterparty group, type of exposures to be included in or excluded from those limits, basis for computation of exposures, eligible credit risk mitigation techniques, and approach for aggregation of exposures.
Effective Date: July 01, 2021
Keywords: Asia Pacific, Singapore, Banking, Counterparty Credit Risk, Credit Risk, Liquidity Risk, Reporting, Basel, Regulatory Capital, SA CCR, MAS
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