MAS published Notices 612, 612A, 1005, and 1005A that set out requirements for maintaining credit files and the basic information required for objective credit assessment, grading of credit facilities, and recognizing allowance for expected credit losses; the Notices shall take effect on March 16, 2021. Notice 612 also sets out requirements specific to locally incorporated domestic systemically important banks in Singapore, including a minimum level of credit loss allowances and the setting up of regulatory loss allowance reserves. Notices 612 and 612A apply to all banks in Singapore while Notices 1005 and 1005A apply to merchant banks in Singapore.
The updated Notices 612 and 1005 cover amendments to the December 2017 version of the respective notices and, among others, address requirements for recognition of credit loss allowance in financial statements of banks, under the Singapore Financial Reporting Standard (FRS) 109 on Financial Instruments. In addition, Notices 612A and 1005A set out the credit grading treatment for the credit facilities granted support measures by banks and merchant banks, respectively, in response to the COVID-19 outbreak. Notices 612A and 1005A cover treatment of pandemic-related measures for the period beginning on January 01, 2021 and ending on December 31, 2021. In this period of disruption, banks and merchant banks have granted certain borrowers extended loan repayment moratoria. In conjunction with the extraordinary fiscal support measures for households and corporates, a longer adjustment period for creditworthy borrowers would be helpful toward the broader economic recovery and overall loan quality. Notices 612A and 1005A set out the requirements for classifying a credit facility in the context of the unique environment that banks, merchant banks, and their customers currently operate in. Notices 612A and 1005A clarify that, for the stipulated time period, a bank or merchant bank is not required to adversely classify the credit facility of a borrower just because the borrower is granted extended credit support measures. Banks and merchant banks should instead holistically assess a borrower’s ability to fully repay its credit facilities, considering the impact of the support provided to the borrower in response to the COVID-19 pandemic, either through standardized relief programs or other support measures offered by the respective banks.
Effective Date: March 16, 2021
Keywords: Asia Pacific, Singapore, Banking, COVID-19, Credit Risk, Regulatory Capital, D-SIBs, Notice 612, Notice 1005, Loan Moratorium, Loan Repayment, IFRS 9, ECL, FRS 109, Financial Instruments, MAS
Scott is a Director in the Regulatory and Accounting Solutions team responsible for providing accounting expertise across solutions, products, and services offered by Moody’s Analytics in the US. He has over 15 years of experience leading auditing, consulting and accounting policy initiatives for financial institutions.
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