The Monetary Authority of Singapore (MAS) issued an update on the resolution framework for banks and announced that Credit Suisse Group AG will continue operating in Singapore with no interruptions or restrictions, following the announced takeover by UBS Group AG. MAS also imposed on DBS Bank Ltd an additional regulatory capital requirement, following the widespread unavailability of DBS Bank’s digital banking services on March 29, 2023 and a subsequent disruption to its digital banking and ATM services on May 05, 2023. In another development, MAS recently hosted the inaugural Financial Sector Cloud Resilience Forum for Asia Pacific financial regulators and Cloud Service Providers to exchange views on appropriate public cloud risk management practices for the financial sector. The Forum highlighted a trend of increasing adoption of public cloud services by financial institutions, the increasing need to ensure high operational resilience, and the criticality of sharing information between cloud service providers and regulators.
With respect to the update on resolution framework, MAS states that in exercising its powers to resolve a financial institution, it intends to abide by the hierarchy of claims in liquidation. This means that equity holders will absorb losses before holders of Additional Tier 1 (AT1) and Tier 2 capital instruments. Creditors who receive less in a resolution compared to what they would have received had the financial institution been liquidated would be able to claim the difference from a resolution fund that would be funded by the financial industry. The creditor compensation framework will also apply in the exceptional situation where MAS departs from the creditor hierarchy in order to contain the potential systemic impact of the financial institution’s failure or to maximize the value of the financial institution for the benefit of all creditors as a whole. MAS’ resolution framework is in line with the Financial Stability Board’s Key Attributes of Effective Resolution Regimes for Financial Institutions.
AT1 bonds in Singapore are offered in the wholesale market, which is only for institutional investors accredited investors or transactions in denominations of at least SGD 200,000. No prospectus for the offering of AT1 bonds to retail investors has been registered with MAS. 6. As with other investment products, financial institutions that offer or distribute AT1 bonds are expected to make accurate and clear disclosures of key product features and risks to investors. Investors should understand the risks and rewards, and exercise due care in their selection of investment products.
Keywords: Asia Pacific, Singapore, Banking, Basel, Regulatory Capital, Resolution Framework, UBS-Credit Suisse, DBS Bank, Cloud Service Providers, Operational Resilience, MAS
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