The Monetary Authority of Singapore (MAS) is seeking feedback on the recommended changes to the regulatory framework for large exposures of Singapore-incorporated banks under the Banking Act and MAS Notice 639. These changes will be implemented from 1 January 2019.
BankBazaar Singapore – January 4, 2018
SINGAPORE: In April 2014, the Basel Committee published ‘Supervisory Framework for Measuring and Controlling Large Exposures’ on Banking Supervision (BCBS). MAS has suggested the current revisions based on this standard. The closing date for bank to submit feedback is 12 February 2018.
The proposals will replace the current regulatory requirements set out in MAS Notice 639. The objective of these suggestions is to restrict the bank’s concentration risks from a counterparty or a single counterparty group. Currently, MAS Notice 639 imposes an exposure limit of 25% of total capital on a Singapore-incorporated bank’s exposure to any connected counterparty group along with shareholder and direct group.
Some of the suggested proposals to the regulatory framework for large exposures of Singapore-incorporated banks are as follows:
- Singapore-incorporated banks be subjected to large exposures limit, supporting the Basel large exposures framework (except for intraday interbank exposures).
- To constrict the large exposures limit from 25% of the total capital to 25% of Tier 1 capital.
- To exempt related corporations of a Singapore-incorporated bank such as a bank or its parent company from exposures, unless it is the bank’s subsidiaries with over one year residual maturity.
- A limit of 15% of Tier 1 capital for a G-SIB that is headquartered in Singapore to another G-SIB and for other financial institutions to set an internal exposure limit.
- Banks to assess the possible financially-dependant counterparties if the exposures to a counterparty exceeds 5% of Tier 1 capital.
- Removal of the limit on bank’s investment in individual index or funds.
MAS is seeking comments and feedback from banks on the suggested scope of exempt exposures, on the treatment of exposures to investment funds and securitisation vehicles, and on the implementation date of January 1, 2019.