MAS strengthens financial sector, lists systemically important banks

[strongman93]

In a further step to strengthen the financial sector and ensure that it is resilient in the face of an economic crisis, the Monetary Authority of Singapore (MAS) yesterday published its framework for identifying and supervising domestic systemically important banks (D-SIBs) and announced the inaugural list of seven D-SIBs in the Republic.

D-SIBs are banks that are assessed to have a significant impact on the stability of the financial system and proper functioning of the broader economy, and the MAS will apply additional supervisory measures on these lenders.

The MAS has designated as D-SIBs the three local lenders, DBS Bank, Oversea-Chinese Banking Corp (OCBC) and United Overseas Bank (UOB), as well as Citibank, Malayan Banking, Standard Chartered Bank, and the Hongkong and Shanghai Banking Corp.

Source: http://goo.gl/YT42kc

[runicx]

Thanks for the link. If I understood the article correctly, does it indirectly mean that no matter what kind of financial meltdowns, MAS will not allow these 7 banks to go down under? As per the case of citibank in the US.

[strongman93]

I think the term too big too fail is still somewhat hard to understand. I think the MAS will monitor the credit of these banks closely. prevention is better than cure right... It is like what they are implementing the TDSR and high stamp duty on the properties market.

But some people are still just have cash to buy properties even they have to pay absd or invest overseas. because investors are not feeling good when they have too much cash in hand.

[tanjm]

it basically means that MAS will want these banks to show they have adequate capital cushion to cover losses over and above other banks. It comes in the form of higher Basel 3 capital ratios (meaning they need to set aside more riskless or near riskless capital for a given amount of business). It also comes in the form of requiring all such banks to incorporate in Singapore (meaning that their capital and regulations have to be local).

In theory, this can lead to decreased margins if banks are forced to either reduce business or raise capital, but I believe the big 3 May already be compliant so non news for them.