Fitch: Singapore Banking Sector Robust; Regulation Evolving

Thu Aug 28, 2014 10:00pm EDT

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(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Singapore Banking System and Prudential Regulations here SINGAPORE, August 28 (Fitch) Fitch Ratings says that the prudential and regulatory framework for banks in Singapore remains strong. The country's central bank, the Monetary Authority of Singapore, continues to be proactive in its oversight of the banking sector, and local regulatory standards are progressing apace with global best practices, Fitch says in a new report on the Singapore banking system and prudential regulations. Singapore banks have maintained high capitalisation under the MAS's Basel III capital rules, and this is likely to remain one of their rating strengths. Minimum capital ratios required by the MAS under Basel III - at 2pp above those prescribed by the Basel Committee - are higher than those in many other jurisdictions. By 1 January 2019, the three local banks - DBS Bank Ltd., Oversea-Chinese Banking Corp and United Overseas Bank Limited - will need to meet a minimum core Tier 1 capital adequacy ratio (CAR) of 9.0%, Tier 1 CAR of 10.5% and total CAR of 12.5%. Fitch estimates that they already meet these requirements on a fully implemented basis as of end-June 2014. The three banks' funding positions are also sound, underpinned by their stable local deposit franchises. This places them in good stead to meet the MAS's new liquidity coverage rules which will apply from 1 January 2015. Singapore's competitive and mature domestic market continues to motivate the local banks to diversify and expand overseas. Loan growth has been high in recent years and Fitch expects regional growth to gradually increase the banks' risk profiles, as operating and regulatory environments in many emerging markets are still developing and the Singapore banks have modest capacities to compete with more entrenched domestic banks in these countries. However, the banks have generally been disciplined in their offshore expansion thus far. Due to the high property lending exposure of the local banks, Fitch expects the MAS to maintain a close watch over this segment. A series of macro-prudential cooling measures have been introduced since 2009 to curb rising housing loans and property exposure, which were driven by low interest rates and rising household wealth. These measures, together with the banks' satisfactory underwriting standards, should serve to mitigate the buildup of systemic risk due to property exposure in the banking sector. The special report titled "Singapore Banking System and Prudential Regulations" is available on www.fitchratings.com or by clicking on the link above. Contacts: Elaine Koh Director +65 6796 7239 Fitch Ratings Singapore Pte Ltd 6 Temasek Boulevard #35-05 Suntec Tower 4 Singapore 038986 Mikho Irawady Associate Director +65 6796 7230 Ambreesh Srivastava Senior Director +65 6796 7218 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Additional information is available at www.fitchratings.com. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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