| SINGAPORE, June 28
SINGAPORE, June 28 Singapore said on Tuesday it
will make its banks hold higher capital levels than those set
out under the new Basel III regulations, imposing some of the
toughest new banking rules unveiled so far across the globe.
The Monetary Authority of Singapore (MAS) intends to make
its local banks hold a higher level of top quality capital as a
proportion of their risk-weighted assets than was agreed on by
banking regulators in Basel.
Under the new rules, banks will have to hold a common equity
tier one ratio -- which is retained earnings or shares -- of 6.5
percent as well as a conservation buffer of 2.5 percent, making
a total requirement of 9.0 percent. That is two percentage
points above the Basel III rules which requires banks to hold a
total of 7.0 percent in top quality capital.
"We must maintain the high standards of financial
regulations which have become associated with Singapore," Lim
Hng Kiang, minister for trade and industry and deputy chairman
of the MAS, said in a speech.
The Basel III rules were drawn up following the financial
crisis to ensure banks were better positioned to withstand
unexpected losses. Singapore tends to set particularly strict
requirements for its banks given their systemic importance to
its domestic economy and the fact that they cater to a large
proportion of its retail banking market.
"Our financial sector has weathered several crises well. But
we cannot take this for granted," said Lim.
However the city state's three domestic banks -- DBS
, Oversea-Chinese Banking Corp and United
Overseas Bank -- along with Citigroup's
subsidiary Citi Singapore are unlikely to have to raise any new
capital to meet the new rules.
They already hold high levels of capital, with DBS reporting
a tier one capital ratio in 2010 of 15.1 percent.
"DBS maintains a robust core capital position and has strong
capital generation capabilities to pay dividends and support
business growth," CEO Piyush Gupta said in a statement.
David Conner, chief executive of OCBC, said he expected his
bank would have few problems meeting the new rules.
"We expect to be able to meet MAS' revised CAR (capital
adequacy ratio) requirements comfortably without having to raise
any additional equity, undertake any rights issue, cut any
dividends, or change our strategic plans," he said in a
UOB also said it was confident of meeting the requirements.
While only a handful of countries have already announced how
they plan to implement Basel III, Switzerland and China have
both set a core tier one equity ratio lower than Singapore's
plan. Switzerland's government has said however it wants to set
a much higher capital buffer for its two biggest banks, Credit
Suisse Group AG and UBS AG , which are facing
an overall common equity requirement of 10.0 percent.
Singapore also plans to make its banks compliant with the
Basel rules ahead of the official timetable, with banks having
to meet the Basel minimum capital requirements by January 1,
2013, two years ahead of the Basel Committee's 2015 timeline.
(For a full breakdown of the new rules click here
Singapore's rival Hong Kong has not yet announced how it
plans to implement Basel III, although in a letter to banks in
January it said it intended to "adhere to the BCBS (Basel
Committee on Banking Supervision) implementation timetable".
(Additional reporting by Saeed Azhar; Editing by Raju