On 25 June 2014, the Monetary Authority of Singapore (the “MAS”) issued a consultation paper proposing a framework to identify domestic systemically important banks (“D-SIBs”) in Singapore.

The MAS proposes to build on its existing supervisory diagnostic tool to formalise an explicit D-SIB framework. To assess a bank’s systemic importance, the MAS will consider factors such as its size, interconnectedness to the financial system, substitutability of the institution and its overall complexity. The MAS also proposes a range of policy measures for D-SIBs, most notably, a new framework for liquidity requirements.

The consultation period closed on 25 July 2014.

Background

Following the Global Financial Crisis, the Basel Committee on Banking Supervision (the “BCBS”) published a framework for assessing global systemically important banks (G-SIBs) which imposed higher loss absorbency (“HLA”) requirements for G-SIBs. To complement the G-SIB framework, the BCBS has issued a set of principles for national regulators who are expected to develop and implement their own frameworks by 1 January 2016 to identify and adopt appropriate measures to address D-SIBs.

Proposed D-SIB framework

Currently, the MAS performs regular impact assessments of each financial institution (“FI”) and calibrates its supervisory attention for that FI accordingly. The MAS proposes a D-SIB framework that will build upon its existing impact assessment framework to assess a bank’s systemic importance to Singapore’s financial system and broader domestic economy. The D-SIB framework will also establish relevant policy measures that may apply to D-SIBs.

The proposed scope of the D-SIB framework will cover all banks in Singapore, encompassing locally-incorporated banks, including subsidiaries of foreign banks, and foreign bank branches.

Locally-incorporated banks will be assessed at the consolidated group level. In addition, the assessment of foreign banks will take into account the activities of all related banking entities in Singapore. Hence, the designation of a D-SIB will be on a group basis and include all related banking entities in Singapore. The related banking entities include all regulated FIs in Singapore held under the same ultimate parent company (except for insurance and capital markets services licensees).

There will be three broad categories of D-SIBs as follows:

  • Locally-incorporated bank groups: Local banks headquartered in Singapore;
  • Foreign bank groups: Locally-incorporated foreign bank subsidiaries and sister branches (if any); and
  • Foreign bank branches: Foreign banks that operate only as branches.

Implementation timelines

The MAS proposes to publish an initial list of D-SIBs in the first quarter of 2015.

Reference materials

The following materials are available from the MAS website www.mas.gov.sg: