The Monetary Authority of Singapore (the “MAS”) has developed a framework for identifying and supervising domestic systemically important banks (“D-SIBs”) in Singapore. Details of the framework can be found in Appendix 1 of the MAS Monograph entitled “MAS’ Framework for Impact and Risk Assessment of Financial Institutions”. This was announced by the MAS on 30 April 2015.
On the same day, the MAS released the inaugural list of banking groups designated as D-SIBs:
- DBS Bank;
- Oversea-Chinese Banking Corporation;
- United Overseas Bank;
- The Citibank;
- Malayan Banking Berhad;
- Standard Chartered Bank and
- The Hongkong andShanghai Banking Corporation.
The framework addresses the scope of D-SIB assessment, the assessment methodology and the policy measures applicable to D-SIBs.
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 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.
Scope of D-SIB assessment
Under the D-SIB framework, all banks licensed in Singapore will be assessed for their systemic importance. This includes all locally-incorporated banks (including subsidiaries of foreign banks) and foreign bank branches in Singapore.
D-SIBs can be broadly categorised into three types:
- Locally-incorporated bank groups: Banks headquartered in Singapore;
- Foreign bank groups: Locally-incorporated foreign bank subsidiaries and sister branches, if any. This would include foreign bank branches with significant retail presence pending local incorporation of their retail operations; and
- Foreign bank branches: Foreign banks that operate only as branches in Singapore.
Locally-incorporated banks, including their operations outside of Singapore, will be assessed. For foreign banking groups, the activities of all related banking entities in Singapore that are within the scope of assessment will be taken into account.
To assess banks’ systemic importance under the D-SIB framework, the MAS adopts an indicator-based approach based on four factors, namely size, interconnectedness, substitutability and complexity.
A bank that is assessed to have a significant retail presence will be designated as a D-SIB, and will be required to locally incorporate its retail operations.
To ensure it remains relevant, the MAS will review the D-SIB framework every three years taking into account developments in the banking sector and assessment methodologies. Any changes to the framework will be announced.
The MAS will assess banks’ systemic importance on an annual basis taking into account changes in their systemic importance as a result of changes in their risk profiles or business models. Two years’ data will be looked at before the MAS confirms changes in a bank’s D-SIB status.
Policy measures applicable to D-SIBs
The MAS will apply appropriate policy measures to each type of D-SIB.
The policy measures that the MAS will consider applying are as follows:
- Higher loss absorbency
- Enhanced disclosure
- Recovery and resolution planning
- Effective risk data aggregation and risk reporting
- Liquidity coverage ratio
On 25 June 2014, the MAS issued a consultation paper on “Proposed Framework for Systemically Important Banks in Singapore”. The MAS issued its Response to the feedback received from the public consultation on 30 April 2015.
The following materials can be found on the MAS website www.mas.gov.sg:
- Media release
- MAS Monograph “MAS’ Framework for Impact and Risk Assessment of Financial Institutions”
- MAS Response
An article about the MAS public consultation in June 2014 was featured in the Allen & Gledhill Financial Services Bulletin (July 2014). To read the article entitled “MAS proposes framework for systemically important banks in Singapore”, please click here.