On 28 November 2014, the Monetary Authority of Singapore (the “MAS”) issued the new MAS Notice 649 on “Minimum Liquid Assets and Liquidity Coverage Ratio” (“MAS Notice 649”). New MAS Notice 649 will introduce a new liquidity requirement framework for banks, finance companies and merchant banks. The new framework will implement the Basel III liquidity coverage ratio (the “LCR”) rules, the minimum standard for liquidity risk endorsed by the Group of Central Bank Governors and Heads of Supervision.
MAS Notice 649 will take effect as follows:
- 1 January 2015: For a bank incorporated and headquartered in Singapore
- 1 January 2016: For all other banks in Singapore
A bank incorporated and headquartered in Singapore is required to maintain at all times, a Singapore Dollar LCR (the “Singapore Dollar LCR requirement”) of at least 100% and an all currency LCR (the “all currency LCR requirement”) of at least 60% by 1 January 2015, with the all currency LCR requirement increasing by 10% each year to 100% by 2019.
Any other bank notified by the MAS that it is D-SIB (namely, a domestic systemically important bank) or a bank that elects to comply with the LCR framework, shall maintain at all times, a Singapore Dollar LCR requirement of 100% and an all currency LCR requirement of 50% by 1 January 2016. The MAS has indicated that it intends to publish the initial list of D-SIBs in early 2015.
Two new reporting forms for the new liquidity requirement framework are prescribed in MAS Notice 649.
By way of background, from 6 August 2014 to 5 September 2014, the MAS conducted a public consultation on a draft MAS Notice 649. In November 2014, the MAS issued its Response to feedback received pursuant to its Consultation on Local Implementation of Basel III Liquidity Rules - Liquidity Coverage Ratio. The following are some of the issues covered in the Response:
- Criteria for country-level compliance with the LCR requirement, as well as the method for identifying a “significant currency”;
- Definition of high-quality liquid assets, and computation of outflows and inflows;
- The different treatment of liquid assets under the Minimum Liquid Assets (“MLA”) and LCR frameworks;
- Treatment of intra-group borrowings in the MLA framework; and
- Reporting forms.
The following materials are available from the MAS website www.mas.gov.sg: