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Singapore's Regulator Eases Banks' Red Tape, Capital Burdens
Tom Burroughes
8 April 2020
The is lightening the regulatory and supervisory tests it imposes on banks and other institutions to allow for relief efforts against the disruption of COVID-19. The move mirrors steps of tax and regulatory authorities worldwide to ease filing and other requirements. The worldwide pandemic has upended all manner of reporting deadlines, banks' capital standards and other tests that are standard parts of the financial system. In many cases regulators around the world have pushed back deadlines and sought to soften the blow of rules still in place. Deferrals
The watchdog said it will take the following steps:
-- adjust banks’ capital and liquidity requirements, to help sustain their lending activities;
-- allow FIs to take into account the government’s fiscal assistance and banks’ relief measures in setting more realistic accounting loan loss allowances;
-- defer FIs’ implementation of the final set of Basel III reforms, margin requirements for non-centrally cleared derivatives, and other new regulations and policies, to ease FIs’ operational burden;
-- allow FIs more latitude on submission timelines for regulatory reports and defer non-urgent industry projects; and
-- suspend regular onsite inspections and supervisory visits until further notice.
MAS said that it is adjusting banks’ capital and liquidity requirements.
The regulator said it “encourages banks to utilise their capital buffers as appropriate to support their lending activities”.
“Banks in Singapore can afford to do this because they have managed their businesses prudently and have built up healthy capital buffers over the years. Our banks have sufficient capital to see them through the current economic slump while continuing to supply credit to the economy to support businesses and individuals,” MAS said.
MAS said maintaining lending activities “should take priority” over dividend pay-outs. “While MAS does not see a need to restrict banks’ dividend policies, the release of capital buffers should not be used to finance share buybacks during this period,” it said.
The watchdog said it will allow banks to recognise more of their regulatory loss allowance reserves as capital, making it easier for banks to lend. The relief period will apply until 30 September 2021, and may be extended if necessary, MAS said.
Banks will also be able to use their “liquidity buffers” as necessary to meet liquidity demands. To support banks’ lending activities, MAS will adjust the Net Stable Funding Ratio requirement.
The regulator said that it will defer the implementation of the final set of Basel III reforms by one year for banks in Singapore.
“While the reforms are necessary to strengthen the banking system over the long term, they will require banks to make considerable operational adjustments which they would be hard pressed to make under the current challenging conditions,” it said.