Local banks not at risk despite Moody's downgrade: MAS

PropertyGuru

17 July 2013 at 6:16 am

Singapore banks are not at risk from potential downturns as they have adequate buffers to cope with rising interest rates, according to the Monetary Authority of Singapore (MAS) in its reaction to Moody's outlook downgrade for Singapore banks from stable to negative. "Local banks are not at risk" even though some borrowers may face problems should interest rates rise due to a slowing of the US Federal Reserve's bond-buying programme, MAS said. "They undertake regular stress tests on their own as well as coordinated by the MAS, and have adequate buffers in place to cope with the inevitable upturn in the interest rate cycle." Moreover, the financial positions of local banks continue to be strong. As Moody's also concluded, Singapore banks have sufficient capital to withstand even severe stress test scenarios. For instance, the capital levels of three local banks – UOB, OCBC and DBS – exceeds the threshold required under the Third Basel Accord (Basel III), or the new global regulatory standard on bank capital adequacy. They also have the highest average credit ratings among other global banking systems. The bearish forecast by Moody's is due to concerns over the rapid growth of Singapore's household debt, as well as rising property prices in the city-state and regional markets where the banks operate.

Romesh Navaratnarajah, Senior Editor at PropertyGuru, wrote this story. To contact him about this or other stories email romesh@allproperty.com.sg