Singapore directs DBS to halt acquisitions on outage fallout

By Low De Wei and Chanyaporn Chanjaroen

(Bloomberg) — Singapore’s financial regulator banned DBS Group Holdings Ltd. from acquiring new business ventures for six months and the bank will hold senior management accountable after a spate of digital banking service outages.

The changes will ensure that the bank focuses on restoring the resilience of its digital banking services, the Monetary Authority of Singapore said in a statement Wednesday. The actions followed repeated and prolonged disruptions of DBS’ banking services this year, including just last month.

The MAS also barred Southeast Asia’s largest bank from paring local branch and ATM networks during the period. The regulator imposed penalties on DBS including higher capital requirements totaling S$1.6 billion (US$1.2 billion) since early 2022 for similar service disruptions.

“Senior management will be held accountable, and this will be reflected in their compensation,” DBS Chairman Peter Seah said in a statement. The bank will set aside S$80 million to enhance system resiliency and will commit to high service availability.

Chief Executive Officer Piyush Gupta apologized for the disruptions and acknowledged the need to do better.

DBS, which will report quarterly earnings on Nov. 6, has been on an acquisition spree in recent years. The bank remains interested in raising its 13% stake in China’s Shenzhen Rural Commercial Bank, Gupta said in September. Other recent purchases include Citigroup Inc’s consumer unit in Taiwan, and India’s Lakshmi Vilas Bank Ltd.

The MAS will review the progress made by DBS at the end of six months after which it may decide on further actions.

“Notably, MAS has refrained from imposing fines, a decision that could be interpreted as a tacit acknowledgment of DBS’s proactive stance,” said Tareck Horchani, head of prime brokerage dealing at Maybank Securities. “This interlude is unlikely to hinder DBS’ overall growth trajectory.”

DBS is also streamlining its technology teams. Chief Information Officer Jimmy Ng, who also heads the group’s technology & operations, will only be in charge of operations. The bank is searching for a new CIO. Singapore country head Han Kwee Juan will take an additional role of acting CIO. Sim S. Lim, a senior adviser, will temporarily return to day-to-day functions of the home-turf market.

DBS’ stock has lost 2.6% this year through Wednesday’s close, compared with a 2.7% loss on the Bloomberg Asia Pacific Banks Index and 5.4% drop in Singapore’s benchmark Straits Times Index.

Singapore requires banks to ensure any unscheduled outages that affect their operations or customer services not exceed four hours within a one-year period.

“The frequency of outages is unacceptable, the slowness in recoverability is unacceptable,” Ravi Menon, MAS’ managing director said in an earlier Oct. 27 interview with Bloomberg News.“The problem is that the largest bank in Singapore with the largest number of customers has had more than its fair share of outages.”

A Oct. 14 weekend outage left DBS customers unable to access multiple services including online banking and ATM cash withdrawals. The disruption, that also affected Citi’s local unit, comes on the heels of similar episodes that DBS has so far struggled to fix.

After the mid-October disruption, MAS ordered DBS and Citi to conduct a thorough investigation on why they were not able to recover their systems within the required time-frame. While the outage had occurred due to a technical issue at an Equinix Inc. data center used by the lenders, MAS said it expects banks to have contractual agreements with data center providers that incorporate its requirements on system availability.

“There are some bank-specific issues they need to address and they are on top of it,” Menon said. “They will do it and we will hold them accountable.”

Data released in April showed that the seven banks considered to be systematically important to Singapore — which includes DBS and Citi — have reported 17 disruptions that lasted over an hour to their digital banking services since 2018.

Menon said that despite the visibility of DBS’s outages, he did not see this as a systemic issue affecting the whole financial system. “It’s not as if the entire banking system is prone to outages,” he said. “If you look across the banking system, I don’t think we have a problem.”

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