What if another crisis sets off ....from one of the major member of the EUROZONE? In the past we saw musical chair being pass around called the CRISIS chair. Time will tell who is next!
Reuters
Tuesday, Jun 24, 2014
SINGAPORE - Singapore is to bring in
new rules to ensure all banks operating in the city-state have enough liquid
assets to withstand a sudden shock to the financial system, falling in line
with the global regulatory trend for tougher liquidity rules.
DBS, Oversea-Chinese Banking Group
and United Overseas Bank, and foreign banks with a major local presence will
have to meet a requirement proposed by the Basel Committee on Banking known as
the liquidity coverage ratio (LCR) by 2015, Lim Hng Kiang, Singapore's trade
and industry minister, said in a speech on Tuesday.
Regulators proposed the LCR in the
wake of the 2008 financial crisis to ensure banks have a big enough buffer of
top quality assets such as cash and government bonds so they can withstand 30
days of outflows at a time when it is tough to get funding on the wholesale
markets.
Under the rules formulated by
Singapore, the three local banks will have to meet the full LCR requirement for
Singapore-dollar assets by January 2015 and an all-currency LCR of 60 per cent.
They will then have to meet the all-currency LCR in full by 2019, meaning they
will need to have enough assets to withstand a sudden outflow of deposits and
other liabilities, regardless of the currency.
Foreign banks will have to meet a
Singapore dollar LCR of 100 per cent and an all-currency LCR of 50 per cent.
These rules for foreign banks will apply from January 2016.
Lim did not specify which assets
will be regarded as "high quality", an issue that has been of
concern, as assets regarded as liquid in western markets, such as domestic
government bonds, are scarce in Singapore due to a low level of public debt.
DBS Group CEO Piyush Gupta told
Reuters that initially the central bank was proposing a separate liquidity
requirement for the US dollar alone, which they have done away with due to
opposition from the banking industry.
The industry is comfortable with the
new rules because now it covers all currencies and it is easy to meet the
liquidity requirements, he said. "The crisis experience shows how the
buildup of risks can severely destabilise even the most developed and
sophisticated financial markets," Lim, who is also the deputy chairman of
the Monetary Authority of Singapore (MAS), told a banking event. "Securing
the safety and robustness of our banking sector must be an ongoing
process," he added.
NEW FRAMEWORK
Lim also said the central bank will
come up with a new framework of rules for local and foreign banks with a large
retail presence in Singapore, to ensure the domestic banking system is
protected in the event they run into difficulties.
This will include ensuring they have
a well-developed recovery and resolution plan, so they have a clear blueprint
of what to do in the event they were to become distressed.
MAS proposes to regard a bank as
having a significant retail presence if its market share of resident non-bank
deposits is 3 per cent or more, and if it has 150,000 or more depositors with
accounts under S$250,000.
This suggests these rules will apply
not only to Singapore's three main banks, but also to international lenders
such as Citigroup, Standard Chartered and Malaysia's Maybank.
- See more at:
http://business.asiaone.com/news/singapore-unveils-new-liquidity-rules-banks#sthash.KLaDCQm6.dpuf
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