Singapore changes liquidity rules for major retail banks
Large retail lenders will be required to hold cash assets in the country to support outflows
Singapore said banks with a "significant retail presence" in the city-state will soon be required to maintain some liquid assets in the country to support short-term cash outflows.
The new liquidity framework applies to all currencies, and banks also need to hold liquid Singapore dollar assets separately to manage their liabilities in the local currency, Lim Hng Kiang, the deputy chairman of the Monetary Authority of Singapore, said in a speech.
The proposal comes six months after the central bank warned rising global interest rates could weigh on household and corporate debt and pose risks for banks.
Foreign banks operating in the country include Citigroup and Standard Chartered.
"While MAS recognises that there may be cost efficiencies in managing liquidity centrally at the group level, there can be significant obstacles to the free movement of liquidity across borders during a stress scenario," said Lim, who is also minister for trade and industry.
The foreign banks will be required to meet a Singapore dollar liquidity coverage ratio of 100 per cent, Lim said.
He did not specify a deadline for liquid holdings such as cash for the short term.
The coverage for other currencies will be 50 per cent as their head offices are probably subject to similar coverage ratios, he said.
The liquidity coverage ratio is one of the main components of an overhaul of banking standards agreed on by the Group of 20 nations in response to the global financial crisis that followed the 2008 collapse of Lehman Brothers Holdings.
The overhaul requires the city's banks to have enough easy-to-sell assets on their books to survive a 30-day funding squeeze, and is set to begin phasing in next year.
For the country's three banks, the requirement for 100 per cent Singapore dollar liquidity coverage ratio will be for the start of 2015, Lim said.
Coverage for other currencies is set at 60 per cent from 2015, increasing to 100 per cent by 2019, he said.
The banks are DBS, Oversea-Chinese Banking and United Overseas Bank.
The monetary authority said it will consider a bank as having a "significant retail presence" if its share of resident non-bank deposits exceeds 3 per cent, and it has more than 150,000 depositors with balances of as much as S$250,000 (HK$1.55 million).
The central bank will release a consultation paper for the proposals, Lim said.
