We are currently facing a COVID-19 pandemic. It has become a worldwide crisis and governments around the world are scrambling to contain the spread of the coronavirus.
We are living in unprecedented times and the Singapore Government is spending S$60B (S$6.4B Unity Budget; S$48.4B Resilient Budget and S$5.1B Solidarity Budget) this year in various schemes and initiatives to support the economy and save jobs.
The Monetary Authority of Singapore (“MAS”) has also announced on 7 April 2020 that it will adjust selected regulatory requirements and supervisory programmes to enable Financial Institutions (“FIs”) to focus on its operations as additional adjustments such as telecommuting, safe distancing and customer support are required.
(i) ADJUSTING CAPITAL AND LIQUIDITY REQUIREMENTS FOR BANKS
Banks are encouraged by MAS to utilise their capital buffers to support the lending activities. Banks should focus on its lending activities as the Net Stable Funding Ratio requirements have been adjusted from 50% to 25%. This will enable banks to loan to individuals and businesses that are maturing in less than six months.
MAS also allows banks to recognise as capital more of their regulatory loss allowance reserves. These two reliefs will apply until 30 September 2021 and maybe extended if necessary.
(ii) DEFERRING IMPLEMENTATION OF REGULATORY REFORMS
Banks in Singapore will have more time to adapt as MAS will defer by one (1) year the following reforms:
(a) the final set of Basel III reforms;
(b) final two phases of the margin requirements for non-centrally cleared derivatives; and
(c) the final phase of the reporting requirements for over-the-counter trades.
The new timelines laid out are:
- 1 September 2021 for banks or merchant banks whose group’s aggregate non-centrally cleared derivatives exposure is more than $80 billion;
- 1 September 2022 for banks or merchant banks whose group’s aggregate non-centrally cleared derivatives exposure is more than $13 billion and up to $80 billion;
- 1 October 2021 for the over-the-counter derivatives trades reporting requirements; and
- 1 January 2023 for the revised standards for credit risk, operational risk, leverage ratio, output floor and related disclosure requirements (with the accompanying transitional arrangements for the output floor extended to 1 January 2028), market risk and credit valuation adjustments for supervisory reporting purposes.
All public consultations on outsourcing requirements for banks and environmental risk management guidelines will be deferred until further notice.
(iii) SETTING ACCOUNTING LOAN LOSS ALLOWANCES
In line with the FRS 109 accounting standard, FIs are not required to make higher accounting loan loss allowances due to the impact of COVID-19. However, MAS expects FIs to assess the borrower’s long-term creditworthiness after considering the government’s additional budget support.
MAS will allow FIs leeway for the submission of regulatory reports, grant deferment of non-urgent industry projects, and suspend on-site and supervisory visits until further notice.
MAS will focus and review the impact of COVID-19 on FIs business and operations.
The COVID-19 pandemic has posed many challenges. However, FIs are expected to maintain sound risk management, key financial services and flow of credit to customers.
FIs should also remain vigilant to heightened risks such as cybersecurity threats, fraudulent transactions and scams, money laundering, and terrorism financing whilst staying resilient in managing the COVID-19 pandemic.
RHT Compliance Solutions
RHT Compliance Solutions is a premier Compliance Service Advisory firm based in Singapore. Our team comprises experienced and certified professionals with extensive regulatory, compliance and risk management experience from Singapore, Indonesia, Hong Kong and the broader region. The team is well equipped to provide clients with intelligent, risk-focused and cost-effective solutions.
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