While most banks across the world will find the ratios hard to maintain, our four local banks will manage without any difficulties.
Singapore (PRWEB) July 08, 2011
The Singapore government recently announced that locally-incorporated banks will meet capital adequacy requirements higher than Basel III, which is the global regulatory standard on bank capital adequacy and liquidity agreed by the members of the Basel Committee to come into force in 2015. “But the city state's three domestic banks as well as the Citygroup's subsidiary are well-capitalized and in a strong position to meet the revised requirements,” says Satish Bakhda, head of Rikvin Singapore.
Under the new rules, banks will have to hold a common equity tier one ratio of 6.5 percent in addition to a conservation buffer of 2.5 percent, making a total requirement of 9 percent. Whereas under the Basel III rules, the top quality capital requirement for banks is only 7 percent. Also, the local banks will have to meet these requirements two years ahead of the Basel time line, by January 1, 2013.
Explaining the reason for such measures, Trade and Industry Minister Lim Hng Kiang, who is also deputy chairman of the Monetary Authority of Singapore (MAS), said: “This is necessary as the banks are systemically important in Singapore and have a substantial retail presence. Together, they account for more than half of the total non-bank resident deposits and loans in Singapore. Hence, higher capital levels are required to strengthen their ability to absorb unexpected losses effectively in a crisis.”
Meanwhile, all the three domestic banks - DBS, Oversea-Chinese Banking Corporation (OCBC) and United Overseas Bank (UOB) - along with Citigroup's subsidiary Citi Singapore, lauded the government's move. Last month, three among these were ranked in the top six of the world’s strongest banks by Bloomberg Markets ranking, which were based on criteria such as Tier 1 capital ratio, non-performing assets and a comparison of costs against revenue. OCBC topped the list, DBS was fifth and UOB was placed at the sixth position.
“This more stringent standard underlines Singapore’s status as a very solid and prudently managed financial center and we are very well positioned to meet the latest requirements. Nevertheless, we hope the global regulators will continue to monitor transition arrangements across countries to ensure a level playing field and avoid regulatory arbitrage,” said Piyush Gupta, chief executive officer, DBS.
Supporting him was OCBC's CEO, David Conner. “Today, our capital levels under Basel III rules are already higher than MAS's revised requirements, ahead of the January 2019 target time line. We expect to meet the revised requirements comfortably without having to raise any additional equity, undertake any rights issue, cut any dividends, or change our strategic plans.”
Wee Ee Cheong, CEO, UOB, and Citibank Singapore's CEO Anil Wadhwani also welcomed the stricter norms.
“These measures are credit positive for the local banks, which will help in maintaining their existing conservative capital positions. While most banks across the world will find the ratios hard to maintain, our four local banks will manage without any difficulties,” concludes Bakhda.
The Rikvin Group, founded in 1998, is the leading one-stop resource for entrepreneurs, whether at home or abroad, for company registration in Singapore. Rikvin's business advisory team staffs qualified company secretaries and accountants with extensive experience in the country's business incorporation landscape. The firm provides form a Singapore company, Singapore taxation and immigration regulatory frameworks. Rikvin also provides Employment Pass, EntrePass and other related services in Singapore. For more information, please visit http://www.rikvin.com/
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