Intensified Prudential Supervision of Financial Institutions
MAS had intensified supervision of financial institutions in Singapore as signs of the subprime crisis emerged in early 2007. We further stepped up our supervision as the crisis widened into a global one, with repercussions on solvency of international financial institutions, and spillover effects on the real economy.
Given Singapore's openness and its role as a financial centre, MAS maintained heightened vigilance on international financial developments and the channels through which these developments could affect us, at both the macro and micro level. We strengthened prudential oversight of financial institutions' risk exposures and management, including their capital and liquidity positions, as well as their asset quality. Where necessary, we increased the prudential buffer of foreign bank branches in Singapore.
Besides regular discussions with the management, board and auditors of financial institutions, MAS kept up dialogue with home and host regulators and head-office auditors of foreign bank branches. As host regulator to some of the world's largest financial institutions operating in Singapore, MAS continued to participate in supervisory colleges established by home regulators. These include colleges established for major US and European banks.
MAS also emphasises the importance of stress testing as a tool to assess potential risks to financial institutions' soundness, and the need for measures to enhance their financial resilience. In addition to stress testing by individual financial institutions and the Singapore Exchange (SGX), MAS regularly conducts a coordinated industry stress testing exercise with banks and life insurers. Over the course of the year under review, MAS increased the magnitudes of stress parameters used in the industry stress test exercises as economic conditions deteriorated rapidly. We extended the exercises to include finance companies and are
currently developing a stress testing framework for direct general insurers.