Monetary Authority of Singapore Annual Report 2012/2013

A ROBUST FINANCIAL CENTRE

Strengthening Capital Requirements for Singapore-incorporated Banks

MAS is committed to ensuring full, timely and consistent implementation of Basel III, issued by the Basel Committee on Banking Supervision (BCBS) to strengthen the resilience of the banking system. In September 2012, MAS issued a revised MAS Notice 637 to implement the Basel III capital framework in Singapore with effect from 1 January 2013. The revised Notice requires Singapore-incorporated banks to meet capital adequacy standards that are higher than the Basel capital standards, and also implements the Basel III capital reforms on raising the quality of capital, enhancing risk coverage, requiring capital buffers and monitoring of the leverage ratio. For Common Equity Tier 1 capital, Singapore-incorporated banks are required to maintain a ratio of at least 9%, inclusive of a capital conservation buffer requirement of 2.5%, compared to the Basel III requirement of 7%. This will further strengthen the ability of Singapore incorporated banks to operate under stress conditions, and help safeguard financial stability.

MAS amended MAS Notice 637 further in Q4 2012 to implement BCBS’ requirements issued in 2012 as part of Basel III on capital requirements for bank exposures to central counterparties and disclosure requirements on composition of capital. The capital requirements for bank exposures to central counter parties enhance incentives for banks to use central counterparties while ensuring that such exposures remain adequately capitalised. The disclosure requirements enhance the transparency and comparability of disclosures on the composition of regulatory capital.

Our Basel III implementation efforts were validated by the BCBS under its Regulatory Consistency Assessment Programme from July 2012 to March 2013. In its assessment report of Singapore published in March 2013, the BCBS concluded that Singapore has put in place national regulations in accordance with the capital standards under the Basel framework, and assessed Singapore as being compliant.