ROBUST, TRUSTED, AND

PURPOSEFUL FINANCIAL CENTRE

A ROBUST FINANCIAL CENTRE
BANKING

Strengthening Resilience
MAS implemented fully the Basel III capital standards for Singapore-incorporated banks with effect from 1 January 2013. MAS requires Singapore-incorporated banks to meet capital adequacy standards that are higher than the Basel capital standards. For Common Equity Tier 1 capital, Singapore-incorporated banks will be required to maintain a ratio of at least 9% by 1 January 2015 (inclusive of a capital conservation buffer requirement of 2.5%) compared to the Basel III requirement of 7%. MAS also implemented in 2013 the other Basel III capital reforms to improve the quality of capital, enhance risk coverage and begin monitoring the leverage ratio.

Effective 1 January 2014, MAS also implemented the disclosure and submission requirements set out in the Basel Committee on Banking Supervision (BCBS)'s framework for assessing global systemically important banks (G-SIBs). This will facilitate assessment of the systemic importance of Singapore-incorporated banks based on the BCBS' G-SIB assessment methodology.

Mortgage Loans Underwriting Standards
MAS conducted a thematic inspection of the residential property loans business of major banks in late 2012. The thematic inspection revealed that the banks have put in place adequate policies and procedures to assess the credit worthiness and repayment capability of their borrowers. The inspection also found that the overall nonperforming loan ratio across the major banks was low. In addition, the banks have also been subjecting their residential property portfolios to regular monitoring and reviews, as well as stress testing to ensure that any vulnerabilities or deterioration in asset quality is promptly detected and addressed.

Nonetheless, there were variations in the methodologies and practices used by banks to compute the debt servicing ratio and determine the loan approval thresholds. To strengthen and standardise credit underwriting practices among banks, MAS issued the Notice on Computation of Total Debt Servicing Ratio (TDSR) for Property Loans and refined the existing housing loan rules for banks in June 2013.

Macroprudential Policies
MAS introduced a TDSR framework in June 2013 to strengthen the credit underwriting practices of financial institutions and encourage financial prudence among borrowers. The TDSR has to be computed for individual borrowers obtaining a property loan from a financial institution and should generally not exceed 60%.

To instil greater financial prudence among borrowers, MAS also lowered the maximum tenure of new loans granted by financial institutions for the purchase of HDB flats from 35 years to 30 years in August 2013. Loans with tenures that exceed 25 years or whose loan periods extend beyond the borrower's age of 65 are subject to tighter loan-to-value limits. In addition, MAS introduced a mortgage servicing ratio of 30% on loans for the purchase of executive condominium units bought directly from property developers in December 2013.