Singapore, 14 December 2007…The Monetary Authority of Singapore (MAS) today released Basel II rules in Singapore. The rules will come into effect on 1 January 2008.
2 Basel II, formally known as “International Convergence of Capital Measurement and Capital Standards: A Revised Framework”, was established by the Basel Committee on Banking Supervision in June 2004. The framework more closely aligns the minimum capital requirements for banks with the risks that they face than the 1988 Basel Capital Accord (commonly referred to as “Basel I”).
3 MAS’ Basel II rules were released after extensive industry and public consultation beginning in 2004. The sixth and final phase of consultation concluded in October 2007. In addition, MAS participated in an industry working group formed to develop requirements for disclosure and regulatory reporting under Basel II. These processes provided opportunities for the industry to be closely involved from the early stages of policy formulation.
The objective of the Basel II framework was to enhance the soundness and stability of the banking system by aligning the minimum regulatory capital requirements more closely to the risks that banks face, and encouraging improvements in banks’ risk management. The framework was developed by the Basel Committee on Banking Supervision, a group of central banks and bank supervisory authorities in the G10 countries. MAS will implement the Basel II framework for Singapore-incorporated banks from 1 January 2008.
The Basel II framework comprises three “pillars”. Pillar 1 prescribes rules relating to how banks should calculate the minimum capital that they are required to hold for credit, market and operational risks. It provides a range of options to allow banks to select the approaches that are appropriate for their operations and risk profiles.
Pillar 2 describes the accompanying supervisory review of a bank’s internal capital adequacy assessment. Pillar 2 encourages banks to continually develop and use better risk management techniques to monitor and manage their risks, and to have processes for assessing their overall capital adequacy in relation to their risk profile. Pillar 3 prescribes minimum disclosure requirements to facilitate market discipline.
MAS’ minimum Tier 1 and Total Capital Adequacy Ratios (CAR) of 6% and 10%, respectively, remain unchanged.