Reply to Parliamentary Question on prudential treatment of Singapore banks' crypto asset exposure
QUESTION NO 2448
NOTICE PAPER 1549 OF 2022
FOR WRITTEN ANSWER
Date: For Parliament Sitting on 28 November 2022
Name and Constituency of Member of Parliament
Ms He Ting Ru, MP, Sengkang GRC
To ask the Prime Minister (a) what are MAS's requirements as to the prudential treatment of Singapore banks’ crypto asset exposure; and (b) what are the risk-weighting requirements applicable to crypto asset exposures in assessing Singapore banks’ capital adequacy.
Answer by Mr Tharman Shanmugaratnam, Senior Minister and Minister in charge of MAS:
1. Singapore-incorporated banks’ exposures to cryptoassets are insignificant, contributing less than 0.05% of their total risk weighted assets.
2. The Basel Committee on Banking Supervision (BCBS) is working to finalise a framework for the prudential treatment of banks’ exposures to cryptoassets. MAS contributes actively to this work, which seeks to ensure that banks maintain adequate capital and liquidity for such exposures. The BCBS has issued two rounds of consultation thus far and will finalise the framework around the end of 2022.
3. Pending the finalisation of the framework, MAS requires Singapore-incorporated banks to apply a 1250% risk weight for exposures to riskier cryptoassets such as Bitcoin and Ether. This is the highest risk weight under the BCBS’ capital framework. Based on MAS’ minimum total capital adequacy requirement of 10% for systemically important banks incorporated in Singapore, this means that Singapore-incorporated banks are required to hold $125 of capital against an exposure of $100 to a cryptoasset like Bitcoin. For less risky cryptoassets, such as tokenised corporate bonds that meet a set of conditions to ensure that they pose the same level of financial risks as traditional corporate bonds, the prudential treatment is similar to that applied to the traditional non-tokenised asset.