MAS scans the external environment for emerging vulnerabilities and risks that may affect the financial sector. Financial institutions are required to test their financial health against stress scenarios such as high unemployment rates, sharp declines in property prices, and other catastrophic events.
When there are threats to the stability of individual financial institutions, MAS takes measures to mitigate these risks. For instance, financial institutions may be required to set aside more capital or liquid assets to weather potential stress events.
If there are more systemic risks to the financial sector as a whole, MAS responds with macroprudential measures. For example, MAS introduced tighter rules on properly loans to encourage financial prudence, and to promote a stable and sustainable property market.