Singapore is to bring in new rules to ensure all banks operating in the city-state have enough liquid assets to withstand a sudden shock to the financial system, falling in line with the global regulatory trend for tougher liquidity rules.
DBS, Oversea-Chinese Banking Group and United Overseas Bank, and foreign banks with a major local presence will have to meet a requirement proposed by the Basel Committee on Banking known as the liquidity coverage ratio (LCR) by 2015, Lim Hng Kiang, Singapore's trade and industry minister, said in a speech on Tuesday.
Regulators proposed the LCR in the wake of the 2008 financial crisis to ensure banks have a big enough buffer of top-quality assets like cash and government bonds so they can withstand 30 days of outflows at a time when it is tough to get funding on wholesale markets
Under the rules formulated by Singapore, the three local banks will have to meet the full LCR requirement for Singapore dollar assets by January 2015 and an all-currency LCR of 60 percent. Foreign banks will have to meet a Singapore dollar LCR of 100 percent and an all-currency LCR of 50 percent.
"The crisis experience shows how the buildup of risks can severely destabilise even the most developed and sophisticated financial markets," Lim, who is also the deputy chairman of the Monetary Authority of Singapore, said at a banking event.
Lim also said the central bank will come up with a new framework of rules for local and foreign banks with a large retail presence in Singapore to ensure the domestic banking system is protected in the event they run into difficulties.
