mr funny
30-06-11, 01:29
http://www.businesstimes.com.sg/sub/news/story/0,4574,445195,00.html?
Published June 29, 2011
Singapore sets banking bar higher than Basel III
Banks here to hold more capital than global norm; and rules will kick in earlier - from Jan 1, 2013
By EMILYN YAP AND CONRAD TAN
(SINGAPORE) Singapore-incorporated banks will soon have to hold more capital - exceeding the amount needed under new Basel III rules - and the changes will start kicking in from 2013, ahead of the global timeline.
The stricter conditions were not entirely unexpected; even under the Basel II regime, capital adequacy rules set by the Monetary Authority of Singapore (MAS) have been tougher. Indeed, the four banks incorporated here expressed confidence in meeting the new guidelines.
Trade and Industry Minister Lim Hng Kiang, who is also deputy chairman of the Monetary Authority of Singapore (MAS), announced the new capital adequacy rules at the Association of Banks in Singapore's (ABS) annual dinner last night.
'We will require Singapore-incorporated banks to meet Basel III earlier and at a higher standard,' he said.
Today, DBS Group, United Overseas Bank (UOB), OCBC Bank and Citibank Singapore are required to hold a minimum Tier 1 capital adequacy ratio (CAR) of 6 per cent and a total CAR of 10 per cent.
These already meet or exceed the new Basel III standards, which require banks around the world to have a Tier 1 CAR of at least 6 per cent and a total CAR of at least 8 per cent.
What is different is this: Basel III will also require banks to hold a minimum common equity Tier 1 (CET1) CAR of 4.5 per cent. MAS has decided that locally incorporated banks meet this rule from Jan 1, 2013 - two years ahead of the Basel Committee's 2015 timeline.
And it is going one step further. MAS will raise the minimum CET1 CAR to 6.5 per cent from Jan 1, 2015. It will also bring the minimum Tier 1 CAR to 8 per cent. The total CAR will remain at 10 per cent.
MAS will also introduce a capital conservation buffer of 2.5 per cent above the CET1 CAR, in line with Basel III requirements. This will be phased in from 2016 to 2019.
Taking into account the capital conservation buffer, the locally incorporated banks will have to maintain a CET1 CAR of at least 9 per cent, above the Basel III minimum of 7 per cent. Mr Lim said this is necessary as the banks are systemically important in Singapore and have a substantial retail presence.
'Together, they account for more than half of the total non-bank resident deposits and loans in Singapore,' he said. 'Hence, higher capital levels are required to strengthen their ability to absorb unexpected losses effectively in a crisis.'
Mr Lim also stated that CET1 requirements that are significantly above Basel III's will not lead to a large reduction in economic output. In fact, they will help to reduce the likelihood and costs of a crisis.
'MAS carefully weighed the costs of additional capital against the benefits. Banks that are well-capitalised, prudently regulated, and located in stable financial centres such as Singapore present an attractive value proposition to depositors and investors,' he said.
The impact of the changes on locally incorporated banks is expected to be slight as they are already well capitalised. Both UOB CEO Wee Ee Cheong and Citibank Singapore CEO Anil Wadhwani welcomed MAS's moves.
OCBC estimates its CET1 CAR under Basel III would be around 10.8 per cent based on the bank's financial position as at March 31. Its corresponding Tier 1 and total CAR are estimated at 14.1 and 16.9 per cent, respectively.
'Today, our capital levels under Basel III rules are already higher than MAS's revised requirements, ahead of the January 2019 target timeline,' said OCBC Bank CEO David Conner. 'We expect to be able to meet MAS's revised CAR requirements comfortably without having to raise any additional equity, undertake any rights issue, cut any dividends, or change our strategic plans.'
DBS CEO Piyush Gupta said that DBS, too, had no need to raise new capital to meet the MAS requirements. Its 'robust' capital position and profitability meant that its ability to pay dividends and grow its business wouldn't be hurt by the new rules, he added.
'Nevertheless, we hope the global regulators will continue to monitor transition arrangements across countries to ensure a level playing field and avoid regulatory arbitrage.'
http://www.businesstimes.com.sg/mnt/media/image/launched/2011-06-29/mas29.jpg
Published June 29, 2011
Singapore sets banking bar higher than Basel III
Banks here to hold more capital than global norm; and rules will kick in earlier - from Jan 1, 2013
By EMILYN YAP AND CONRAD TAN
(SINGAPORE) Singapore-incorporated banks will soon have to hold more capital - exceeding the amount needed under new Basel III rules - and the changes will start kicking in from 2013, ahead of the global timeline.
The stricter conditions were not entirely unexpected; even under the Basel II regime, capital adequacy rules set by the Monetary Authority of Singapore (MAS) have been tougher. Indeed, the four banks incorporated here expressed confidence in meeting the new guidelines.
Trade and Industry Minister Lim Hng Kiang, who is also deputy chairman of the Monetary Authority of Singapore (MAS), announced the new capital adequacy rules at the Association of Banks in Singapore's (ABS) annual dinner last night.
'We will require Singapore-incorporated banks to meet Basel III earlier and at a higher standard,' he said.
Today, DBS Group, United Overseas Bank (UOB), OCBC Bank and Citibank Singapore are required to hold a minimum Tier 1 capital adequacy ratio (CAR) of 6 per cent and a total CAR of 10 per cent.
These already meet or exceed the new Basel III standards, which require banks around the world to have a Tier 1 CAR of at least 6 per cent and a total CAR of at least 8 per cent.
What is different is this: Basel III will also require banks to hold a minimum common equity Tier 1 (CET1) CAR of 4.5 per cent. MAS has decided that locally incorporated banks meet this rule from Jan 1, 2013 - two years ahead of the Basel Committee's 2015 timeline.
And it is going one step further. MAS will raise the minimum CET1 CAR to 6.5 per cent from Jan 1, 2015. It will also bring the minimum Tier 1 CAR to 8 per cent. The total CAR will remain at 10 per cent.
MAS will also introduce a capital conservation buffer of 2.5 per cent above the CET1 CAR, in line with Basel III requirements. This will be phased in from 2016 to 2019.
Taking into account the capital conservation buffer, the locally incorporated banks will have to maintain a CET1 CAR of at least 9 per cent, above the Basel III minimum of 7 per cent. Mr Lim said this is necessary as the banks are systemically important in Singapore and have a substantial retail presence.
'Together, they account for more than half of the total non-bank resident deposits and loans in Singapore,' he said. 'Hence, higher capital levels are required to strengthen their ability to absorb unexpected losses effectively in a crisis.'
Mr Lim also stated that CET1 requirements that are significantly above Basel III's will not lead to a large reduction in economic output. In fact, they will help to reduce the likelihood and costs of a crisis.
'MAS carefully weighed the costs of additional capital against the benefits. Banks that are well-capitalised, prudently regulated, and located in stable financial centres such as Singapore present an attractive value proposition to depositors and investors,' he said.
The impact of the changes on locally incorporated banks is expected to be slight as they are already well capitalised. Both UOB CEO Wee Ee Cheong and Citibank Singapore CEO Anil Wadhwani welcomed MAS's moves.
OCBC estimates its CET1 CAR under Basel III would be around 10.8 per cent based on the bank's financial position as at March 31. Its corresponding Tier 1 and total CAR are estimated at 14.1 and 16.9 per cent, respectively.
'Today, our capital levels under Basel III rules are already higher than MAS's revised requirements, ahead of the January 2019 target timeline,' said OCBC Bank CEO David Conner. 'We expect to be able to meet MAS's revised CAR requirements comfortably without having to raise any additional equity, undertake any rights issue, cut any dividends, or change our strategic plans.'
DBS CEO Piyush Gupta said that DBS, too, had no need to raise new capital to meet the MAS requirements. Its 'robust' capital position and profitability meant that its ability to pay dividends and grow its business wouldn't be hurt by the new rules, he added.
'Nevertheless, we hope the global regulators will continue to monitor transition arrangements across countries to ensure a level playing field and avoid regulatory arbitrage.'
http://www.businesstimes.com.sg/mnt/media/image/launched/2011-06-29/mas29.jpg