Singapore sets capital rules for banks above Basel III levels

Singapore said it will raise capital rules for local lenders to more than the global minimum to solidify the city’s reputation as a financial hub after regulators tightened norms for the world’s biggest banks.

Lenders incorporated in Singapore will need to meet a minimum common equity Tier 1 capital adequacy ratio of 6.5% from Jan. 1, 2015, the Monetary Authority of Singapore said in a statement today. That’s 2%age points more than the so-called Basel III rules announced last year.

Policymakers in the Southeast Asian nation aim to join U.S. and European regulators in shoring up capital at banks that are deemed too big to fail.The Basel Committee on Banking Supervision this weekend said that systemically important banks must hold as much as percentage points in additional capital as part of efforts to prevent another financial crisis.

 

“The MAS guidelines clearly set out what’s expected of locally-incorporated banks and ensures the strength and stability of the banking sector,” Anil Wadhwani, chief executive officer of New York-based Citigroup Inc.’s local unit, said in an e-mailed statement. “We are pleased to note that Citibank Singapore is more than adequately capitalized to meet and exceed the new requirements.”

 

The Basel III capital rules announced last year, which apply to a broader group of banks worldwide, are scheduled to be phased in from 2013 through 2019. National regulators should treat the rules as a minimum standard that they can surpass if they wish, according to the Bank for International Settlements, the parent organization of the Basel committee.

‘LEVEL PLAYING FIELD’

DBS Group Holdings, Southeast Asia’s biggest bank, is “very well positioned” to meet the requirements compared with global rivals, Chief Executive Officer Piyush Gupta said.

 

The more stringent standard “underlines Singapore’s status as a very solid and prudently managed financial center,” Gupta said. “Nevertheless, we hope the global regulators will continue to monitor transition arrangements across countries to ensure a level playing field and avoid regulatory arbitrage.”

 

The world’s largest banks will have to meet the Basel surcharges using core Tier 1 capital, also known as common equity, regulators said in a June 25 statement. The extra measures for as many as 30 of the biggest lenders will be imposed in addition to the Basel rules announced last year that require lenders to hold core capital equivalent to at least 7% of their risk-weighted assets.

 

Singapore plans to raise the Tier 1 capital adequacy ratio to 8% from 6% and introduce a capital conservation buffer of 2.5 percentage points.

 

“Each of the Singapore-incorporated banks is systemically important in Singapore and has a substantial retail presence,” the city-state’s central bank said in the statement. “The higher capital requirements will further strengthen their ability to operate under stress conditions.”