Singapore said it would set capital levels for local lenders above the global minimum to solidify the city-state’s position as a financial hub after regulators tightened norms for the world’s largest banks.
Lenders incorporated in Singapore will need to meet a minimum common equity Tier 1 capital adequacy ratio of 6.5 percent from Jan. 1, 2015, the Monetary Authority of Singapore (MAS) said in a statement on Tuesday. That’s 2 percentage points more than the Basel III rules announced last year.
Policymakers in the Southeast Asian nation aim to join US 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 2.5 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 [it] ensures the strength and stability of the banking sector,” Anil Wadhwani, who heads the local unit of New York-based Citigroup Inc said in an e-mailed statement. “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.
DBS Group Holdings Ltd, Southeast Asia’s biggest bank, is “very well positioned” to meet the latest requirements compared with global rivals, chief executive Piyush Gupta said in a statement on Tuesday.
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.”
Singapore’s three banks are ranked in the top six among the world’s strongest banks based on criteria such as Tier 1 capital ratio, non-performing assets and a comparison of costs against revenue, Bloomberg Markets magazine reported in this month’s issue. Oversea-Chinese Banking Corp topped the global list, with DBS at No. 5 and United Overseas Bank Ltd in sixth.
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