IMF: Singapore’s financial sector oversight ‘among the best globally’

Singapore’s financial sector oversight is ‘among the best globally’ and its financial system can withstand even a large-scale global financial market turmoil, the International Monetary Fund said. — TODAY file pic
Singapore’s financial sector oversight is ‘among the best globally’ and its financial system can withstand even a large-scale global financial market turmoil, the International Monetary Fund said. — TODAY file pic

SINGAPORE, July 16 — Singapore’s financial sector oversight is “among the best globally” and its financial system can withstand even a large-scale global financial market turmoil, the International Monetary Fund (IMF) has found.

The IMF also found that Singapore’s economic fundamentals were strong and its economic policies sound, the Monetary Authority of Singapore (MAS) said in a statement today, announcing the IMF’s assessment.

The IMF’s conclusions come after it completed its Financial Sector Assessment Programme (FSAP) for Singapore.

Singapore is one of 29 countries required to undergo the FSAP once every five years, due to their “very large financial sectors that are highly interconnected with others globally”.

For this review, the FSAP mission visited Singapore three times between June last year and February this year and met officials from the MAS, other government agencies, academics as well as those from the private sector.

“Overall, the financial sector in Singapore was assessed to be resilient, with healthy buffers to withstand severe adverse shocks,” the MAS said.

“The IMF also noted that MAS has struck a good balance in fostering financial innovation while strengthening regulatory oversight since its last FSAP review in 2013.”

Other key findings in the IMF assessment include:

Singapore’s financial system is resilient even under very adverse scenarios, as demonstrated by stress tests, including a large-scale global financial market turmoil.

The MAS’ crisis management and resolution regime for distressed financial institutions has been strengthened, with the introduction of enhanced resolution powers in 2017.

The MAS has the ability to act proactively to address emerging threats to financial stability through the use of macroprudential policies.

In the area of financial technology, the MAS has struck a good balance between promoting financial innovation, while safeguarding financial stability.

However, the IMF also pointed out several areas in which Singapore can improve:

While banks have “comfortable” levels of Singapore dollar liquidity — the amount of Singdollars they have on hand, their US dollar liquidity is vulnerable to stress conditions, the IMF said. The loan-to-deposit ratio in foreign currency remains high at 128 per cent. This means that among the banks in Singapore, loans made in foreign currencies is 1.28 times more compared to deposits being held in foreign currencies. The IMF said that strengthening the banks’ foreign exchange liquidity should be a priority.

The role of the Chief Cyber Security Officer at MAS should be clarified to strengthen the central banks’ cyber resiliency.

The MAS division that supervises payment systems seems stretched and should receive more resources, the IMF said. The IMF found that the resources for this division are not commensurate with the broad scope of its supervisory responsibilities, and considering also the evolving payments landscape. — TODAY  

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