MAS adjusts selected regulatory requirements and supervisory programmes to allow FIs to focus on Covid-19 related issues

9 April 2020

On 7 April 2020, the Monetary Authority of Singapore (“MAS”) announced that selected regulatory requirements and supervisory programmes will be adjusted to allow financial institutions (“FIs”) to focus on handling Covid-19 related issues and to support their customers during this difficult period.

Set out below is a summary of the regulatory and supervisory measures MAS is taking.

Adjust capital and liquidity requirements to sustain lending activities

  • Banks may use capital buffers to support lending activities: Banks are encouraged to utilise their capital buffers as appropriate to support their lending activities but the release of capital buffers should not be used to finance share buybacks during this period.
  • Banks may recognise as capital more of their regulatory loss allowance reserves: MAS will allow banks to recognise as capital more of their regulatory loss allowance reserves. This relief will apply until 30 September 2021, and may be extended if necessary.
  • Banks may use liquidity buffers to meet liquidity demands: Banks may also utilise their liquidity buffers as necessary to meet liquidity demands. MAS will adjust the Net Stable Funding Ratio requirement. The amount of stable funding that banks must maintain for loans to individuals and businesses that are maturing in less than six months will be halved from 50% to 25%. The relief will apply until 30 September 2021, and may be extended if necessary.

Setting accounting loan loss allowances

  • FIs may consider Singapore Government’s fiscal assistance and banks’ relief measures to set more realistic accounting loan loss allowances: According to MAS, when assessing Covid-19’s impact on future economic conditions in estimating accounting loan loss allowances under accounting standards FRS 109, FIs should also consider the extraordinary measures taken by the Government to bolster economic resilience. FIs are not expected to maintain higher accounting loan loss allowances solely because Covid-19 relief measures are applied to these loans. FIs should assess a borrower’s risk of default comprehensively, taking into account the mitigating effects of the relief measures, and the borrower’s ability to make full repayment based on the revised loan terms as well as its creditworthiness in the long term.

Defer implementation of regulatory reforms

  • Implementation of final set of Basel III reforms deferred: MAS will defer by one year the implementation of the final set of Basel III reforms for banks in Singapore which is in line with the recent announcement by the Basel Committee on Banking Supervision to delay the internationally agreed start date for the revised standards.
  • Implementation of revised standards deferred: MAS will defer to 1 January 2023 the implementation of revised standards for:
    • credit risk, operational risk, leverage ratio, output floor and related disclosure requirements (with the accompanying transitional arrangements for the output floor extended to 1 January 2028); and
    • market risk and credit valuation adjustments for supervisory reporting purposes (for purposes of compliance with capital adequacy and disclosure requirements, these standards will be implemented from 1 January 2023 or later).
  • Implementation of final phases of margin requirements for non-centrally cleared derivatives deferred: MAS will defer by one year the implementation of the final two phases of the margin requirements for non-centrally cleared derivatives. The new timelines are:
    • 1 September 2021 for a bank or merchant bank whose group’s aggregate non-centrally cleared derivatives exposure is more than S$80 billion; and
    • 1 September 2022 for a bank or merchant bank whose group’s aggregate non-centrally cleared derivatives exposure is more than S$13 billion and up to S$80 billion.
  • Final phase of reporting requirements for OTC derivatives trades extended: MAS will also extend by one year to 1 October 2021 the final phase of the reporting requirements for over-the-counter (“OTC”) derivatives trades.
  • Implementation of certain licensing and conduct requirements deferred: MAS will defer the implementation of certain licensing and conduct requirements, which were introduced under the Securities and Futures (Amendment) Act 2017, and extend the transitional period for these requirements by one year to 8 October 2021.
  • New policies deferred: MAS will defer the following new policies where consultations have closed and provide FIs with sufficient time for transition to the new dates when announced:
    • Requirements on controls against market abuse
    • Guidelines on individual accountability and conduct / information paper on culture and conduct practices of financial institutions
    • Complaints handling and resolution regulations
    • Requirements on execution of customers’ orders
  • Public consultations on outsourcing requirements for banks and environmental risk management guidelines deferred: MAS will defer until further notice the public consultations on outsourcing requirements for banks and environmental risk management guidelines.
  • Longer response time for ongoing public consultations: MAS will provide a longer response time for FIs and other interested parties to provide feedback to ongoing public consultations of new policies during this period.

Extend reporting timelines and defer industry projects

  • More latitude on submission timelines for regulatory reports: MAS will provide more latitude on submission timelines for regulatory reports and will work with FIs to review submission timelines while taking into account the need for timely information by MAS to facilitate supervisory reviews.
  • Non-urgent industry projects to be deferred: MAS will defer non-urgent industry projects such as the launch of a new electronic system for banks and insurers to submit applications for approval of key appointment executives which was scheduled for launch in Q2 2020. The existing application process will continue to be used until further notice. MAS will provide a longer response time for FIs and other interested parties to provide feedback to ongoing public consultations of new policies during this period.
  • Potential challenges transiting to a more comprehensive reporting regime under revised MAS Notices 610 and 1003: MAS will seek feedback from banks and merchant banks on potential challenges in transiting to a more comprehensive reporting regime under the revised MAS Notice 610 and MAS Notice 1003 respectively. In recognising that substantial investment in effort and resources has already been made by the industry and the good progress to-date, MAS will assess the need to defer the targeted implementation timeline from January 2021 to a later date. MAS will provide a longer response time for FIs and other interested parties to provide feedback to ongoing public consultations of new policies during this period.

Suspending on-site inspections and supervisory visits

  • Supervisory reviews to focus on Covid-19 impact management: MAS will suspend all regular on-site inspections and supervisory visits to FIs till further notice, and focus its supervisory reviews on how FIs are managing the impact of Covid-19 on their business and operations.

Sound risk management

  • Maintain key financial services, sustain flow of credit: MAS expects FIs to maintain key financial services to customers and sustain the flow of credit to the economy. FIs should also ensure operational resilience and sound risk management amid the challenges posed by the Covid-19 pandemic, and remain vigilant to heightened risks such as cybersecurity threats, fraudulent transactions and scams, money laundering and terrorism financing.

Reference materials

Please click here to read the media release on MAS website www.mas.gov.sg.

Further information

Allen & Gledhill has a Covid-19 Resource Centre on our website www.allenandgledhill.com that contains knowhow and materials on legal and regulatory aspects of the Covid-19 crisis.

In addition, we have a cross-disciplinary Covid-19 Legal Task Force consisting of Partners across various practice areas to provide rapid assistance. Should you have any queries, please do not hesitate to get in touch with us at covid19taskforce@allenandgledhill.com.

 

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