}

29 September 2021

On 13 September 2021, the Monetary Authority of Singapore (“MAS”) issued the following consultation documents relating to the Basel Framework:

  1. Response to feedback received from the consultation paper on Proposed Implementation of the Final Basel III Reforms in Singapore - Market Risk Capital Requirements (“Response”) 
  2. Consultation paper on Draft Standards for Market Risk Capital and Capital Reporting Requirements for Singapore-incorporated Banks (“Consultation Paper”)

This article discusses both documents briefly.

Response

On 7 May 2019, MAS consulted on the proposed implementation of the final Basel III reforms in Singapore. The Response sets out MAS’ response to feedback received on the consultation paper published on 7 May 2019 regarding the proposals on market risk capital requirements.

MAS informs that it has carefully considered the feedback received and, where appropriate, has incorporated them into the Consultation Paper discussed below.

MAS had received feedback relating to the use of the Simplified Standardised Approach for Market Risk (“SSA(MR)”). MAS had proposed to permit banks that maintain small and simple market risk portfolios to use the SSA(MR) for calculating market risk capital requirements, subject to MAS approval. To assess whether a bank’s market risk portfolio is “small”, MAS will consider the size of a bank’s risk-weighted assets (“RWA”) for market risk, in absolute terms and as a proportion of the bank’s total RWA.

The Response notes that while most respondents supported or had no comments on the proposal, there was a suggestion to set a quantitative threshold to assess the size of a bank’s market risk portfolio. In this regard, MAS informs that it agrees with this suggestion. It will generally consider a bank’s market risk portfolio to be small if its RWA for market risk (excluding CVA RWA) using the SSA(MR) is S$200 million or less, or is 2% or less of the bank’s total RWA. 

Consultation Paper

MAS seeks feedback on draft standards relating to market risk capital and capital reporting requirements for Singapore-incorporated banks via its Consultation Paper issued on 13 September 2021. The draft provisions in MAS Notice 637 on Risk Based Capital Adequacy Requirements for Banks Incorporated in Singapore (“MAS Notice 637”) take into account standards relating to market risk capital requirements in the consolidated Basel Framework, published by the Basel Committee on Banking Supervision.

The draft provisions in MAS Notice 637, relating to market risk capital and capital reporting requirements, are appended in Annex B of the Consultation Paper. As announced by MAS on 7 April 2020, MAS will implement the revised standards for market risk capital for supervisory reporting purposes from 1 January 2023, and for the purposes of compliance with capital adequacy and disclosure requirements from 1 January 2023 or later. The draft amendments take into account the feedback received on the Consultation Paper on Proposed Implementation of the Final Basel III Reforms in Singapore - Market Risk Capital Requirements issued in May 2019 and MAS’ Response to feedback relating to market risk capital requirements mentioned above.

This Consultation Paper follows the consultation paper on draft standards for operational risk capital and leverage ratio requirements issued on 17 December 2020, and the consultation paper on draft standards for credit risk capital and output floor requirements issued on 25 March 2021. MAS will consult on the draft standards for public disclosure requirements relating to the Basel III reforms at a later date.

The consultation closes on 13 October 2021.

Reference materials

The Response is available on the MAS website www.mas.gov.sg via the relevant webpage. Materials relating to the Consultation Paper are also available on the MAS website www.mas.gov.sg via the relevant webpage, including a template for response.

 

Allen & Gledhill Regulatory & Compliance

To assist our clients with compliance matters, our consultancy arm, Allen & Gledhill Regulatory & Compliance, provides a range of services and solutions. Should you have any queries relating to compliance issues arising out of these developments, please contact:

Lawrence Low
+65 6890 7448
lawrence.low@allenandgledhill.com