MAS issues revised MAS Notice 637 on risk based capital adequacy requirements for banks incorporated in Singapore to implement final Basel III reforms

30 October 2023

On 20 September 2023, the Monetary Authority of Singapore (“MAS”) published the revised MAS Notice 637 on Risk Based Capital Adequacy Requirements for Banks Incorporated in Singapore (“Notice”) to implement the final Basel III reforms.

The Notice:

  • establishes the capital adequacy ratios and leverage ratio requirements for a reporting bank and the methodologies a reporting bank must use for calculating these ratios (Pillar 1);
  • sets out the requirements in respect of the internal capital adequacy assessment process of a reporting bank under the supervisory review process (Pillar 2); and
  • specifies the minimum disclosure requirements for a reporting bank in relation to its capital adequacy with a view to enhancing market discipline (Pillar 3).

MAS had published consultation papers seeking feedback on proposed revisions to the Notice relating to:

  • the draft standards for operational risk capital and leverage ratio requirements (published on 17 December 2020);
  • the draft standards for credit risk capital and output floor requirements (published on 25 March 2021);
  • the draft standards for market risk capital and capital reporting requirements (published on 13 September 2021); and
  • the draft public disclosure requirements for regulatory capital (published on 30 March 2022).

On 20 September 2023, MAS published its Response to the feedback received, stating that it has carefully considered the feedback received and incorporated them into the revised Notice where it has agreed with the feedback.

The revised Notice will be effective from 1 July 2024, with the requirements in the revised Notice coming into effect as follows:

Requirement

Effective date

All standards other than the revised market risk and credit valuation adjustment (“CVA”) standards

From 1 July 2024

Revised market risk and CVA standards

From 1 July 2024 for compliance with supervisory reporting requirements, and from 1 January 2025 for compliance with capital adequacy and disclosure requirements

Output floor

To commence at 50% from 1 July 2024 and reach full phase-in at 72.5% on 1 January 2029


MAS advises banks which intend to seek regulatory approval for certain rules in line with the requirements of the revised Notice to engage MAS on their intended applications as soon as possible to facilitate MAS’ review process.

Reference materials

The following materials are available on the MAS website www.mas.gov.sg: