29 November 2018

On 13 November 2018, the Monetary Authority of Singapore (“MAS”) issued three versions of MAS Notice 637 on “Notice on Risk Based Capital Adequacy Requirements for Banks Incorporated in Singapore” (“MAS Notice 637”) with commencement dates as follows:

  • MAS Notice 637 effective 16 November 2018
  • MAS Notice 637 effective 31 December 2018
  • MAS Notice 637 effective 1 January 2019

On the same day, MAS issued MAS Notice 637 (Amendment No. 2) 2018 which reflects amendments made to MAS Notice 637 to:

  • implement the revised Basel Committee on Banking Supervision (BCBS) standard for interest rate risk in the banking book (“IRRBB”);
  • implement the BCBS’ total loss-absorbing capacity (“TLAC”) holdings standard; 
  • widen the scope of eligible collateral relating to commodities and equity for credit risk mitigation purposes; 
  • revise the risk weight for unrated exposures to public sector entities (PSEs) under the standardised approach for credit risk (SA(CR));
  •  make technical amendments to the public disclosure requirements; 
  • make other miscellaneous technical amendments.

MAS has also issued the following responses to consultation papers on proposed changes to MAS Notice 637:

  • Response to feedback received on Proposed Amendments to Widen the Scope of Eligible Collateral in MAS Notice 637

From 20 December 2017 to 19 January 2018, MAS sought feedback on the proposals set out in its consultation paper on “Proposed Amendments to Widen the Scope of Eligible Collateral Relating to Commodities and Equity Securities in MAS Notice 637”. MAS proposed to amend MAS Notice 637 to revise the list of eligible collateral that may be recognised for credit risk mitigation purposes. Among other things, MAS proposed to recognise commodities as eligible physical collateral for banks using the foundation internal ratings-based approach for credit risk. On 13 November 2018, MAS issued its Response to the feedback received on the proposed changes.
The revisions to MAS Notice 637 relating to these proposals took effect from
16 November 2018.

  • Response to feedback received on Proposed Capital Framework for Interest Rate Risk in the Banking Book in MAS Notice 637

From 9 January 2017 to 10 February 2017, MAS sought feedback on the proposals set out in its consultation paper on “Proposed Amendments to the Capital Framework for Securitisation Exposures and Interest Rate Risk in the Banking Book in MAS Notice 637”.

MAS had proposed a framework for IRRBB which sets out Pillar 2 requirements for the identification, measurement, monitoring and control of IRRBB, and disclosure requirements under prescribed interest rate shock scenarios.
On 13 November 2018, MAS issued its Response to the feedback received relating to IRRBB. The amendments to MAS Notice 637 relating to IRRBB will take effect from 31 December 2018.

In the same consultation paper, MAS had also sought feedback on proposed amendments to the securitisation framework to strengthen capital standards for securitisation exposures, while providing preferential capital treatment for simple, transparent and comparable securitisations. The amendments to MAS Notice 637 in this regard took effect from 1 January 2018.

  • Response to feedback on Proposed Regulatory Capital Treatment of Banks’ Holding of Total Loss-Absorbing Capacity (TLAC) Liabilities in MAS 637

On 9 April 2018, the Monetary Authority of Singapore (“MAS”) issued a consultation paper on “Proposed Regulatory Capital Treatment of Banks’ Holdings of Total Loss-Absorbing Capacity (TLAC) Liabilities under MAS Notice 637”. MAS sought comments on its proposal to introduce an additional 5% threshold for non-regulatory capital TLAC holdings in accordance with the Basel standard on TLAC holdings. It also proposed that the additional 5% threshold may be used only for non-regulatory capital TLAC holdings that meet certain conditions. On 13 November 2018, MAS issued its Response to the feedback received.

The revisions to MAS Notice 637 relating to these proposals will take effect from 1 January 2019.

Reference materials

To access the various versions of MAS Notice 637 with the relevant effective date from the MAS website www.mas.gov.sg, please click here.

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

 

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