Basel III banking reforms : Singapore banks meet rules

[Watchman]

Basel III banking reforms
S'pore banks meet rules
Basel reform will have no impact on them
By Gabriel Chen

The Monetary Authority of Singapore's (MAS) existing requirements are well above the new global requirements, outlined by global regulators in Basel, Switzerland, on Sunday. -- PHOTO: BLOOMBERG


SINGAPORE'S three local banks already comfortably meet new global requirements on the levels of reserves which must be set aside as a kind of shock absorber against unexpected losses.

DBS Group Holdings, OCBC Bank and United Overseas Bank (UOB) easily exceed the so-called Basel III requirements in terms of Tier 1 capital, which is a core measure of a bank's financial strength.

In fact, the Monetary Authority of Singapore's (MAS) existing requirements are well above the new global requirements, outlined by global regulators in Basel, Switzerland, on Sunday.

The level of banks' buffers against unexpected losses has been a hot topic following the global financial crisis, which hammered the banking sector, especially in the United States and Europe.

In Singapore, finance industry analysts say investors need not be concerned that the three local banks will be forced to sell shares, for instance, to raise additional funds to set aside.

'It's very clear cut; there's no impact on local banks,' said Phillip Securities analyst Magdalene Choong.

 

[Watchman]

New Basel rules represent new challenge to banks: vice premier
2010/09/14 17:50:02

Taipei, Sept. 14 (CNA) Vice Premier Sean Chen said Tuesday that new banking regulations known as Basel III represent a new challenge for the local banking sector.

Chen said that although the average Bank for International Settlements (BIS) ratio, or capital adequacy ratio, of the local banking sector currently stands at 12 percent -- well above the required 8 percent under the Basel agreement -- some banks are still facing pressure to raise their capital to boost the ratio.

However, Chen did not elaborate on which banks will have to make quick adjustments to raise capital.

The BIS ratio is used to gauge the financial health of a bank by comparing its capital with risk-weighted assets.

Central bankers from the 27 member-countries of the Basel Committee on Banking Supervision met Sept. 12 in Basel, Switzerland, and came up with new regulations that will require banks to more than triple their core tier-one capital ratios -- which measure the buffer of highest-quality assets banks own against future losses -- from the current 2 percent to 7 percent by 2019.

Chen said the higher requirements for the core tier-one capital ratio show that banks' common shares play an important role in tier-one capital by ensuring that they can take on business risks.

While Chen did not disclose the local average tier-one capital ratio, the Financial Supervisory Commission told CNA that the local level is "well above" the Basel requirements.

Chen said banks should make rights issues to boost their common shares to lift tier-one capital ratios, a move that has become a trend in the international banking sector.

While the new Basel rules are not as stringent as the market had previously anticipated, global financial authorities are expected to closely follow the new regulations to enhance risk management and control, Chen said.

Minister of Finance Lee Sush-der said his ministry will consider asking government-owned banks to issue stock dividends through earnings to raise capital. (By Kao Chao-fen and Frances Huang) ENDITEM/J