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Thursday, September 03, 2020 – 2:22 pm
The Monetary Authority of Singapore (MAS) announced on Thursday that it will take steps to boost Singapore dollar (SGD) and US dollar (USD) financing for banks in an effort to promote more stable financing conditions and strengthen the resilience of the sector.
Among the measures is a new MAS SGD term credit line that will be introduced to provide banks and finance companies with an additional channel to borrow SGD funds on longer terms and with more forms of collateral.
MAS said it is introducing this facility “preemptively to provide greater certainty of access to central bank liquidity,” which will help contain any liquidity stress “before it poses a serious challenge.”
The new facility will offer SGD funds in terms of one month and three months, complementing the existing permanent MAS permanent facility. A broader range of collateral will be accepted comprising cash and SGD marketable securities and major currencies.
The enhanced guarantee pool will include cash and investment grade debt securities (BBB- and above) issued by governments, central banks, public sector entities and non-financial corporations, denominated in SGD and G-10 currencies (Group of the Ten).
Prices will be set above the rates in force in the market, in accordance with the objective of the line to serve as a liquidity backup. The installation will launch in the week of September 28, 2020.
Additionally, Singapore-incorporated National Systemically Important Banks (D-SIB) may pledge eligible mortgage loans as collateral in the MAS SGD Term Facility.
The acceptance of residential real estate loans as collateral is only available to D-SIB and is in line with the practices of major central banks, MAS said.
“The expansion of acceptable collateral will help these banks retain their most liquid instruments and strengthen the effectiveness of the MAS SGD Term Facility to provide liquidity support,” he added.
D-SIBs are banks that are considered to have a significant impact on the stability of the financial system and the proper functioning of the economy in general. As of September 2020, there are seven D-SIBs in Singapore: DBS Bank, OCBC, UOB, Citibank, Maybank, Standard Chartered Bank, and HSBC.
Singapore’s central bank will also increase the asset tax limit imposed on locally incorporated banks under the Banking Act to 10 percent of a bank’s total assets, up from the current limit of 4 percent.
MAS said this increase will give locally incorporated banks greater leeway to pledge residential property loans as collateral for accessing funds so that they can support the financial needs of individuals and businesses affected by the Covid pandemic. -19.
He added that the 10 percent limit ensures that these banks maintain a large reserve of free assets that, along with other prudential rules of MAS, safeguard the interests of depositors.
In parallel to this measure, MAS will also expand the range of guarantees that Singapore banks can use to access US dollar liquidity from the MAS USD line. Banks will be able to obtain liquidity in US dollars by pledging a broader pool of cash and marketable securities as of September 28, 2020, in accordance with what is accepted in the SGD Term Facility.
The MAS USD Facility was established in March 2020 to support the stability of the USD financing terms in Singapore. Currently, banks in Singapore can borrow US dollars by pledging eligible SGD-denominated collateral.
The expansion of the pool of eligible collaterals in the MAS USD Line will provide banks with greater flexibility to manage their USD liquidity, MAS said.
Jacqueline Loh, MAS Deputy Managing Director (Markets and Development), said these enhancements to MAS’s suite of liquidity services “will strengthen the resilience of the banking sector and financial markets in Singapore, and allow our banks to continue to support the needs of companies. Business”. and the people here and in the region through the crisis. “
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