.MAS_sg to adjust banks' capital requirements amid Covid19 pandemic
The three local banks – DBS, OCBC and UOB – have been on a share buyback spree in the past few months. In March, the trio had led a S$502 million buyback consideration tally on the Singapore Exchange, accounting for 88 per cent of the total.
Instead, MAS urged banks to utilise their capital buffers as appropriate to support their lending activities and flagged that"sustaining lending activities should take priority over discretionary distributions". But Singapore's central bank"does not see a need to restrict banks' dividend policies", an approach that differs from the UK, where the Bank of England intervened with UK banks to cancel dividends.
In addition, MAS will allow full recognition of regulatory loss allowance reserves as Tier 2 Capital for banks to enhance their capacity to lend. RLAR is part of lenders' loss allowances, which are currently only granted limited recognition as Tier 2 Capital. The relief will apply until Sept 30, 2021, and may be extended if necessary.
Banks may also utilise their liquidity buffers as necessary to meet liquidity demands. To support banks' lending activities, MAS will adjust the net stable funding ratio requirement. The amount of stable funding that banks must maintain for loans to individuals and businesses that are maturing in less than six months will be halved from 50 per cent to 25 per cent. The relief will apply until Sept 30, 2021, and may also be extended.
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