How Safe Are Singapore Banks? Assessing the Strength and Stability of the Banking Sector

Goh Jun Cheng

As a major financial center and banking hub, Singapore is home to numerous local and international banks.

But how stable and secure are Singapore’s banks?

This comprehensive article delves into the resilience of Singapore’s banking sector amid economic fluctuations, its strong prudential regulation and oversight, and measures to safeguard depositors.

Overview of Singapore’s Banking Landscape

Singapore’s banking landscape comprises over 150 commercial banks spanning local banks, foreign banks and international bank subsidiaries.

Local banks like DBS, OCBC and UOB dominate the retail market while foreign banks focus more on corporate banking and wealth management. Singapore is headquarters for many banks’ Southeast Asian operations, making it a pivotal banking node regionally and globally. In addition to commercial banking, Singapore is also a dynamic wealth management center.

Singapore emerged relatively unscathed from the 2007–2009 global financial crisis compared to the US and Europe. Non-performing loan ratios rose in Singapore but remained healthy. Moreover, during COVID-19, ample fiscal support and debt relief helped avert a sharp jump in bad loans. This attests to the soundness of Singapore banks as well as the banking regulator’s prudence.

Let us explore the pillars that make Singapore’s banking system resilient.

Robust Regulatory Oversight and Governance

A key reason Singapore banks remain stable is robust regulation and supervision. The Monetary Authority of Singapore (MAS) as central bank and banking regulator promotes financial stability through high prudential standards. Banks must adhere to rules and capital requirements that align with international Basel standards. MAS has established thorough oversight processes encompassing:

  • Stringent licensing framework to assess banks’ financial health and risk management.
  • Ongoing supervision via activities like on-site audits and stress testing exercises.
  • Review of banks’ internal controls, credit underwriting and operations.
  • Monitoring emerging threats and market risks.

Banks found to have deficiencies or excessive risks face remedial orders or penalties from MAS to rein in unsafe practices. Besides prudential regulation, good corporate governance enforced by MAS helps ensure prudent management in Singapore banks.

Strong Capital and Liquidity Buffers

Singapore banks are required to maintain resilient capital and liquidity buffers that serve as shock absorbers against losses. MAS mandates minimum capital adequacy ratios based on the amount of risk-weighted assets a bank holds. Key capital ratios for Singapore banks range between 12% to 15% which surpasses global standards. Capital ratios shield banks from balance sheet erosion and prevent insolvency.

In tandem, MAS requires banks to maintain healthy liquidity coverage ratios and cash buffers to withstand sudden liquidity strains. Conservative liquidity means banks are less likely to encounter funding difficulties in crises. Robust capital and liquidity positions enable Singapore banks to weather economic storms. During downturns, MAS may also lower capital requirements temporarily to facilitate lending. But buffers remain sizeable.

Risk Management and Diversification

Through regulations and guidelines, MAS promotes strong risk management to avoid excessive risk concentrations in Singapore banks. Banks adopt risk management systems incorporating credit checks, portfolio limits, scenario stress testing, derivatives valuation and other quantitative controls. MAS also encourages banks to diversify risks. For example, interbank lending restrictions prevent overexposure to a few counterparties.

Banks are advised to limit property lending to dampen asset bubbles. Broad diversification across industries and asset classes makes bank portfolios more resilient to sector-specific downturns. MAS supervision ensures prudent standards are upheld. The healthy risk management culture contributes to stability.

Deposit Insurance Scheme

Singapore has a deposit insurance scheme (DIS) to provide confidence that small deposits are protected. The DIS covers eligible deposits up to S$75,000 per depositor per bank. This safeguards the vast majority of individual savings accounts.

Since DIS coverage is limited, depositors are encouraged to also consider banks’ financial strength in decisions. But DIS prevents potential runs on banks due to isolated failures. MAS can also intervene to facilitate resolution measures for troubled banks that pose broad systemic risks. With DIS, bank runs are unlikely and savings remain protected up to limits, thereby upholding stability.

Restrictions on Foreign Banks

Compared to local banks, MAS imposes stricter limits on foreign bank operations to prevent risks from transmitting through their parent banks overseas. Foreign banks face constraints on expansion, acquisition of local banks and domestic branch networks.

This reduces the possibility of problems at foreign banks negatively impacting the Singapore banking system. The insulation between foreign banks and local banks contains contagion risks.

Financial and Technology Risk Management

MAS promotes sound technology risk management as banks digitize. With rising cyber threats and tech risks, MAS established guidelines on IT security controls, data protection and resilience against cyber attacks. Technology risk management regulations require management oversight, robust systems and testing.

Financial crime surveillance capabilities are also strengthened through public-private partnerships. Prudent technology risk management improves operational resilience.

Ongoing Initiatives and Reform

Looking ahead, MAS continues enhancing prudential policies and risk surveillance. Some initiatives include:

  • Refining capital rules to improve bank rescues.
  • Implementing global reforms like the Basel III accords.
  • Developing more rigorous stress testing models.
  • Promoting responsible lending through measures like borrowing limits.
  • Regulating technology and cyber risks.
  • Monitoring emerging threats from climate change, cryptocurrencies etc.
  • Improving resolution planning for non-performing loans.
  • Greater cross-border cooperation with other regulators.

By regularly reviewing and upgrading regulations, MAS ensures framework relevance and sound oversight of banks.


In summary, Singapore’s banking system remains fundamentally robust due to strong prudential regulation, adequate capital safeguards, diversification, deposit insurance and good governance.

Conservative oversight by MAS promotes stability while allowing banks to meet credit needs safely. While Singapore banks are not immune to global crises, sound supervision means disruptions are less likely to originate locally.

Through vigilant and responsive regulation adapted to changing risks, Singapore upholds a resilient financial sector that contributes to economic development.

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