SINGAPORE: Singapore’s banking system remains robust and well-equipped to navigate current macro-financial uncertainties, according to the Monetary Authority of Singapore (MAS).
In its 2024 Financial Stability Report, released on Nov 27, the central bank highlighted the sector’s strong capital and liquidity buffers, as well as the overall health of asset quality.
Despite elevated borrowing costs, MAS affirmed that banks had maintained sufficient precautionary buffers to mitigate potential credit quality declines.
“Asset quality remains healthy despite still-elevated borrowing costs, and banks have adequate precautionary buffers to guard against any credit quality decline,” the report stated.
A separate survey conducted by MAS in September 2024 revealed expectations of rising credit demand in the near term, driven primarily by corporate borrowers seeking loans for capital expenditures and acquisitions.
Credit growth peaked earlier in 2024 and has moderated since the third quarter, primarily due to a slowdown in interbank lending. However, lending to non-bank entities has continued to grow since March, coinciding with a global shift towards easing interest rates.
The report noted that the recovery in lending to non-bank entities has been largely supported by loans extended to Singapore residents.
However, lending to trade-related sectors remains weak despite some early signs of recovery, as the manufacturing and wholesale sectors grew in September.
Loans to small and medium enterprises (SMEs) remain a concern. MAS reported a decline in total loan value to SMEs, which was attributed to the expiration of COVID-19-era loans provided by Enterprise Singapore.
The slight tightening of credit conditions—stemming from the earlier rise in global interest rates—has also contributed to the subdued demand for SME credit.
While banks anticipate an uptick in credit demand, they remain cautious in their approach.
MAS emphasized that banks intend to maintain current underwriting standards as a precaution against the uncertain economic outlook, which continues to be influenced by geopolitical tensions and other global risks.
MAS underlined its confidence in the banking system’s resilience, noting that the sector is well-positioned to support Singapore’s economic growth while safeguarding financial stability in the face of evolving challenges.