SAFE HAVEN: So much cash has been deposited in Singapore that DBS lent MAS $30 billion

SINGAPORE: Despite the uncertainties felt all around the globe, Singapore is perceived to be so much of a safe haven that banks have had an influx of deposits and not enough choices as to where they can be deployed, with the lending environment remaining “tepid.”

In May, Mr Piyush Gupta, the CEO of DBS Group Holdings Ltd., said that DBS lent the country’s central bank, the Monetary Authority of Singapore (MAS), $30 billion.

“We are not finding enough opportunities to put the money to work and instead have lent $30 billion to MAS,” said Mr Gupta in a May 2 conference call. He also noted that “we benefit from deposit inflows” and that “our deposit market share has continued to creep up.”

“The liquidity surplus underscores how Singapore has been a beneficiary as Asia’s wealthy shift their money to a perceived safe haven, even as customers in the city-state have flocked to lock in high-interest rates on fixed deposits. Local lenders meanwhile have signalled a softer outlook for loan growth amid global economic uncertainty,” reads a June 7 Bloomberg piece.

Banks in Japan similarly sit on trillions of dollars in surplus liquidity, while the scenario is entirely different in India, where banks “are trying to keep up with a decade-high demand for loans by hoovering up deposits.”

Regarding on DBS loan to MAS, the Bloomberg piece quotes Fitch Ratings’ financial institutions’ team director Willie Tanoto as saying, “Banks do not actively gather customer deposits just to park them at the central bank as a business strategy.”

This is because banks stand to earn more with loans to customers than with the central bank.

DBS, South East Asia’s biggest lender, has total deposits from December 2019 and March 2023 of $529 billion, an increase of 31 per cent.

Meanwhile, its total loans, which also saw a 16 per cent increase, are at $417 billion, a spokesperson told Bloomberg News.

The increase in deposits has continued to outpace the increase in loans, with banks in Singapore seeing the biggest “excess” since 2020. /TISG

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