Singapore’s non-bank financial sector sees growth in 2024, with insurers and investment funds leading the way

SINGAPORE: The total assets of non-bank financial institutions (NBFIs) in Singapore grew by 4% in 2024, fuelled by strong expansions in the insurance and investment fund sectors, according to the latest report from the Monetary Authority of Singapore (MAS).

Liquidity resilience amid redemption shocks

According to the Singapore Business Review, the latest liquidity stress simulation exercise revealed that the majority of investment funds are well-prepared to handle redemption shocks.

Most funds have sufficient liquid assets to meet potential redemption demands, even in a severe market downturn.

However, 7% of fixed-income funds could face a liquidity shortfall, ranging from 2% to 16% of their total net assets under such circumstances.

Private credit and derivatives market growth

Private credit funds in Singapore have also seen significant growth. As of December 2023, assets under management (AUM) in these funds surged to $55 billion, up from $45 billion in 2022.

Private credit now represents 1% of the total AUM in Singapore’s financial industry.

Despite this growth, MAS reassured that private credit funds pose minimal risk to the broader financial system, given the limited exposure of banks and insurers to these funds, coupled with strong risk management practices.

Additionally, Singapore’s over-the-counter (OTC) derivatives market saw notable growth, with the total gross notional value of outstanding derivatives rising by 16% year-on-year, reaching $74.9 trillion as of September 2024.

While synthetic leverage by NBFIs via OTC derivatives decreased earlier in the year, it edged up slightly after June. As of September, gross notional exposure stood at 9.1 times the gross market value.

Overall, the NBFI sector in Singapore remains resilient, with robust growth and a solid financial foundation as it navigates evolving market conditions.