Singapore: Financial System Stability Assessment

EXECUTIVE SUMMARYThe Singapore financial system is highly developed, and well regulated and supervised.Singapore is one of the world's largest financial centers, built around a core of domestic andinternational banks, and also offers a wide range of non-bank services. The authorities have givenstrong emphasis to integrity and stability in finance and to compliance with international standards,and have addressed most recommendations made by the 2004 FSAP.Singapore's current regulation and supervision are among the best globally. The MonetaryAuthority of Singapore (MAS) oversees the entire financial system, and has the analytical andoperational capabilities to do so effectively.Singapore is exposed to a broad array of domestic and global risks, especially in light of itsinterconnectedness with other financial centers. The most pressing vulnerability appears to stemfrom the rapid growth of credit and real estate prices in recent years, but the financial system is alsoexposed to possible spillovers from a future tightening of U.S. monetary policy, an economicslowdown in China, or a deterioration of economic conditions in Europe.The team's stress tests suggest that these risks are manageable. This reflects banks' large capitaland other cushions, and the decisive macroprudential actions taken by MAS to address the threat ofa bubble in the housing sector. Moreover, MAS has sought to address potential spillovers fromother major financial centers by converting large retail branches operating in the domestic marketinto domestically incorporated subsidiaries, and by pressing in international fora for greater sharingof supervisory information on global systemically important financial institutions (G-SIFIs). Lookingforward, the analysis suggests the importance of continuing to monitor closely cross-borderinterbank liabilities, and also of continuing to adjust macroprudential measures in response todomestic housing market conditions.