By Chun Han Wong
SINGAPORE--Singapore's banking system has sufficient capital to
cope with eventual rises in global interest rates, the city-state's
central bank said Tuesday, in response to Moody's Investors
Service's move to cast a negative outlook on the sector.
"Local banks continue to have strong financial positions by any
serious assessment," the Monetary Authority of Singapore said in a
statement. "As Moody's itself concluded, the local banks have
enough capital to withstand even the severe stress test scenarios
that it considered."
Moody's on Monday cut its outlook for Singapore's banks to
"negative" from "stable," citing their rapid loan growth in recent
years and rising property prices in the city-state--factors that
have raised chances of declining credit quality and an increase in
non-performing loans. The credit rater had given its outlook on
Singapore banks at "stable" since 2010.
Its outlook downgrade came after the MAS in June tightened rules
on property loans to discourage "imprudent" lending to individuals,
in a move to mitigate risks to local homebuyers whose finances may
be stretched when the global low-interest-rate environment comes to
an end.
Singaporean regulators have also repeatedly taken steps since
September 2009 to rein in real-estate prices that have been rising
almost nonstop since the global financial crisis. Helped by low
interest rates and abundant capital, home prices in the city-state
have surged 61% since the second quarter of 2009, the most recent
market trough.
The MAS said it "has been concerned that some borrowers are at
risk of being overstretched, especially when interest rates rise.
However, the local banks are not at risk."
While the MAS acknowledged that Singapore's banks "are not
immune" to concerns over potential credit risks from rising
interest rates, the central bank said local lenders "have adequate
buffers in place to cope with the inevitable upturn in the interest
rate cycle."
Write to Chun Han Wong at chunhan.wong@dowjones.com
