Banks Will Have More Singdollar Funds Available with New MAS Facility
Singapore’s banks and finance firms would have access to more funds if they face liquidity issues due to the Covid-19 pandemic. The Singapore Monetary Authority (MAS) is carrying out a pre-emptive Singdollar term facility to handle liquidity constraints before they become severe challenges.
Although Singapore’s banks and finance companies maintain healthy liquidity buffers, MAS is preemptively implementing this facility to offer greater certainty of access to liquidity from central banks, “a central bank statement said Thursday
The initiative, to be launched by the end of September, comes on top of two other liquidity facilities that have been rolled out by the central bank since the start of the Covid-19 crisis. The two are MAS USD Facility and Enterprise Singapore (ESG) loans facility MAS SGD.
Banks and finance companies are calling for further defaults as businesses are struggling to remain alive in the midst of the pandemic and the possibility of end-of-year relief initiatives being wounded.
Local banks-DBS Bank, OCBC Bank and United Overseas Bank-all shore up their balance sheets, even as they posted net profit declines in the second quarter of this year. The MAS said its new facility will provide Singdollar funds in tenors of one and three months, and will consider a variety of collateral, including cash and marketable securities in Singdollar and major currencies. In addition, the collateral approved for its US dollar facility will be extended to include the above.
The MAS SGD Term Facility will also enable banks incorporated in Singapore and classified as “systematically significant domestic” or D-SIBs to pledge “worthy residential real estate loans as collateral”
CIMB Private Banking economist Song Seng Wun described the MAS move as a guard and a contingency plan against deeper economic cuts if the current “recessionary tensions do not ease”. More retrenchments and business closures will affect repayment schedules for both retail and corporate customers, Mr Song said.
MAS USD Facility to lend US Dollars to Singapore’s banks on March 26. Both the swap line and the MAS USD Facility were extended to the end of next March. In April, the central bank said it would give near-zero interest-rate loans to qualifying banks-only 0.1 per cent per annum for a two-year tenor-as part of an effort to support loans under the ESG scheme to small and medium-sized businesses.