MAS releases new Basel II rules

MAS says it will review the rules as necessary


EVEN as the new Basel II rules governing capital requirements for banks are released in Singapore, the Monetary Authority of Singapore (MAS) said it will monitor international developments and review them as necessary.

The MAS yesterday released Basel II rules in Singapore which seek to align capital requirements more closely with the risks that banks face.

The rules - four years in the making with extensive industry consultation - will take effect on Jan 1, 2008, the MAS said.

The MAS will implement the Basel II framework for Singapore - incorporated banks from Jan 1. They are Citibank Singapore Ltd, DBS Group Holdings, OCBC Bank and United Overseas Bank.

Basel II rules are global rules on capital requirements for banks and established by the Basel Committee on Banking Supervision in June 2004. The committee was made up of a group of central banks and bank supervisory authorities in the industrialised G-10 countries.

Singapore is among a number of developed countries to implement Basel II next year.

But already regulators in the United States and Switzerland said this week that the new rules may need tightening to reflect the current credit market turmoil caused by the US mortgage defaults crisis.

Said an MAS spokeswoman: 'The implementation of Basel II will make the minimum capital requirements for banks more sensitive (than under the current Basel Accord) to changes in banks' risk profiles, including risks arising from securitisation exposures.'

In addition, the public disclosure requirements under Basel II will improve the information available to the market on the risk profile of individual banks, including information on banks' securitisation activities.

'MAS will continue to monitor international developments and review its rules as necessary,' said the spokeswoman.

The Basel II framework, comprising three pillars, more closely aligns the minimum capital requirements for banks with the risks that they face.

Pillar 1 prescribes rules on how banks should calculate the minimum capital that they require to hold for credit, market and operational risks. Pillar 2 describes the accompanying supervisory review of a bank's internal capital adequacy assessment and encourages banks to continually develop their risk management techniques. Pillar 3 prescribes minimum disclosure requirements to facilitate market discipline.

The MAS's minimum Tier 1 and total capital adequacy ratios of 6 per cent and 10 per cent respectively remain unchanged.