Singapore’s new LCR is credit positive for largest bank: Moody’s

The LCR will be introduced in January 2015.

Amid the recent publication of the Monetary Authority of Singapore’s (MAS) consultation paper for the liquidity coverage ratio (LCR) applicable to the country’s banks and foreign branches, Moody’s Investors Service says Singapore’s new LCR is credit positive for largest bank.

According to a release from Moody’s Investors Service, Singapore’s LCR rules will ensure that banks have enough high-quality liquid assets (HQLA) to withstand a 30-day liquidity stress scenario.

The new LCR rules will further strengthen Singapore’s three large domestic banking groups’ already robust liquidity profiles and resilience to short-term funding shocks and are credit positive.

Here’s more from Moody’s Investors Service:

The LCR is part of the Basel III capital, funding and liquidity framework developed by the Basel Committee on Banking Supervision (BCBS).

Singapore’s LCR will be introduced in January 2015 for the three largest lenders, DBS Bank Ltd. (DBS, Aa1 stable, B/aa3 stable4), Oversea-Chinese Banking Corp Ltd (OCBC; Aa1 review for downgrade, B/aa3 review for downgrade) and United Overseas Bank Limited (UOB; Aa1 stable, B/aa3 stable).

At introduction, these banks will be subject to two minimum LCRs: 60% all-currency LCR,5 and 100% Singapore dollar LCR; the latter is in line with the BCBS recommendation that banks should use separate LCRs for their main operating currencies.

Based on Moody’s discussions with these banks, they are already compliant with the upcoming LCR rules because of their ample HQLA, which is the numerator in the ratio, and robust deposit-funded profiles, which reduce the denominator of assumed cash outflows.