Singapore banks are poised to reduce their capital buffers, which currently stand at double the regulatory requirement, according to a report by S&P Global Ratings. The adjustments will be influenced by loan growth and emerging opportunities, as detailed in the report titled “Banking Brief: High Capital Levels A Double-Edged Sword For Singapore Banks.”
The report notes that the increase in banks’ capital ratios, following Basel reforms in July 2024, offers protection against unexpected losses and boosts public confidence. However, excessively high capital levels may suggest underutilisation of capital for growth and expansion. S&P Global Ratings suggests that banks are already planning short to mid-term strategies to manage these levels effectively.
The report, which does not constitute a rating action, is accessible to RatingsDirect subscribers and can be purchased by non-subscribers. It provides insights into how Singapore banks might navigate their capital strategies in the coming months.
As Singapore banks consider these adjustments, the financial sector will be closely watching how these changes impact overall growth and stability. The potential recalibration of capital buffers could influence lending practices and investment strategies, shaping the future landscape of Singapore’s banking industry.
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