MAS consults on draft standards for operational risk capital ...

MAS consults on draft standards for operational risk capital and leverage ratio requirements for Singapore-incorporated banks and issues ... Skiptonavigation Skiptomaincontent(accesskeys) Skiptofooter(accesskeyx) 28January2021 On17December2020,theMonetaryAuthorityofSingapore(“MAS”)issuedtheConsultationPaperonDraftStandardsforOperationalRiskCapitalandLeverageRatioRequirementsforSingapore-incorporatedBanks(“ConsultationPaper”)andtheResponsetoFeedbackReceivedonProposedImplementationoftheFinalBaselIIIReformsinSingapore-OperationalRiskCapitalandLeverageRatioRequirements(“Response”). ConsultationPaper MASsoughtfeedbackonitsdraftstandardsrelatingtooperationalriskcapitalandleverageratiorequirementsforSingapore-incorporatedbanks.Theconsultationclosedon21January2020.AsannouncedbyMASon7April2020,MASwillimplementtherevisedstandardsforoperationalriskcapitalandleverageratiorequirementsfrom1January2023. ThedraftprovisionsinMASNotice637onRiskBasedCapitalAdequacyRequirementsforBanksIncorporatedinSingapore(“MASNotice637”)takeintoaccountstandardsrelatingtooperationalriskcapitalandleverageratiorequirementsinthefinalBaselIIIreformspublishedbytheBaselCommitteeonBankingSupervision(BCBS),namely: theconsolidatedBaselFramework,publishedinDecember2019,whichincludesthefollowingstandardsandfrequentlyaskedquestions:  “BaselIII:Finalisingpost-crisisreforms”,containingrevisedstandardsforoperationalriskcapitalandleverageratiorequirements,publishedinDecember2017 “Leverageratiotreatmentofclientclearedderivatives”,publishedinJune2019; “FrequentlyaskedquestionsontheBaselIIIstandardisedapproachforoperationalrisk”,publishedinAugust2019;and “BaselFrameworkfrequentlyaskedquestions”,publishedinJune2020. ThedraftprovisionsinMASNotice637,relatingtooperationalriskcapitalandleverageratiorequirements,areannexedtotheConsultationPaper.TheConsultationPaperstatesthatMASwillconsultonthedraftMASNotice637provisionsforotherareasoftheBaselIIIreformsatalaterdate. Response Bywayofbackground,MASconsultedontheproposedimplementationofthefinalBaselIIIreformsinSingaporeon7May2019.TheResponsecontainsMAS’responsetothefeedbackreceivedontheproposalsonoperationalriskcapitalandleverageratiorequirements.TheResponsestatesthatMASwillbepublishingitsresponsestothefeedbackreceivedontheotherareasoftheBaselIIIreformsatalaterdate. MAShasconsideredthefeedbackreceived,andwhereappropriate,hasincorporatedthemintothedraftstandardsforoperationalriskcapitalandleverageratiorequirementsforSingapore-incorporatedbanksissuedforconsultation. Amongotherthings,MASconsideredfeedbackonitsinitialproposalnottoimplementthelosscomponentinthecalculationoftheoperationalriskcapitalrequirementforallbanks.MASrecognisedindustryfeedbackthat(1)settingtheinternallossmultiplier(“ILM”)tooneforallbankswouldresultinanoperationalriskframeworkthatisnotsufficientlyrisksensitive,penalisingbanksthathadlowhistoricaloperationallosses,and(2)incorporatinglossesintothecalculationoftheoperationalriskcapitalrequirementwouldincentivisebankstomanagetheiroperationalriskswell. Assuch,MASwillrequirebankswithabusinessindicator(“BI”)greaterthanS$1.5billiontoincorporatelossesintothecalculationoftheoperationalriskcapitalrequirementandmeetminimumlossdatastandards.WhereabankwithaBIgreaterthanS$1.5billionhasbreachedtherequirementtomeetminimumlossdatastandards,itwillberequiredtosetILMequaltoone,orifspecifiedbyMAS,greaterthanone.MASwillrequireallbankswithaBIgreaterthanS$1.5billiontodisclosetheirannuallossdataunderthePillar3disclosurerequirements. BankswithaBIlessthanorequaltoS$1.5billionmaychoosetoincorporatelossesintothecalculationoftheoperationalriskcapitalrequirement,subjecttoMAS’approvalandprovidedthebankmeetstheminimumlossdatastandardsanddisclosesitsannuallossdata.BankswithaBIlessthanorequaltoS$1.5billionwhichdonotchoosetoincorporatelossesintothecalculationoftheoperationalriskcapitalrequirementwillberequiredtosetILMequaltooneandwillnotberequiredtomeetminimumlossdatastandardsnordisclosetheirannuallossdata. Referencematerials ThefollowingmaterialsareavailableontheMASwebsitewww.mas.gov.sg: ConsultationPaperonDraftStandardsforOperationalRiskCapitalandLeverageRatioRequirementsforSingapore-incorporatedBanks ProposedReportingSchedulesRelatingtoOperationalRiskCapitalandLeverageRatioRequirements ResponsetoFeedbackReceivedonProposedImplementationoftheFinalBaselIIIReformsinSingapore-OperationalRiskCapitalandLeverageRatioRequirements Shareviaemail ShareviaLinkedin Joinourmailinglist Publications BacktoPublications Contacts: AdrianAng Singapore +6568907710 [email protected] FrancisMok Singapore +6568907786 [email protected] CatherineNeo Singapore +6568907195 [email protected] KarenTiah Singapore +6568907741 [email protected] Close Thissiteusescookiesandbyusingthesiteyouareconsentingtothis.Findoutwhyweusecookiesandhowtomanageyoursettings.Moreaboutcookies