Risks to financial stability rising but Singapore households, corporates, banks resilient: MAS

Most Singapore households are prudent but a small group with high amounts of debt could encounter difficulties, says MAS.
Most Singapore households are prudent but a small group with high amounts of debt could encounter difficulties, says MAS. PHOTO: ST FILE

SINGAPORE - Singapore's banks, companies and households are resilient to potential vulnerabilities and shocks in the economy, but pockets of risks are emerging in the face of slowing growth and rising interest rates, the Monetary Authority of Singapore said on Friday (Nov 27).

Most households are prudent and would be able to service their debt payments, but a small group of households with high amounts of debt could encounter difficulties, the regulator said in its latest Financial Stability Review.

Already, the MAS noted, there has been a slight rise in the number of individuals who had missed two months or more of their unsecured debt payments from September last year to September this year.

Some 5.8 per cent of unsecured credit customers missed two months or more of their payments in September this year, up from 5 per cent in the same month a year ago.

However, the number of borrowers with high outstanding unsecured debts, exceeding 24 times of monthly income, has nearly halved from February to September this year.

Furthermore, macroprudential measures introduced in the last few years have helped to curb rising domestic household debt, the MAS noted.

Most companies too can withstand interest and earning shocks, but some highly leveraged firms in certain sectors could be vulnerable in the uncertain operating environment, the MAS said.

Overall corporate debt has risen since the financial crisis of 2008 but has started to stabilise, it added. MAS' stress tests of corporate balance sheets suggest that most companies can withstand interest rate and earnings shocks.

Larger firms have ample financial buffers and are able to mitigate risks from their foreign currency exposures.

Financing conditions for small- and medium-sized enterprises (SMEs) have remained generally positive but such firms could face tighter financing conditions if subdued economic conditions persist, it added.

They could also face currency risks if they have unhedged foreign currency debt, or if they have currency mismatches between their revenues and costs.

Meanwhile, Singapore's financial system remains sound, but banks must stand vigilant against rising credit and currency mismatch risks, the MAS said.

Another emerging risk, it noted, is the fact that weak commodity prices have put strains on commodity-related firms with knock-on effects on banks, financial markets, sovereign balance sheets and the economy.

Recent geopolitical developments could fuel further uncertainty, the regulator added.

Furthermore, Singapore's strong links with other markets in the region could increase the possibility of contagion from a China-related shock, while subdued growth in the region will add to headwinds.