Singapore banking sector, regulations remain strong: Fitch

SINGAPORE - The banking sector in Singapore remains strong and local financial regulations are keeping pace with global standards, said ratings agency Fitch in a new report on Friday.

The agency noted that the Monetary Authority of Singapore (MAS), the country's central bank and financial regulator, "continues to be proactive in its oversight of the banking sector".

Banks in Singapore have maintained high levels of capital under the MAS' Basel III rules, which will help them retain strong credit ratings, Fitch added. The MAS' requirements under Basel III are higher than in many other jurisdictions.

While the competitive and mature nature of Singapore's domestic market are spurring local banks to expand overseas, their offshore expansion has been generally "disciplined" so far, Fitch said.

But it cautioned that these regional forays are expected to increase the banks' risk profiles "as operating and regulatory environments in many emerging markets are still developing and the Singapore banks have modest capacities to compete with more entrenched domestic banks in these countries".

The latest regional expansion by a local lender has been OCBC's acquisition of Hong Kong's Wing Hang Bank for more than $6 billion.

Fitch also said it expects the MAS to maintain a close watch over property lending, which makes up a large chunk of banks' loans. However, the property cooling measures introduced since 2009 should help mitigate the buildup of risk due to property exposure in the banking sector, it added.