S'pore's financial sector resilient but watch out for debt, external headwinds: MAS

The Monetary Authority of Singapore. Local financial markets have remained resilient even as Singapore's economic growth has been muted and the banking system is still strong too, as local lenders have maintained healthy funding and capital prof
The Monetary Authority of Singapore. Local financial markets have remained resilient even as Singapore's economic growth has been muted and the banking system is still strong too, as local lenders have maintained healthy funding and capital profiles amidst regional expansion. -- PHOTO: ST FILE

SINGAPORE - Local financial markets have remained resilient even as Singapore's economic growth has been muted and the banking system is still strong too, as local lenders have maintained healthy funding and capital profiles amidst regional expansion.

However, the Government will continue to keep a close watch on growing debt among companies and households and still-elevated property prices.

This assessment comes from the Monetary Authority of Singapore's (MAS) most recent Financial Stability Review, which it published on Thursday.

The MAS said corporate and household balance sheets are still healthy overall, but reiterated a warning it has sounded in past reviews - that some highly indebted households could be vulnerable should interest rates rise or the economy slow down.

The MAS will continue to monitor and take further measures where necessary to keep household debt at a manageable level, it added.

Private residential property prices have moderated, but remain at an elevated level, the MAS continued.

"MAS will continue to monitor the property market and take measures, where appropriate, to maintain a stable and sustainable market."

Banks, meanwhile, should remain watchful of liquidity and credit risks as interest rates are expected to rise, although industry-wide stress testing results indicate that local lenders would be able to meet regulatory capital requirements even under severe stress conditions, the MAS said.

The major risks facing Singapore's financial system are mainly external, the MAS noted.

Financial vulnerabilities are building up in the wake of loose monetary policies by developed economies, while the prolonged low interest rate environment and the search for yield has contributed to greater financial risk-taking by investors and elevated asset prices, including in less liquid assets and markets.

"Faster-than-expected rate rises, volatility spikes or geopolitical tensions could trigger disorderly market adjustments in the G3 that may spill over to other regions," the MAS warned, referring to the world's biggest three economies - the United States, European Union and Japan.

Furthermore, Asia'¦s economic outlook remains mixed and shocks in the advanced economies could be amplified in Asian assets through low market liquidity, the MAS added.