MAS slaps requirement on DBS to set aside additional $930m in capital due to November outage

DBS suffered its worst digital disruption in a decade from Nov 23 to 25 last year. PHOTO: LIANHE ZAOBAO

SINGAPORE - DBS Bank will have to set aside another $930 million in capital following the widespread outage of its digital banking services last November.

The Monetary Authority of Singapore (MAS) has imposed this additional capital requirement on Singapore's largest bank after it suffered its worst digital disruption in a decade, from Nov 23 to 25.

The central bank on Monday (Feb 7) said DBS will need to apply a multiplier of 1.5 times to its risk-weighted assets for operational risk.

This translates into an additional amount of about $930 million in regulatory capital based on the bank’s financial statements as at Sept 30 – four times higher than the $230 million that DBS had to set aside for a similar disruption of its digital banking services in 2010.

The capital requirement refers to the amount of capital banks have to set aside as a buffer to cover unexpected losses and keep themselves solvent in a crisis.

MAS’ new requirement will not impact DBS’ dividend policy. But it will affect its capital ratios, which are used to measure a bank’s financial strength and ability to withstand risks. 

The November disruption, which DBS had attributed to a problem with its access control servers, led to customers being unable to log in to the bank’s Internet banking platform and mobile app. 

MAS noted deficiencies in the bank’s management of the incident and recovery procedures to restore its digital banking services to a normal state, resulting in the prolonged disruption.

The regulator said it has directed DBS to appoint an independent expert to conduct a comprehensive review of the incident, including of the bank's recovery actions.

The independent review will also have to assess how a similar incident can be prevented in future, said MAS.

In a statement on Monday, DBS chief executive Piyush Gupta said the bank will continue to review its systems and processes with an independent expert over the next few months. 

He noted that customers rightly expect to have seamless and uninterrupted access to online banking services round the clock in a digital era. 

“This is something we take very seriously. Since the November incident, DBS has taken a series of actions to improve the resilience of our services and incident response,” he said.

DBS told The Straits Times it has made several improvements to its access control server system since the incident, adding that the key focus has been on improving diagnostics and recovery protocols.

MAS said DBS has to rectify all shortcomings identified from the review and implement measures to ensure any future disruption to its digital banking services is resolved quickly and adequately. 

“The additional capital requirement will be reviewed when MAS is satisfied that DBS Bank has addressed the identified shortcomings,” it added.

DBS said the MAS requirement will affect its capital ratios by 0.4 percentage point until remedial actions are completed. 

The lender’s common equity tier 1 (CET-1) ratio as at Sept 30 would have been 13.4 per cent, including the capital impact arising from its acquisition of Citi’s Taiwan consumer banking business, which it announced last month. 

The CET-1 ratio measures a bank’s core equity capital, compared with its total risk-weighted assets.

DBS said the ratio is at the upper end of its target CET-1 range and will therefore not impact its dividend policy.

Mr Marcus Lim, MAS' assistant managing director for banking and insurance, said the regulator requires financial institutions to have robust controls and processes to ensure that their IT systems are reliable and resilient, and essential financial services can be delivered continuously to customers.

"MAS will take appropriate supervisory action against any financial institution that falls short of our regulatory expectations," he added.

Follow ST on LinkedIn and stay updated on the latest career news, insights and more.