Local banks lead market decline as S'pore imposes sanctions against Russia

Singapore banks led a steep decline in the local stock market yesterday, reflecting investors' concern over growth, inflation and tightening financial conditions as Singapore joined the ranks of Western nations in imposing unilateral sanctions on Russia for the invasion of Ukraine.

The Straits Times Index ended down 1.6 per cent at 3,242.24 points. DBS Bank slipped 3.2 per cent, OCBC Bank fell 1.5 per cent and UOB declined by 2.2 per cent.

The rare move by Singapore to slap sanctions on a country in the absence of a United Nations resolution comes after the US and the European Union ramped up their measures against Russia.

They have already blocked some Russian banks from the international Swift transaction messaging system and frozen the Russian central bank's reserves.

Analysts said Russia's attack on Ukraine has already put into question supplies of commodities.

The financial sanctions may raise doubts about the health of banks that are heavily exposed to Russian entities and boost speculation about the stability of the global financial system.

Bloomberg quoted unnamed sources as saying Singapore's top three banks have stopped issuing letters of credit involving Russian energy deals.

Some European banks, such as ING, Rabobank, Credit Suisse and Societe Generale, and two of China's largest state-owned banks - Industrial and Commercial Bank of China and Bank of China - have also announced a halt to commodities trade financing for Russian companies.

A spokesman for the Monetary Authority of Singapore (MAS) said financial institutions in Singapore are aware of the heightened risks, and are taking appropriate measures to manage any legal, reputational and operational risks arising from the sanctions imposed by various jurisdictions.

"MAS has sent a circular to all financial institutions in Singapore, reminding them to manage any risks associated with the situation in Ukraine and the sanctions imposed by major jurisdictions," it said.

"(They) should also continue to stay vigilant to any suspicious transactions or flow of funds, and apply enhanced customer due diligence in higher-risk situations," it added.

With a total asset size of almost US$2 trillion (S$2.72 trillion), the banking sector here is critical to Singapore's role in financing local and regional growth in trade and infrastructure.

In response to queries from The Straits Times, Ms Koh Ching Ching, head of group brand and communications at OCBC, said: "Our business is predominately in Asia and our international branches serve mostly our network of customers. Our exposure to Russian entities is not significant."

DBS and UOB gave similar replies.

A UOB spokesman said: "As a bank focused on South-east Asia, UOB has no direct exposure to Russian banks. We have advised a handful of our clients with trade flows affected by potential sanctions to manage down their exposure accordingly."

DBS said it will comply with all applicable sanctions.

"Separately, we have minimal direct exposure to Russia and, consistent with our risk management obligations, have adjusted appetite for transactions consuming Russian exposure limits," a DBS spokesman said.