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Press Release: S&PGR Publishes Latest BICRA On Singapore

1 Jun 2018 4:21 am
 
 
The following is a press release from S&P Global Ratings: 
 
SINGAPORE (S&P Global Ratings) June 1, 2018-- S&P Global Ratings today 
published its "Banking Industry Country Risk Assessment: Singapore." 
 
We classify the banking sector of Singapore in group '2' under its Banking 
Industry Country Risk Assessment (BICRA). Other countries in group '2' are 
Belgium, Canada, Finland, Germany, Hong Kong, Japan, Liechtenstein, 
Luxembourg, Norway, Sweden, and Switzerland. 
 
Our bank criteria use our BICRA economic risk and industry risk scores to 
determine a bank's anchor, the starting point in assigning an issuer credit 
rating. The anchor for banks operating only in Singapore is 'a-'. 
 
In our opinion, Singapore banks benefit from operating in a high-income and 
economically and politically stable environment. Singapore's economy is highly 
competitive, diverse, and resilient. The high fiscal and monetary policy 
flexibility, as well as the strong sovereign creditworthiness, support 
economic resilience. 
 
Economic imbalances exist in Singapore because of high residential real estate 
prices. Prices are elevated relative to income levels, and affordability in 
certain segments appears stretched. Property prices are also starting to 
increase after years of moderation following the government's cooling 
measures. Credit risk is mitigated by strong household balance sheets, and 
full employment conditions, which support the economy's debt-bearing capacity. 
 
We believe that the asset quality of Singapore banks will be vulnerable to 
further deterioration in external conditions and a meaningful exposure to the 
commodities sector. Singapore banks have conservative lending practices and 
underwriting standards. They also benefit from a very strong payment culture 
and rule of law in the country. 
 
Singapore's economic risk trend is stable. The Singapore economy is chugging 
along smoothly supported by robust external demand amid an improvement in the 
global economic outlook. Economic growth is likely to be firm in 2018 on 
steady external demand, although it is likely to be slower than the 3.6% 
increase in 2107. 
 
Regarding industry risk, we believe the institutional framework is very 
strong. Our view reflects Singapore's capital regulations that are more 
stringent than international standards, and the regulator's very strong record 
of maintaining financial stability during past crises. Singapore's sound 
governance and high transparency provide further support. 
 
Risk appetite is restrained, and the banking sector had relatively stable 
profitability even during periods of external turmoil. Banks do not have 
high-risk characteristics, such as particularly risky products or aggressive 
commercial practices. Industry stability is high, with three local banks 
dominating the market. No particular market distortions affect the sector. 
Banks typically benefit from high customer retention and a stable deposit base 
and high customer confidence in the system. 
 
We consider the industry risk trend to be stable. The Monetary Authority of 
Singapore has a solid record of maintaining the stability and soundness of 
Singapore's financial system. Domestic banks have strong funding profiles and 
maintain healthy local currency deposits. Singapore's banks have expanded 
overseas to establish a regional presence, particularly in emerging markets, 
to reap growth, profit, and diversification benefits. However, such expansion 
could also expose the banks to greater operational and credit risks; they 
could also pose challenges to the regulator. 
 
Only a rating committee may determine a rating action and this report does not 
constitute a rating action. 
 
The reports are available to subscribers of RatingsDirect at 
www.capitaliq.com. If you are not a RatingsDirect subscriber, you may purchase 
copies of these reports by calling (1) 212-438-7280 or sending an e-mail to 
research_request@spglobal.com. Ratings information can also be found on S&P 
Global Ratings' public website by using the Ratings search box located in the 
left column at www.standardandpoors.com. Members of the media may request 
copies of these reports by contacting the media representative provided. 
 
Primary Credit Analyst: Ivan Tan, Singapore (65) 6239-6335; 
                        ivan.tan@spglobal.com 
Secondary Contact: Rujun Duan, Singapore +  65 6216 1152; 
                   nancy.duan@spglobal.com 
Sovereign Analyst: Rebecca Hrvatin, Singapore (65) 6530-6420; 
                   rebecca.hrvatin@spglobal.com 
 
 
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(END) Dow Jones Newswires

June 01, 2018 00:21 ET (04:21 GMT)
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