MAS to withdraw pandemic relief measures but promises ‘well-paced’ exit

Tharman Shanmugaratnam, minister-in-charge of the Monetary Authority of Singapore (MAS), used his addendum to last week’s president’s address to reassure the local and international risk and financial markets that it will continue to do all it can to maintain financial stability in the nation and support businesses and individuals as they attempt to ride out the Covid-19 crisis. The package of banking, credit and insurance relief measures introduced to help individuals and businesses through the worst of the crisis will gradually be withdrawn because of the high costs. But he said this will be a “well-paced” exit that minimises “sharp cliff” effects for borrowers, while safeguarding financial stability. The minister also said the MAS will not allow the focus on the recovery process and related acceleration in financial technology investment to divert its attention away from the goal of tackling environmental risk and climate change impacts. He said the authority would forge ahead with its goal of making Singapore a global green finance hub. Mr Shanmugaratnam said the Singapore economy is experiencing its most severe downturn since independence. He said the MAS seeks to “anchor” economic and financial stability and will ensure that the financial sector emerges stronger, so that it can continue to support the economy and provide more jobs for Singaporeans. “MAS has adopted an accommodative monetary stance, to complement the government’s significant fiscal policy measures in mitigating the economic impact of the Covid-19 Circuit Breaker and broad-based decline in global demand,” said the minister. “MAS eased monetary policy in April this year to prevent a broadening of disinflationary pressures that would be destabilising for the economy. Through its money market operations, MAS has and will continue to ensure the smooth functioning of funding markets in Singapore, so that there is no disruption to banks’ ability to continue to extend credit to the economy,” he continued. The minister said that sustaining the safety and soundness of the financial sector is critical for supporting the economy through the downturn as well as its recovery. “Banks and insurance companies generally entered the crisis with financially strong balance sheets. MAS’s stress tests found them to be resilient in a deep downturn. Singapore’s financial sector has also demonstrated strong operational resilience and has been able to continue to serve customers through the different phases of the Covid-19 pandemic,” he said. “This has reflected years of investments in digitalisation, sound business continuity planning and agile adjustments to work processes. To ensure that financial institutions stay resilient financially and operationally, MAS has provided a number of regulatory reliefs that do not compromise prudential standards, and will continue to supervise the industry closely,” continued the minister. The MAS has introduced a range of relief measures to help individuals and businesses deal with the pandemic-induced economic crisis. These measures need to withdrawn over time but the minister promised it would be a “well-paced” exit strategy. “MAS and the financial industry introduced a comprehensive package of measures that have provided relief to individuals and businesses in meeting their loan and insurance commitments, and helped ensure continued access to bank credit and insurance coverage. As the measures provided temporary relief and come with longer-term costs, they need to be gradually withdrawn. MAS is working closely with the industry to ensure a well-paced exit that minimises sharp cliff effects for borrowers, while safeguarding financial stability,” explained Mr Shanmugaratnam. The minister stressed that the financial sector remains “integral” to Singapore’s recovery from the Covid-19 crisis and longer-term growth. He promised that the MAS will work with the industry to ensure that the financial sector is well equipped with the skills and capabilities to emerge stronger from the crisis, and advance Singapore as a global financial centre. The focus and investment in financial technology (fintech) will also continue as Singapore continues its goal of remaining one of the top hubs globally, promised the minister. An estimated 1,000 fintech firms are now based in Singapore and the MAS recently announced a $250m enhanced Financial Sector Technology and Innovation Scheme, known as FSTI 2.0, to accelerate technology and innovation-driven growth in the sector. The new technology will be used to raise operational resilience and better manage risks, stressed the minister. “With the accelerated pace of digitalisation due to Covid-19, MAS is also working actively with other government agencies and the industry to drive further progress on electronic payments and digital banking. In addition, MAS will work with the financial services and fintech sectors to adopt digital solutions that will strengthen operational resilience, improve productivity and better manage risks, as well as engage customers. Achieving a high degree of digitalisation will be a key source of competitive advantage for our financial sector in the future,” he said. The focus on recovery from the pandemic and investment in fintech will not, however, divert attention away from the critical need to tackle environmental and climate-related risks, the minister stressed. There is a generally held fear that the worldwide recovery process from the crisis will divert attention away from this critical area and store up huge problems in future. Not so in Singapore, assured the minister. “Safeguarding the environment and managing climate-related risks is an increasingly important issue both globally and in Singapore. MAS set out our vision for Singapore to be a leading global centre for green finance last November. We have made good progress and will continue to press on with all three pillars of our Green Finance Action Plan, to strengthen the financial sector’s resilience to environmental risks, develop green finance markets and solutions, and harness technology and innovation to promote green finance,” he said.

MAS to withdraw pandemic relief measures but promises ‘well-paced’ exit

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