Experts focus on tight regulation in Singapore

Experts focus on tight regulation in Singapore

SINGAPORE: The recent collapse of three US banks and the takingover of 167 year old banking institution Credit Suisse by Swiss rival UBS has raised nervous questions about banks and whether the money they hold is secure.

Will this spiral of fear spread to Asia and can a bank run in Singapore where depositors rush to withdraw their money?

Guest speakers on the CNA podcast Heart of the Matter said that.

Sumit Agarwal, professor at the School of Business at the National University of Singapore, and Thilan Wickramasinghe, head of research Singapore and regional financials at Maybank Investment Banking Group, pointed out the tight regulation in the country.

I don't think we should worry about that much in Singapore context, because a few things have to happen. The macroeconomic conditions are turning on you. Agarwal said the bank is making bad decisions and taking on a lot of risk, either credit risk or maturity risk.

Both should be caught by the regulators, he said.

In any jurisdiction, oversight is important, not just in Singapore, according to Wickramasinghe. It boils down to knowing what risks banks are taking with their businesses.

As regulators, you have to put in very strong safeguards to make sure there is trust within the banking system, not just in a single bank. That's what you see in Singapore, he said.

This applies broadly in the Southeast Asian context, where regulators tend to be conservative.

Wickramasinghe said that they've been through this collective experience of the Asian Financial Crisis and the global financial crisis.

Wickramasinghe: People get spooked when there is a question on a bank's solvency Banking is all about balancing confidence and taking risks. If you looked at Silicon Valley Bank, they had enough assets to cover their deposits. But that didn't matter. People were spooked and they wanted to take their money out.