SG banks strong and stable despite uncertain AT-1 issuance market - experts
Asian Banking & Finance|Issue 111
They may face higher funding costs as lenders could demand higher risk premiums on AT-1 papers.
SG banks strong and stable despite uncertain AT-1 issuance market - experts

Singapore banks have a stronger resilience compared to their Asian counterparts, so experts say. But just how strong they are and how easily they adapt to global banking crises are occasionally put to the test.

The zero write-off of Credit Suisse’s Additional Tier-1 (AT-1) bonds presented concerns over the impact of AT-1 bond losses on global banks. Although Asian banks are less likely to be dramatically affected, it pays to see how and why Singapore banks stand in the wind.

Credit Suisse’s AT1 write-down 

AT-1 bonds are a type of hybrid debt that can be converted into equity if a predetermined event occurs, acting as an additional capital and buffer for banks. That’s why Credit Suisse’s $17-billion write-down of AT-1 notes early this year caused such a stir in the industry.

The “Lion City” has been marked to have a lesser chance of following in the footsteps of the AT-1 writedown of the Swiss bank, according to Gary Ng, senior economist at Natixis Corporate & Investment Banking.

“Singaporean banks have higher ratings than Asian peers with minor AT-1 bond price movement and low reliance on AT-1, and therefore the impact is limited to credit ratings. Based on our calculation, DBS and OCBC’s AT-1 to Common Equity Tier 1 (CET 1) ratio is around 5%, lower than the average level of 14% in Asia,” Ng told Asian Banking and Finance.

He emphasised that Singapore’s AT-1 bond coupon rate is one of the lowest in the region at 3.6%. Thus, a slight increase would not have a great impact on general funding costs.

Bu hikaye Asian Banking & Finance dergisinin Issue 111 sayısından alınmıştır.

Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.

Bu hikaye Asian Banking & Finance dergisinin Issue 111 sayısından alınmıştır.

Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.

ASIAN BANKING & FINANCE DERGISINDEN DAHA FAZLA HIKAYETümünü görüntüle
Embedded Finance, Digital Banks To Drive SEA's Fintechs
Asian Banking & Finance

Embedded Finance, Digital Banks To Drive SEA's Fintechs

Embedded finance, partnerships, and digital banks will be the three defining trends shaping Southeast Asia’s financial technology (fintech) landscape in the future.

time-read
1 min  |
Issue 114
UBC Aims For Top 5 In Sri Lanka Banking
Asian Banking & Finance

UBC Aims For Top 5 In Sri Lanka Banking

Chairman Nirvana Chaudhary is prepared to lead amidst a national finance crisis.

time-read
3 dak  |
Issue 114
What Makes Malaysia The Next Great Investment Banking Frontier In Southeast Asia?
Asian Banking & Finance

What Makes Malaysia The Next Great Investment Banking Frontier In Southeast Asia?

EVs, takaful insurance, and its proximity to Singapore attract investment activity, according to a BofA executive.

time-read
3 dak  |
Issue 114
How HomePay Is Combating Renovation Scams In Singapore
Asian Banking & Finance

How HomePay Is Combating Renovation Scams In Singapore

Money is put in an escrow account and disbursed when milestones are reached.

time-read
3 dak  |
Issue 114
Will Property Woes Continue To Weigh On Chinese Megabanks?
Asian Banking & Finance

Will Property Woes Continue To Weigh On Chinese Megabanks?

This year, Chinese megabanks are facing two big hurdles: the government’s mandate that may force banks to take on more risks in the name of propping up China’s embattled property sector; and declining credit demand and interest rates.

time-read
2 dak  |
Issue 114
How Have Banks' Wealth Management Pivots Played Out In China?
Asian Banking & Finance

How Have Banks' Wealth Management Pivots Played Out In China?

There’s up to $25b in fees to be made in Asia, but it’s a tough market, an analyst said.

time-read
5 dak  |
Issue 114
Why Singaporeans are okay with locking away over $4b of their money
Asian Banking & Finance

Why Singaporeans are okay with locking away over $4b of their money

Customers can only access 'locked' money with a physical card or by visiting a branch.

time-read
2 dak  |
Issue 114
OCBC builds the the next pipeline of talent
Asian Banking & Finance

OCBC builds the the next pipeline of talent

Lim weaves in support for women bankers to broader industry talent shortage.

time-read
3 dak  |
Issue 114
Banks flip the tables on disruption by becoming the disruptors themselves
Asian Banking & Finance

Banks flip the tables on disruption by becoming the disruptors themselves

Companies are facing not just tech transformations but also shorter skill lifespans for their workforce.

time-read
3 dak  |
Issue 114
Basel III capital hike is not a problem for APAC
Asian Banking & Finance

Basel III capital hike is not a problem for APAC

Most of banking jurisdictions in most Asia Pacific markets should be able to absorb the moderate increases in capital requirements stipulated under the final Basel III standards.

time-read
2 dak  |
Issue 114