While the global financial system has remained resilient in 2021, medium-term vulnerabilities have grown with the build-up of non-financial corporate and sovereign debt, as well as elevated property prices and stretched equity valuations, Singapore's central bank and regulator said.
Medium-term vulnerabilities in the global financial system could interact with potential shocks from the evolving macro-financial environment and pose a risk to financial stability, with key risks including new virus strains and above-target inflation, the Monetary Authority of Singapore (MAS) said in its annual «Financial Stability Review» 2021, published this week.
At the same time, indicators of vulnerability for the corporate, household and financial sectors in Singapore have improved through the COVID-19 pandemic, but corporates, households and the financial sector should remain vigilant and prudent, the report said.
Finally, it highlighted increasing vulnerabilities associated with climate change, and said the increased prominence of crypto-assets warrants heightened surveillance.
Banking Sector Resilient
MAS said domestic systemically important banks have «healthy» liquidity buffers, with SGD and foreign currency loan-to-deposit ratios below 100 percent. Overall credit growth has been healthy, largely driven by non-bank lending, while asset quality is healthy and provisioning coverage is adequate.
The report noted that results of the Industry-Wide Stress Test (IWST) 2021 show that banks in Singapore are well-positioned to weather further adverse macroeconomic shocks.
