Profitability at Singapore’s «Big 3» banks is unlikely to be affected by the easing of the deposit cap for the city-state’s digital banks, according to Fitch.
Even if Singapore regulators lift the deposit cap for licensed digital banks, local lenders DBS, OCBC and UOB are unlikely to see their profits impacted, according to a report by Fitch Ratings. Near term implications for net interest margins are also insignificant.
«Abundant liquidity, supported by strong deposit inflows, has mitigated the pressure on the dominant banks to compete for deposits,» Fitch said.
Currently, Singapore has a deposit limit of S$50 million ($38 million) per licensed digital bank for the first two year’s of operations. In comparison, the three local lenders, also known as the «Big 3» banks, account for 65 percent of all deposits denominated in Singapore dollars at S$500 billion.
Deposit Cap
Meanwhile, there have reportedly been efforts by Singapore’s digital banks to push for the local regulator to ease the deposit limit.
Though there has yet to be an official response, the licensed virtual lenders are already making moves to attract new funds. GXS and Sea-owned MariBank – the only two holders of Singapore’s digital full bank license – both recently lifted their deposit caps to S$75,000 per account.
While raising the cap is the first step towards sustainable growth, there are other challenges that digital banks will face to achieving «long-term viability», including the high interest rate environment, Fitch added.
