A. Institutional Framework

7. MAS is the designated resolution authority for financial institutions. It is responsible for all financial institutions including holding companies and domestic branches of foreign banks. In this role, MAS determines if the conditions for entry into resolution are met and designs and implements the resolution strategy. MAS is also responsible for reviewing firms’ recovery plans, assessing their resolvability and drawing up firm-specific resolution plans.

8. The MOF plays only a limited role in the technical decisions concerning bank resolution. The MOF intervenes when public resources are at risk and when there are no viable private sector solutions for resolving a systemically important financial institution. The Minister for Finance sits on the Board of MAS (though not on an ex officio basis) and, where joint action is required, the MOF and MAS have arrangements in place to coordinate on the crisis response.

9. The SDIC administers both the deposit insurance and policy owners’ protection schemes. The SDIC is formally a “paybox”, responsible for the reimbursement of insured deposits. But recent amendments to the Deposit Insurance and Policy Owners’ Protection Schemes Act have expanded SDIC’s responsibilities to include the financing of resolution measures. Nonetheless, it does not participate in the design of resolution strategies or take decisions on resolution actions.

10. In April 2015, MAS introduced a framework for identifying and supervising D-SIBs. D-SIBs are banks that are assessed to have a significant impact on the stability of the financial system and proper functioning of the broader economy through their interconnectedness and complexity. The formal identification of systemically important institutions replaced MAS’s previous practice of conducting economic impact assessments to identify potential risks posed to the financial sector. This revised practice is aligned with the principles set out by the Basel Committee on Banking Supervision for determining banks that are of domestic systemic importance.

11. In addition to the standard prudential requirements, D-SIBs are subject to supplementary regulatory requirements. These include local incorporation of retail operations for foreign banks with significant retail operations, recovery and resolution planning obligations, and liquidity coverage ratio requirements. Locally incorporated D-SIBs must also meet higher capital requirements – a minimum Common Equity Tier 1 (CET1) capital adequacy ratio (CAR) of 6.5 percent, Tier 1 CAR of 8 percent and Total CAR of 10 percent, as compared with the Basel III minimum requirements of 4.5 percent, 6 percent and 8 percent respectively.

B. Recovery Planning

12. The 2017 Amendments strengthened the framework for recovery and resolution planning. While such analysis was previously carried out by supervisors as part of their normal supervisory oversight, the 2017 Amendments introduced explicit powers allowing MAS to impose RRP requirements on all financial institutions and to require financial institutions to remove impediments to resolvability. MAS has identified seven banks as D-SIBs. It based its classification of systemic importance on a combination of quantitative and qualitative indicators taking into account factors including size, interconnectedness, substitutability and complexity.

13. MAS has specified the contents of the recovery plans it expects D-SIBs to prepare. They must outline the measures they will take to restore liquidity, capital, and address medium-term vulnerabilities. Banks must also report on the processes to update their recovery plan on an annual basis or whenever there is an event that could materially impact the recovery plan. MAS requires that the recovery plan be approved or endorsed by the bank’s board of directors (for locally-incorporated banks) or chief executive in Singapore (for foreign bank branches).

14. MAS has made progress in implementing recovery planning. It has completed five formal annual reviews of the recovery plans of the locally headquartered D-SIBs. It has also reviewed the recovery plans of the four foreign-headquartered D-SIBs. For each review of the recovery plans, MAS has provided comments and suggestions that the institutions should incorporate in the drafting of their subsequent recovery plan submissions to MAS. In assessing the recovery plans, MAS should factor into consideration possible overlap of resolution plans and analyze the implications for financial stability of D-SIBs resolution strategies in systemic crisis.

C. Official Liquidity Support

15. MAS can provide liquidity support through various modalities. It conducts daily money market operations, offers two Singapore Dollar (SGD) liquidity facilities and can provide emergency liquidity assistance.

A. Organization of Bank Resolution

24. MAS is governed by the MAS Act. Its functions include both on-going supervision of financial institutions and the resolution of failing or likely to fail financial institutions. The MAS Act and other Acts such as the Banking Act, Insurance Act, Securities and Futures Act give MAS the power to regulate and supervise financial institutions. MAS can also issue directions and guidelines. Legal authorization of MAS activities can be found in several sources:

• Acts: The Acts contain statutory laws under the purview of MAS, which are passed by Parliament. These have the force of law and are published in the Government Gazette. Examples are the Banking Act and Financial Advisers Act.

• Subsidiary Legislation: Subsidiary legislation is issued under the authority of the relevant Acts and typically fleshes out the scope of the provisions of the primary Act and spells out in greater detail the requirements that financial institutions or other specified persons (e.g., a financial adviser’s representative) must meet. Subsidiary legislation has the force of law but is not passed by Parliament. They are also published in the Government Gazette.

• Directions: Directions detail specific instructions to financial institutions to ensure compliance. They have legal effect and penalties apply for a breach of directions.

25. Bank resolution activities in MAS are divided between the supervisory teams and the RSU. The supervisory teams monitor the on-going financial position of financial institutions and are responsible for reviewing the recovery plans, as well as developing and periodically updating the resolution plans for the institutions. The supervisory staff is assisted by the newly established RSU, which replaced the previous ad hoc resolution-working group. The RSU supports the supervisory team and reviews the resolution plans. For the resolution planning process, the RSU provides input on the selection of resolution tools and operational steps, as well as providing an independent review of bank-specific resolution plans. Based on a common supervisory dashboard of financial indicators, the supervisory team together with the RSU determines whether a bank has failed or about to fail. .

26. The RSU does not have full-time staff but draws on the staff from various departments including policy, legal and supervision departments. The RSU is chaired by the Assistant Managing Director (Policy, Risk and Surveillance) who oversees both resolution policy and resolution implementation The RSU is composed of three work streams: resolution policy, resolution execution and legal affairs. The RSU is responsible for formulating policies, building expertise and institutional knowledge, and working with supervisory teams on matters relating to recovery and resolution planning. The RSU represents MAS at international fora on resolution issues, e.g., FSB workgroups and participate in CMG meetings. MAS’s view is that such an organizational structure allows staff to be allocated to the most critical activities and to take advantage of the synergies among different groups in MAS. RSU staff divide their time between work on resolution activities and activities in their other departments.

27. The triggers for escalating the case of a financial institution to the CMT or MRC for resolution are based on both quantitative and qualitative indicators. This decision is not limited to balance sheet insolvency as other quantitative triggers to assess the institution’s financial condition include capital, liquidity and credit indicators. These indicators are posted on the supervisory dashboard, which contains all supervisory data needed to evaluate the soundness of an institution. Examples of qualitative triggers include whether the institution has serious governance issues or risk management and control deficiencies, whether the institution’s business is being conducted in a manner detrimental to public interest, or whether the institution has lost public or creditor confidence.

28. The need for triggering the resolution of an institution can be determined jointly by the supervisors and the RSU and approved by the MRC or CMT. The supervisory staff will determine whether the institution is non-viable and will identify a resolution strategy. The RSU will determine whether there is a viable private sector solution and if there is a public interest reason for resolving (rather than liquidating) the institution. If the supervisors and RSU agree to recommend that the institution be resolved, the RSU will present the resolution proposal to the MRC. The MRC is chaired by the Deputy Managing Director for Financial Supervision and includes the heads of supervisory, policy, legal and technology risk and payments units. If the proposed resolution plan requires public funding or involves a D-SIB or a bank whose failure will have systemic impact, the case is escalated to the CMT. The CMT is a coordination forum chaired by MAS’s Managing Director and comprises senior management from both the supervisory and central banking functions of MAS. In the case of disagreement between the supervisors and the RSU, the RSU has the authority to escalate independently breaches in supervisory indicators to the MRC/CMT for decisions on whether to trigger resolution. Consideration could be given to authorizing the supervisory staff to escalate a case independently if there is no agreement with the RSU.

29. The approval of the Minister-in-charge of MAS is required to implement certain resolution actions.⁸ The Minister-in-charge of MAS must approve any plan that includes the use of public monies, the transfer of the business of, or shares in, a failing institution to a third party, or the restructuring of the share capital of a failing institution. MAS takes the view that the involvement of the Minister-in-charge of MAS is a necessary step to bring public interest considerations to the decision-making process. MAS argues that this arrangement balances expeditiousness and fairness to stakeholders and gives more legitimacy to the chosen resolution strategy. The Minister-in-charge of MAS is not involved in determining the operational and technical aspects of the resolution process but approves implementation of the resolution plan.

30. Once approved by the MRC or CMT, the supervisors are responsible for implementing the resolution plan. The supervisory staff will be supported by the RSU as well as by an intervention team with staff drawn from relevant units of MAS. The intervention team will assist in the assessment of the institution’s financial condition, help monitor the progress of the institution’s financial condition, and help carry out the resolution plan.

31. This arrangement for resolution of financial institutions has a number of benefits but there are some limitations. This framework allows supervisors to use their in-depth knowledge of the institution in developing resolution plans and avoids “silos” that inhibit the exchange of information and technical knowledge. Moreover, the risks of forbearance are ameliorated as the RSU independently has the authority to escalate the case to the MRC/CMT. However, this arrangement has some limitations:

• When multiple functions are performed by one unit, conflicts of interest may arise. The supervisory and resolution objectives may, in some cases, conflict. While such conflicts will be resolved at the MRC or CMT, the difference may delay rapid implementation of the strategy.

• Resolution and resolution planning are highly specialized activities that require investment in time and resources. Not having dedicated staff and dividing responsibilities among different staff could slow the development of necessary skills and procedures. Moreover, supervisors may not have the detailed skills and experience necessary to implement complex resolution plans.

• Internationally accepted principles (the Key Attributes) call for an operationally independent unit resolution responsible for resolution. While such independent need not be institutionally independent, it should be operationally independent from other central bank functions.

32. This organization of resolution functions should be strengthened. The RSU should have a dedicated core staff that specializes in resolution policies and practices. Over time, as experience and technical skills are deepened, the RSU should take over a large portion of resolution activities, including implementation of the resolution plan. The roles and responsibilities of each area should be clearly defined, dedicated staff should specialize in the activities of each unit, and internal policies identified to manage potential conflicts.

33. The final approval of the Minister-in-charge of MAS could compromise or appear to compromise the operational independence of MAS. Although the Minister-in-charge of MAS is not involved in developing the technical aspects of the resolution, the Minister-in-charge should not be required to approve individual resolution strategies such as purchase and assumption. Consideration could be given to ways to ensure MAS’s operational independence in bank resolution.

34. Courts are not involved in triggering and implementing resolution of financial institutions. Court orders are not required for MAS to exercise its resolution powers. Rather, court orders are required for certain specific actions incidental to resolution, including the claw back action for any salary, remuneration or benefits given to the directors and executive officers of the non-viable institutions, winding-up of institutions and imposition of a moratorium.

35. Courts will not review the merits of MAS’s decision but only review whether MAS’s actions were within its legal authority. If the claim against MAS is successful (which can only arise where MAS’s actions are “ultra vires” and were not taken in good faith), the remedial actions can include: (i) a prohibitory order, preventing MAS from proceeding , thus requiring MAS to suspend implementation of the action, (ii) a mandatory order to compel MAS to carry out its duties, or (iii) a quashing order to halt a decision outside of MAS’s jurisdiction. The “quashing order” could be used by the Court to require MAS to reverse the resolution action.

36. The ability of the courts to reverse a decision of MAS introduces some uncertainty. Financial stability could be undermined if MAS decisions that have already been implemented are overturned and the action reversed. However, while courts may reverse resolution actions, the grounds to do so are limited to cases where MAS has acted outside of its scope of authority and in bad faith. No such ruling has been made to date. Moreover, to forestall court challenges, MAS has put in place internal processes to ensure the legality of its actions.

B. Resolution Toolkit

37. MAS determines resolution options in light of a medium-term or forward-looking assessment of viability of the institution. In assessing an institution’s viability, MAS takes into consideration a wide range of indicators including:

• continued deterioration in the institution’s financial condition, in terms of erosion of regulatory capital and/or assets in a manner that may be detrimental to its depositors, policy owners, investors or other creditors;

• increasing signs of financial distress, such as the need to trigger sales of illiquid assets;

• insolvency or serious capital deficiencies;

• serious governance issues or risk management and control deficiencies;

• inability of the institution to meet regulatory and licensing requirements on an on-going basis;

• loss or likely loss of confidence in the institution by the public, financial markets, depositors, or creditors;

• actual or likely failure of recovery measures, or the recovery measures are likely to have a material negative impact on the stability of the financial system, or inability of the institution to implement the recommended steps. Projected financial performance (e.g., three-year operating plan) and the plausibility and consistency of assumptions (e.g., reliance on non-recurring income sources) underlying the projection;

• Potential changes to funding model.

38. The resolution toolkit before the 2017 amendments to the MAS Act in 2017, gave MAS a series of effective resolution powers to address failing institutions. That suite of resolution powers included authority to:

• take operational control of a financial institution by replacing senior management;

• transfer the business (assets and liabilities of a financial institution) to a third party;

• establish a bridge financial institution and asset management company;

• cancel or restructure the whole or any part of the share capital of a financial institution;

• transfer shares in a financial institution to a third party; and

• order the wind down of a financial institution, subject to an order of the Singapore courts.

39. While broadly effective for local institutions, these tools were considered insufficient to deal with the failure of a large, global financial institution. In keeping with the proposals of the FSB’s Key Attributes, the MAS Act was expanded in 2017. In addition to having the power to require explicitly RRP from systemically important institutions, MAS was given additional powers:

• Bail in: Under this resolution tool, MAS has the power to write-down, or convert into equity, (i) unsecured subordinated debt, (ii) unsecured subordinated loans, and (iii) contingent convertible instruments and contractual bail-in instruments. However, the statutory bail-in regime does not apply to senior unsecured debt. Bail-in powers can be exercised while the bank remains open, allowing for a combined strategy of recapitalization through bail-in and sale to, or merger with, an acquiring institution. MAS will have discretion to depart from the statutory creditor hierarchy, for example to maximize value in the interest of all creditors as a group or if deemed in the public interest).

• Temporary stay: MAS has the power to impose a temporary stay on the termination rights of counterparties. Such stays can last up to 2 business days and limit the ability of creditors to accelerate closeout of the contract.

• Creditor compensation: Where creditors and shareholders of a non-viable financial institution receive less in a resolution than what they would have received in a liquidation, the MAS Act gives them the right to compensation for the difference.

40. While these additional powers are broadly consistent with the Key Attributes, the scope of bail in powers is not fully aligned with international best practice. The authorities have restricted the scope of bail-in to equity holders, unsecured subordinated debt holders, contingent convertible instruments and contractual bail-in instruments. The statutory bail-in regime will not apply to senior unsecured debt. MAS is of the view that extending the scope of bail-in increases the risk of contagion to the financial system and creates uncertainty among investors. In the event bail-in is insufficient, the Resolution Fund (see below) could be used to support implementation of resolution measures. MAS also notes that D-SIBs are subject to higher prudential requirements than the Basel framework, and that their capital adequacy and leverage ratios are above minimum regulatory requirements.⁹

41. Notwithstanding such considerations, the limitation on imposing bail-in on senior unsecured creditors reduces the potential funding available in a resolution and is not aligned with international best practice as laid out in the Key Attributes. MAS should expand the scope of the bail in regime to include senior unsecured debt securities. Funding costs in a failure are difficult to estimate and public resources available through the Resolution Fund may be inadequate. Allowing senior creditors to be subject to bail in would strengthen the credibility of a resolution strategy that emphasizes a private sector solution. In addition, resolution plans by home authorities of D-SIBs located in Singapore may require bail-in of such creditors

42. Establishing a bridge bank can be an effective resolution tool when no other private sector solution is available. The RSU should continue to develop detailed guidelines and playbooks for the rapid establishment and implementation of a bridge bank. While MAS explained that it is able to grant straight-through approval to license the bridge bank and is putting in place drawer templates to ensure quick establishment of the bridge bank, the supervisory staff should consider establishing a number of licensed empty or shell bridge banks. Market concerns about the establishment and licensing of such empty bridge banks should be minimal, particularly (i) if done during periods of financial stability and (ii) if MAS explains that it is merely strengthening its resolution toolkit.

43. A bank can be placed in temporary public ownership but only under limited conditions. Public resources can be used only after private sector solutions have been exhausted and MAS assesses that the use of other resolution tools cannot meet MAS’s resolution objectives. In general, losses would have been imposed on equity holders and unsecured subordinated creditors to the fullest extent possible, or appropriate, before a bank is placed in temporary public ownership. If a public sector-owned bridge bank is established, it will be expected to meet all relevant prudential requirements.

44. The resolution tools are largely in line with international best practices as defined by the Key Attributes (with the exception of the design of bail-in powers) but steps are still needed to operationalize such tools. While MAS has developed some internal guidance on the operational aspects of resolution tools, the procedures, sequencing and timelines should continue to be developed and expanded. Issues include the phasing and timing of bail-in and the steps needed to coordinate resolution in a cross-border context. To this end, continuing to develop playbooks and guidelines explaining the operational steps for executing the resolution plans is warranted. Advanced work on determining appropriate steps for asset valuation in a cross-border context and developing funding strategies are important next steps in operationalizing the resolution plans.

C. Resolution Plans and Resolvability Requirements

D. Resolution Funding

58. The funding arrangements for resolution aim at limiting public sector exposure to financial loss. Any cost incurred in resolving an institution will first be borne by that institution, where losses will be imposed on its shareholders and unsecured subordinated creditors. If additional resources are needed, the resolution will be financed by the banking sector, either through the use of the deposit insurance fund or from the newly created Resolution Fund. The Resolution Fund will channel financial resources initially provided by MAS but then recovered from the industry.

59. The 2017 amendments to the Act authorized MAS to use the DI Fund to finance the resolution of DI Scheme members. SDIC is not involved with decisions on the use of its fund. Safeguards for excessive use of the DI Fund include a limit on the total amount of DI funds to what would have been paid out, net of estimated asset recoveries, in a depositor payout.

60. The 2017 Amendments also created a framework for establishing a Resolution Fund for failed institutions. This fund is an account used to channel resources from the SDIC and MAS for the resolution of financial institutions, including banks. Given the relatively small size of the DI Fund and the conditions for its use (i.e., only for the resolution of DI Scheme members and subject to the equivalent cost criterion), the primary source of funding will be in the form of loans from MAS channeled through the Resolution Fund. The range of use of the resolution fund is broad and will be available to:

• make a loan or discharge a guarantee for a liability;

• (re)capitalize a bridge bank or resolved institution;

• make payment of creditor compensation and meet any associated costs;

• any other purpose in support of a resolution measure.

61. The Resolution Fund has not been established as a permanent entity but is a financial account that will be established by MAS for each financial institution in resolution. The Resolution Fund will have a trustee to administer the fund. In a resolution, funds will first be drawn from the DI Fund. If more funding is required, the trustee may obtain a loan from MAS. The trustee will then recover the sums withdrawn from the Resolution Fund from the industry on an ex-post basis and repay loans from MAS.

62. The Resolution Fund can be used to recapitalize a financial institution under resolution. At the Minister-in-charge of MAS’s direction and MAS’s recommendation, the Resolution Fund can be used during resolution for recapitalizing the institution, providing a guarantee, and providing liquidity support. Before channeling public monies to a restructured institution, MAS must determine that no private sector solution exists, and that shareholders and subordinated debt holders have absorbed losses. The resolution is initially funding by SDIC resources and then by MAS credit. Any use of the resolution fund will be recovered from the industry through imposition of levies on industry members.

63. Safeguards apply to the use of the resolution fund. The resolution fund may only be used after losses have been imposed on shareholders and unsecured subordinated creditors to the fullest extent possible or appropriate. As senior debt is exempt from the scope of the proposed bail-in regime, the resolution fund may have to be tapped in situations when losses and resolution costs exceed the capital and unsecured subordinated debt of the resolution entity.

64. The Resolution Fund is a useful channel for public funds (loans from MAS to the Resolution Fund) that provides a mechanism for recovery, but some aspects should be revised. As the operationalization of the fund is still being developed, some design features should be reviewed or considered.

• Central bank funding may be easiest to mobilize, but, based on international practice, is not the preferred source of recapitalization funding. Recapitalization of an insolvent or undercapitalized institution should be through the use of government resources. Under urgent situation, when central bank funding is the only option, central bank funds may be used on a temporary basis but must be repaid by the government as quickly as possible. MAS is of the view that there are benefits to MAS providing the initial loan to the resolution fund as it is more expeditious and MAS is better placed to evaluate the extent of funding support required. More importantly, there are mechanisms in place to provide for the recovery of the resolution cost from the industry.

• A resolution fund may be established for each institution under resolution. The Act currently allows different trustees to be appointed for each Resolution Fund established. Having a different trustee for each Resolution Fund introduces an administrative complication and raises the possibility of uneven treatment. Rather, a single trustee could be appointed to administer all Resolution Funds established at any one time. This approach would allow for easier oversight.

• Guidelines should be developed and published on the expected pace of recovery of public funds. Such guidelines should ensure such recoveries occur and they balance the need for speed with the conditions in the market. Recoveries should begin during relatively stable economic conditions.

• The provision of liquidity for the effective implementation of resolution tools such as purchase and assumption (P&A) transactions is appropriate but liquidity support for on-going operations of the restructured institution should be provided directly by MAS rather than through the Resolution Fund once the institution is assessed to be viable. The fund is unlike to have the capacity to evaluate the continued financial conditions of the entity, will not be able to value or collect any required collateral for the open assistance, and cannot require corrective actions in light of the entity’s performance. A preferable solution is to regularize the restructured entity’s access to MAS support functions as quickly as possible.

E. Resolution of Nonbank Financial Institutions

65. The enhanced resolution powers from the 2017 reforms can also be used in the resolution of an insurance company. There are over 100 insurance companies in Singapore; MAS has identified four systemically important ones. These companies are required to prepare recovery plans based on the resolution powers outlined in the Act. The four systemically important firms represent approximately 80 percent of the industry’s assets. MAS has reviewed the recovery plans of the four firms and provided comments, which will be incorporated in the recovery plans to be presented by the firms in 2019.

66. Powers available for the resolution of insurance companies remain under development. MAS currently has the authority to change management, conduct P&A operations, transferring assets and liabilities into a bridge institution or another solvent institution, transfer insurance contracts; administer existing insurance contracts and fulfill obligations; and restructure policy liabilities of insurance companies to allocate losses to policyholders upon the transfer of the insurance business. In this context, MAS can require an insurance company to halt the sale of new policies and run off the existing portfolio of policies through liquidation of assets. While the 2017 Act established a bail-in regime for the insurance sector and the use of temporary stay powers for reinsurance contracts, regulations permitting the use of such powers are under development.

67. Systemically important insurance companies will be resolved while non-systemically important firms may be wound up. MAS has the powers, among other resolution powers, to transfer policies and liabilities to a bridge institution, recapitalize the insurance company or sell it to a viable institution. Non-systemically important insurance firms may be wound-up under the corporate insolvency law.

68. The full range of the resolution toolkit applies to FMIs as well. MAS has set requirements for preparing RRPs on all locally-incorporated FMIs. MAS is working with the institutions to review and refine those plans. The resolution regime does not include sector- specific powers for FMIs, though in the case of central counterparties (CCPs), MAS is able to enforce their rulebook by using its powers to take control of a financial institution.

F. Safeguards

69. The reforms introduce a “no creditor worse off than in liquidation” (NCWOL) safeguard. Under this safeguard, creditors and shareholders that receive less in a resolution than what they would have received had the financial institution been liquidated, will have a right to compensation for the difference. When MAS exercises any resolution powers on a financial institution that directly affects creditors’ or shareholders’ rights, the Minister-in-charge of MAS will appoint an independent assessor to determine appropriate compensation. Where MAS has recognized a foreign resolution action, any compensation that a creditor or shareholder is eligible for under the law of the foreign country will be counted as part of their compensation. All compensation payable under the MAS Act will be paid from the Resolution Fund.

A. Institutional Arrangements

70. An inter-agency committee exists to coordinate policy development and implementation. The Financial Stability Coordinating Meeting (FSCM) is an inter-agency committee composed of representatives from MAS and the MOF. The objectives of the Committee are to coordinate and execute policies required to address an emerging crisis, particularly if the use of public fund is under consideration. The FSCM serves as a venue for information exchange and policy coordination during stable times. In times of crisis, the committee meets as frequently as needed focus on joint decision-making and execution of the crisis response. Under the MAS Act, the MAS can share information with domestic and foreign authorities with respect to resolution, subject to safeguards for confidentiality.

71. In preparation for a crisis, the FSCM considers strategies and plans, in an inter-agency context, to be activated during such crises. The effectiveness of the plans will be evaluated, inter alia, through simulations and exercises. It also works with other relevant agencies (e.g., the Ministry of Communications and Information) on communication. The FSCM does not meet on a regular basis but on recommendation of MAS. The chairmen may convene a meeting in the absence of a recommendation from MAS. MAS is likely to call for a meeting when joint crisis management actions may be required, including the commitment or use of public funds.

72. The committee plays an important role in risk identification and policy response. Consideration could be given to more regular meetings where risks are identified, and scenarios developed on how to respond. Such meetings could primarily take place at the working-group level but, periodically, should involve principal authorities. Although such topics may be managed by MAS, relatively regular meetings between MAS and MOF to discuss risk scenarios and response plans can be productive in ensuring that the data needs and channels of information flows are well established.

B. Identification of Systemic Risk

73. MAS monitors the buildup of systemic risk. Such risk is defined as any event that could have a widespread adverse effect on the financial system. They could emerge from the interconnectedness among financial institutions as well as between financial institutions and other economic actors. MAS monitors a broad suite of indicators covering five broad sectors: banks, nonbank financial institutions, corporates, households, and the external sector. Linkages within and between these sectors are identified through the analysis of regulatory and market-based data. The Macro-prudential Surveillance Department is the key department tasked with monitoring of systemic risk.

74. In the event of a crisis, MAS will assess the potential impact on the economy and financial market participants. MAS has a framework for identifying, on an ex-ante basis, banks whose failure will have a significant impact on the domestic economy and financial markets. The identification takes into account factors such as interconnectedness and the significance of the banks’ linkages with the real economy. It will use that approach to evaluate the potential for contagion from any given failure of institutions, including those that have not been designated as systemically important MAS will assess if the financial institution’s failure could have a broader impact. If warranted, MAS may consider triggering resolution, even if the institution has not been previously assessed to be systemically important.

C. Crisis Simulations

75. MAS conducts both individual and inter-institutional exercises to prepare itself for crisis management. Over the years, MAS has conducted various internal Business Continuity Planning and crisis management exercises, with scenarios ranging from cyber-attacks, physical terrorism and a pandemic outbreak. MAS has also initiated a series of simulations testing for resolution planning. MAS has conducted tabletop exercises aimed at identifying information gaps and clarifying roles and responsibilities in the resolution process. To date, these exercises have been carried out at a staff level. They intend to expand these efforts to include senior management in MAS and, subsequently, to involve selected financial institutions to test the resolution procedures.

76. Conducting crisis simulations is an essential step in finalizing resolution plans. Given that many of the resolution powers have never been exercised, MAS is encouraged to accelerate the development of simulations and to finalize the operational guidelines and playbooks for the resolution of complex institutions.

77. MAS conducted simulations with the industry. It organized the Industry Wide Business Continuity Exercise (IWBE) in partnership with the Association of Banks in Singapore (ABS). The aim of the exercise is to identify means of maintaining financial stability in the face of major operational disruptions. The exercise provided opportunities to test, review and update business continuity plans and crisis management plans in the face of major operational disruptions. To this end, each successive IWBE has enabled all participants to refine communication and coordination processes internally and with external stakeholders. Five exercises have been conducted thus far. An average of 130 financial institutions participated in each run.

A. Cooperation with Foreign Supervisory and Resolution Authorities

78. Cross-border cooperation is an essential element of the bank resolution and crisis management framework in Singapore. Both the large presence of foreign banks and Singapore’s interconnectedness with the global economy make coordination an essential element of crisis management. MAS is home regulator to three D-SIBs and host regulator for another four D-SIBs. In addition, it is host regulator for a large number of branches of foreign firms. There is a legal framework in place for MAS to share information with foreign resolution authorities. MOUs and CoAGs have also been signed on information sharing. However, most concern information sharing and supervisory exchange rather than resolution strategies.

79. MAS is home regulator to three D-SIBs.¹⁰ As a home regulator, MAS conducts regular supervisory colleges for the three banking groups, where information is shared on RRPs, assessment of the banks’ recovery plans, and preferred resolution strategy. In addition, MAS seeks to identify where the Singapore-based banks have significant operations in host financial systems. In this context, MAS has signed or is in the process of signing MOUs with key host supervisory/resolution authorities. These MOUs provide for information sharing and cooperation in times of crisis and may include a dedicated section with information on recovery and resolution plans. MAS will coordinate the execution of resolution plans with the host resolution authorities.

80. MAS is host regulator to four D-SIBs and a large number of foreign-bank branches.¹¹ For banks with a significant presence in Singapore, MAS participates in their CMGs or regional CMGs and supervisory colleges. These coordinating fora allow MAS to coordinate information sharing and provide an avenue for updating progress made on improving resolvability and for sharing MAS’s assessment of the banks’ progress.

81. MAS has signed CoAgs with resolution authorities responsible for financial institutions in Singapore that are part of a G-SIB. CoAgs support the preparation of RRPs and implementation of resolution measures. They include firm-specific agreements involving either home/host agreements (bilateral CoAgs) or including all members of a firm’s cross-border CMG (multilateral CoAgs), These agreements lay out the legal and resolution regimes, detailing how they interact with a firm’s business. Six bilateral CoAgs have been signed together with three multilateral, regional CoAgs (within the APEC region). The CoAgs focus largely on ensuring cooperation and exchange of information. They provide high-level principles on resolution strategies.

82. The frequency and intensity of coordination has increased but continued progress is warranted. Work at both the supervisory college level and the CMGs has intensified as resolution planning becomes more developed. The different levels of preparedness among home and different host jurisdictions, however, places some constraints on the effective cooperation. Effective resolution of a failed cross-border firm would require a broadly consistent resolution toolkit. Intensified efforts at implementing resolution planning in the jurisdictions where Singaporean banks have subsidiaries may be warranted.

B. Cross-Border Recognition Framework

83. The 2017 Amendments also establish a framework to recognize foreign resolution actions. This statutory framework enables MAS to recognize, fully or in part, the resolution action of a foreign resolution authority. This framework does not provide for a formal requirement for reciprocity. Rather MAS will first determine financial conditions in the affected subsidiary or branch and determine if, under Singaporean prudential regulations, the resolution powers can be applied. MAS will decide on the appropriateness of any action, ensuring that such action will not:

• have a widespread adverse impact on the financial system or economy;

• result in inequitable treatment of any Singapore creditor or shareholder;

• be contrary to the national interest or public interest;

• have material fiscal implications;

• be against any other condition prescribed by regulations.

84. The recognition of foreign resolution actions must be initiated by the foreign resolution authority. MAS then reviews the request and determines if the proposed actions do not have a negative impact on the financial system (as described above). The decision to recognize fully or in part the resolution action is subject to the approval of the Minister-in-charge.