CORPORATES SHOULD WATCH OUT FOR UNEVEN RECOVERY
Amongst native corporates, the MAS stated its monetary vulnerability indices confirmed a drop in vulnerability to shocks in comparison with a yr in the past, as company earnings improved.
Firms will probably must take care of uneven development throughout the financial system shifting forward.
Sectors much less affected by the pandemic, particularly manufacturing, will achieve additional traction, the central financial institution stated. In the meantime, these which might be extra delicate to the pandemic could possibly be topic to sporadic mobility restrictions, relying on the evolution of the coronavirus.
With that, focused assist for viable corporations quickly affected by the resurgence in infections should still be wanted, at the same time as broad-based help measures are withdrawn to protect towards debt sustainability threat within the medium to long term.
This, in accordance with the MAS, underscores the significance of well timed surveillance on non-financial corporates with the intention to assess their vulnerability, perceive their contribution to monetary stability dangers in addition to inform the design of applicable coverage assist.
It stated it’s seeking to improve its present company surveillance framework with “chance of default indicators”.
BANKS SHOULD MAINTAIN SOUND UNDERWRITING STANDARDS
On Singapore’s monetary sector, the MAS famous that banks have maintained wholesome asset high quality, alongside sturdy capital and liquidity buffers.
The non-bank sector has additionally weathered the stresses from COVID-19 effectively, with insurers remaining well-capitalised and funding funds with the ability to meet redemptions.
However credit score high quality might deteriorate if renewed disruptions to financial exercise set off an increase in enterprise insolvencies and unemployment, the MAS stated.
An industry-wide stress take a look at carried out this yr confirmed that banks would stay resilient if a resurgence in COVID-19 infections, attributable to extra virulent mutated virus strains, causes the worldwide restoration to stall.
“Banks ought to keep sound underwriting requirements and actively monitor loans prolonged to weak corporations, particularly these in sectors which might be nonetheless constrained by COVID-19 restrictions, in addition to prudent provisioning to mitigate potential credit score losses,” stated the central financial institution.