Article on the financial situation of banks

Assignment Help Finance Basics
Reference no: EM13826987

Problem:

17 July 2013 TODAY ONLINE; SINGAPORE

The three local banks have the highest average credit ratings in the world and are not at risk, the Monetary Authority of Singapore (MAS) said yesterday, a day after rating agency Moody's Investors Service cut its outlook on the Republic's banking sector to negative from stable. "Local banks continue to have strong financial positions by any serious assessment. As Moody's itself concluded, the local banks have enough capital to withstand even the severe stress test scenarios that it considered. They maintain capital levels well above the Basel requirements that are prescribed globally," the central bank said. Moody's cast its negative outlook on Singapore's banking system because of the recent period of rapid loan growth and rising real estate prices here, as well as in regional markets where the three local banks are active. In its report, Moody's said these factors have increased the probability of deterioration in credit quality under potentially adverse conditions for the banks in the future, such as an increase in interest rates. If that happened, borrowers' ability to pay outstanding obligations could be undermined, it noted. In response, the MAS said that while it had been concerned that some borrowers could become overstretched, "the local banks are not at risk". "They undertake regular stress tests on their own as well as coordinated by the MAS and have adequate buffers in place to cope with the inevitable upturn in the interest rate cycle," it said. With regard to property market risks, the MAS said it had taken pre-emptive measures along with other Government agencies to cool the sector, including tightening loan-to-value ratios for mortgages, introducing additional stamp duties on real estate transactions and shortening loan tenures. Since 2009, the Government has introduced seven rounds of housing market cooling measures to rein in prices that have surged on a combination of cheap funds, hot money and under building in the past. Home prices in Singapore have surged 61 per cent from the market trough about four years ago. For the longer term, the MAS has established a total debt servicing ratio framework for property buyers that seeks to prevent over-borrowing, so that risks from rising interest rates can be mitigated. The central bank has also been monitoring banks' credit underwriting practices to ensure they remain prudent. In Bloomberg Markets' annual ranking of the world's strongest banks released in May, the three local banks were placed in the top six -with OCBC in second place, DBS in fifth and UOB in sixth. Bloomberg ranked the lenders on key criteria such as the ratio of Tier 1 capital to risk-weighted assets, the ratio of non-performing assets to total assets, the ratio of loan loss reserves to non-performing assets, the ratio of deposits to funding, and the efficiency ratio, which compares costs with revenue. The MAS also pointed out yesterday that Moody's had been revising downwards its ratings outlook over the past two years for a number of well-rated banking systems. "This is understandable, in light of the impact that low global interest rates have had on credit growth and asset prices and the potential risks when interest rates rise. The local banks are not immune to such concerns," the central bank said.

Question

The above article came about after Moody's Investors Service has changed the outlook for Singapore's banking system to negative from stable in a published report on 15 July 2013. Discuss and share your views on Moody's report as well as MAS's response.

Summary

This question is basically belongs to Finance as well as it explains about an article on the financial situation of banks in Singapore during 2013. A report about banks' capital and performance has been given by Moody's Investor Service and the views about Moody's have been analyzed.

Reference no: EM13826987

Questions Cloud

Evaluation of advertising effectiveness at axa life insuranc : Evaluation of Advertising Effectiveness at AXA Life Insurance
Law of chemical combination : Can you explain in detail about LAW OF CHEMICAL COMBINATION
Made an investment in certain equipment : Tilly's Travel Service has made an investment in certain equipment that cost the company $366,741. The equipment is expected to generate cash inflows of $51,000 each year. Use your financial calculator or excel to determine how many years the equipme..
How the author dramatize or manipulate the audiences : How does ‘Super Size Me' challenge the idea of non-fiction in documentary. (Focus on the narrative side, how the author dramatize or manipulate the audiences
Article on the financial situation of banks : The three local banks have the highest average credit ratings in the world and are not at risk, the Monetary Authority of Singapore (MAS) said yesterday, a day after rating agency Moody's Investors Service cut its outlook on the Republic's banking..
The profitability index of the project is closest : (Ignore income taxes in this problem.) Dayton Corporation is considering a project that would require an investment of $68,000. No other cash outflows would be involved. The present value of the cash inflows would be $89,080. The profitability index ..
Identify and explain the factors that cause the weakness : Identify and explain the factors that cause this weakness. Given this weakness, how does the President influence what the government does (that is, influence public policy)
Compute the payback period for the machine : (Ignore income taxes in this problem.) Vander Company is considering purchasing a machine that would cost $454,140 and have a useful life of 8 years. The machine would reduce cash operating costs by $84,100 per year. Compute the payback period for th..
How much is total variable cost at an output of five units : The problem is belongs to economics and it is explain about a number of units produced for a given fixed cost and variable cost are calculated in the answer through the given table.

Reviews

Write a Review

 

Finance Basics Questions & Answers

  What are the major constants in designing

What are the major constants in designing the optimal merchandise mix?

  Calculate the opportunity cost

Sporty Corporation a sport machine manufacturer, is considering a new project that will take advantage of excess capacity in an existing plant. The plant has a capacity to create 50,000 tennis rackets, but only 25,000 are currently being produced.

  A bank randomly selected 247 checking account customers and

1.a bank randomly selected 247 checking account customers and found that 107 of them also had savings accounts at this

  How will this change in policy affect accounts receivable

Essence of Skunk is considering a change in its credit policy to terms 3/10, net 30 to preserve its market share. How will this change in policy affect accounts receivable?

  Calculate the number of shares outstanding at the end of

company x has 100 shares outstanding. it earns 1000 per year and announces that it will use all 1000 to repurchase its

  Discuss the difference between direct measurement

Discuss the difference between direct measurement and indirect measurement.  Give examples of each in an accounting context.

  Calculate the unamortized discount or premium for each bond

The initial proceeds per bond, the size of the issue, the initial maturity of the bond, and the years remaining to maturity are shown in the following table for a number of bonds.

  A 10-year coupon paid semianually bond has a face value of

a 10-year coupon paid semianually bond has a face value of 1000 you buy it at par and sell it one year later for a 6

  Determine the consequences of this transaction

Your firm is cash-based. Ignore any income tax implications. Determine the consequences of this transaction for each of the following.

  How many payments will he need tomake to pay off the loan

A guy borrows $7900 and wants to repay it $600 every sixmonths with the first payment in 6 months. If the loan terms are 6%APR with semiannual compounding, how many payments will he need tomake to pay off the loan?

  Thirty years later in 1988 the average cost was 13 700 what

in 1958 the average tuition for one year at an ivy league was 1800. thirty years later in 1988 the average cost was 13

  What would be the maximum amount of checkable deposits

What would be the maximum amount of checkable deposits after deposit expansion, and what would be the money multiplier?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd