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MAS Imposes Additional Capital Requirement for Disruption of Digital Banking Services

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The Monetary Authority of Singapore (MAS) has imposed on a Singapore bank an additional capital requirement following the widespread unavailability of the bank’s digital banking services during 23-25 November 2021. MAS has required the bank to apply a multiplier of 1.5 times to its risk-weighted assets for operational risk. This translates to an additional amount of approximately S$930 million in regulatory capital.

MAS noted deficiencies in the bank’s incident management and recovery procedures to restore its digital banking services to a normal state, resulting in the prolonged duration of the disruption.  MAS has directed the bank to appoint an independent expert to conduct a comprehensive review of the incident, including the bank’s recovery actions. The independent review is also required to assess how a similar incident can be prevented in future.

The bank must rectify all shortcomings identified from the review and implement measures to ensure that any future disruption to its digital banking services is resolved quickly and adequately. The additional capital requirement will be reviewed when MAS is satisfied that the bank has addressed the identified shortcomings.

MAS requires financial institutions to have robust controls and processes to ensure the reliability and resilience of their IT systems and the continuous delivery of essential financial services to their customers. MAS will take appropriate supervisory action against any financial institution that falls short of our regulatory expectations.

MAS has announced that four entities were awarded digital banking licenses. While digital banks offer the same banking services as traditional banks, they operate without a physical setup, enabling customers to control their finances from their computers or smartphones.

There are two types of digital banking licenses – digital full bank license (DFB) and digital wholesale bank license (DWB). The DFB license enables an entity to offer deposits, loans, and investment products through its online platform. DFB license holders can only serve retail and corporate banking services while DWB license holders can only serve businesses, namely small and medium enterprises (SMEs).

MAS also assesses whether the applicant can incorporate innovative technology to meet customer needs that differentiate it from existing banks, as well as the entity’s understanding of local regulatory compliance and risk management plans. Finally, MAS evaluates the growth prospects of the digital bank, such as its potential contribution to jobs, skills development of the local workforce, and regional expansion plans.

The approval of digital banking licenses promises to strengthen Singapore’s banking and finance sector, ensuring it remains resilient, innovative, and competitive. Their low-cost structure, and efficient set-up and operating systems could enable digital banks to quickly expand in ASEAN. Many will utilise Singapore as their base for expansion into other regional markets.

As reported by OpenGov Asia, following the recent spate of SMS-phishing scams targeting bank customers, The Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore (ABS) are introducing a set of additional measures to bolster the security of digital banking.

MAS expects all financial institutions to have in place robust measures to prevent and detect scams as well as effective incident handling and customer service in the event of a scam.  The growing threat of online phishing scams calls for immediate steps to strengthen controls, while longer-term preventive measures are being evaluated for implementation in the coming months.

Banks will continue to work closely with MAS, the Singapore Police Force, and the Infocomm Media Development Authority (IMDA) to deal with this scourge of scams. This includes working on more permanent solutions to combat SMS spoofing, including the adoption of the SMS Sender ID registry by all relevant stakeholders.  MAS is also intensifying its scrutiny of major financial institutions’ fraud surveillance mechanisms to ensure they are adequately equipped to deal with the growing threat of online scams.

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