## EXECUTIVE SUMMARY

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### Institutional framework and responsibilities
- The Monetary Authority of Singapore (MAS) is the designated resolution authority for financial institutions, including holding companies and domestic branches of foreign banks.
- MAS determines if the conditions for entry into resolution are met and designs and implements the resolution strategy.
- The Ministry of Finance (MOF) plays a limited role in technical decisions concerning bank resolution, intervening when the use of public resources is contemplated.
- Resolution functions in MAS are divided broadly between supervisory teams and the Resolution Unit (RSU):
  - Supervisory teams monitor banking institutions, develop resolution plans, and take the lead in implementing resolution plans.
  - The RSU comments and provides input into development of plans, formulates policies, builds expertise and institutional knowledge, and works with supervisory teams on recovery and resolution planning.
  - Either the supervisory team or the RSU may identify institutions that have failed or are about to fail based on a common supervisory dashboard of financial indicators.
  - Once a decision to resolve an institution is made, the RSU would formally escalate the case to the Crisis Management Team (CMT) (for resolution of an institution whose failure can have systemic impact or would require public resources) or to the Management Resolution Committee (MRC) (all other cases).
  - The RSU does not have full-time staff but draws on staff from various departments; MAS considers this flexible arrangement to leverage supervisory knowledge and avoid “silos.”

### Recent legislative changes and resolution powers
- The 2017 amendments to the MAS Act strengthened the resolution framework and introduced enhanced resolution powers and a strengthened framework for recovery and resolution of domestic systemically important banks (D-SIBs).
- The amendments are broadly consistent with the Financial Stability Board’s (FSB) Key Attributes for Effective Resolution of Financial Institutions and are generally applicable to all financial institutions.
- MAS’s original suite of resolution tools included powers to:
  - take operational control of a financial institution,
  - transfer assets and liabilities to a third party,
  - establish a bridge institution and asset management company,
  - restructure share capital.
- The 2017 amendments introduced new tools including powers to:
  - require explicit recovery and resolution planning (RRP),
  - implement temporary stays,
  - bail-in some creditors,
  - conduct reverse transfer and onward transfer,
  - establish a cross-border recognition framework,
  - establish a creditor compensation framework,
  - establish a resolution funding framework.
- A key limitation: the bail-in powers do not extend to writing down or converting senior unsecured and uninsured creditor claims to equity; the report recommends extending bail-in to senior unsecured debt securities.

### Operationalization and organization of resolution work
- The resolution tools are well designed, with the exception of limited bail-in scope, but further steps are needed to operationalize resolution plans:
  - Internal guidelines to operationalize the resolution tools have been established, but procedures, sequencing, and timelines should be further developed and expanded.
  - Issues to address include the phasing and timing of bail-in and coordination steps for cross-border resolution.
  - Advanced work on developing playbooks and guidelines explaining operational steps for executing resolution plans is warranted.
- Organizational recommendation: establish a core staff within the RSU dedicated to resolution work and, over time, transfer resolution planning to the RSU, given resolution and resolution planning are specialized activities requiring investment in time and resources.

### Scope of resolution planning and depositor treatment
- MAS currently develops resolution plans for D-SIBs only.
- Recommendations regarding scope and content of planning:
  - Review resolution plans for each institution for internal consistency and cross-institutional consistency.
  - Consider extending resolution planning beyond D-SIBs to other banks.
  - Continue efforts to identify critical functions on a more granular or product level.
- Creditor hierarchy in liquidation under the Banking Act gives preference to domestic depositors; recommendation that depositors in branches of Singaporean banks located outside Singapore should be treated consistently with local depositors.

### Resolution funding and use of public resources
- Funding arrangements aim to limit public sector exposure:
  - Losses first borne by equity holders and unsecured subordinated creditors.
  - When additional funds are required, the deposit insurance fund (DI Fund), built by ex-ante premiums from members, can be used to support resolution of members on an equivalent cost basis.
  - A Resolution Fund will be established to channel temporary public resources to the resolved institution; any MAS resources used in the Resolution Fund will be recovered from the industry.
- Recommendations and cautions:
  - Central bank funding should not be used as a source of solvency support; resolution funding should be done through government resources. If MAS funding is used for solvency support it should be only temporary and replaced by Government funding.
  - Develop guidelines for the conditions and the pace of recovery of resolution costs from the industry; publish the method and timeline for recovery of public funding.
  - Liquidity support channeled through the Resolution Fund should be phased out once the institution has access to market funding.
  - The Resolution Fund is allowed to provide liquidity support to the restructured institution; such support should be temporary and a preferable solution is to regularize the restructured entity’s access to MAS support functions quickly.

### Cross-border cooperation and systemic considerations
- Cross-border cooperation is important: MAS is home regulator to three D-SIBs and host regulator for another four D-SIBs.
- MAS has signed or is negotiating memorandums of understanding (MoUs) with key host supervisory or resolution authorities of the D-SIBs to formalize crisis management and resolution cooperation.
- MAS participates in Crisis Management Groups (CMGs) for six global systemically important banks (G-SIBs) and regional CMGs for three other G-SIBs; MAS also signed multilateral institution-specific cooperation agreements (CoAgs) with CMG members and home resolution authorities.
- MAS offers liquidity functions to preserve financial stability:
  - Conducts daily money market operations.
  - Offers two Singapore Dollar liquidity facilities: the Intraday Liquidity Facility (ILF) and Standing Facility (SF).
  - Can provide emergency liquidity assistance (ELA).

### Deposit Insurance and SDIC role
- The Singapore Deposit Insurance Corporation (SDIC) operates the Deposit Insurance (DI) and Policy Owners’ Protection Schemes in Singapore.
- Recent amendments allowing DI funds to be used for resolution measures add new responsibilities to SDIC; recommendations include:
  - Explicitly recognize SDIC’s role in resolution and allow SDIC to participate in discussions relating to use of such funds.
  - Over time, SDIC should develop stronger analytical capacity and understanding on bank resolutions to perform its role effectively and participate more fully in resolution planning.
  - Foreign exchange denominated deposits should be covered by the deposit insurance regime; SDIC could pay out such deposits in Singapore dollars at the prevailing exchange rate at the time of failure.

### Key statistics and financial system structure (as of 2018Q2)
- The financial system is dominated by banks, with assets equal to about 600 percent of GDP.
- As of end-June 2018, there were 128 commercial banks with operations in Singapore, with total assets of SGD 2.6 trillion.
- System totals reproduced exactly:
  - System total: Local Number 4, Assets (In billions of Singapore dollars) 982.7; Foreign Number 124, Assets (In billions of Singapore dollars) 1,662.2; Total Number 128, Assets (In billions of Singapore dollars) 2,644.9
  - D-SIBs 1/: Local Number 4, Assets 982.7; Foreign Number 8, Assets 407.8; Total Number 12, Assets 1,390.5
  - Foreign branches: Local Number 0, Assets 0; Foreign Number 116, Assets 1,254.4; Total Number 116, Assets 1,254.4
  - Others: Local Number 0, Assets 0; Foreign Number 0, Assets 0
  - Source: MAS
  - 1/ There are seven D-SIBs banking groups comprising twelve banking entities:
    - Locally-headquartered D-SIBs: 1. DBS Bank Ltd (DBS) 2. Oversea-Chinese Banking Corporation Limited (OCBC) and Bank of Singapore Limited (BOS), a subsidiary of OCBC 3. United Overseas Bank Limited (UOB).
    - Foreign-headquartered D-SIBs: 1. Citibank – Citibank N.A. (Citibank), Citibank Singapore Limited (CSL) 2. HSBC – The Hongkong and Shanghai Banking Corporation Limited (HSBC), HSBC Bank (Singapore) Limited (HSBCBSL), Hang Seng Bank Limited 3. Maybank – Malayan Banking Berhad (Maybank) 4. Standard Chartered Bank – Standard Chartered Bank (SCB), Standard Chartered Bank (Singapore) Limited (SCBSL)

### Selected recommendations (timing and priority reproduced exactly)
- Institutional arrangements:
  - Establish a core staff within the RSU dedicated to resolution work and over time, transfer resolution planning to the RSU. Time*: I; Priority**: H
- Resolution powers:
  - Expand the scope of bail-in to include senior unsecured debt securities. Time*: M; Priority**: M
  - Continue to develop guidelines and playbooks for the new resolution tools. Staff should be trained, and processes tested. Time*: I; Priority**: H
- Recovery and resolution plans:
  - Require annual testing of recovery plans from D-SIBs using common stress assumptions across all banks. Time*: C; Priority**: M
  - Review the resolution plans for all institutions together, looking for common elements and assessing them in the context of a system-wide crisis. Time*: C; Priority**: M
  - Extend recovery and resolution planning to non-systemic institutions. Time*: M; Priority**: M
- Resolution funding:
  - Develop and publish the method and timeline for the recovery of public funding. Time*: I; Priority**: M
  - Liquidity support channeled through the Resolution Fund should be phased out once the institution has access to market funding. Time*: C; Priority**: M
- Crisis management:
  - The MAS-MOF Financial Stability Coordinating Meeting should meet on a regular basis to discuss systemic risk scenarios and plans to address such crises. Working Groups should meet regularly to review analytical tools and develop mechanisms for rapid policy response to a crisis. Time*: C; Priority**: M
  - Expand contingency planning for systemic crisis to include system-wide crisis simulation exercises for specific D-SIBs. Time*: C; Priority**: M
- Deposit insurance:
  - SDIC should be notified of emerging distress and participate in discussions relating to the resolution of DI Scheme members. Time*: I; Priority**: H
  - SDIC could continue to develop its analytical capacity so it may participate more fully in bank resolution discussions where DI Funds are to be used. Time*: M; Priority**: M
  - Foreign exchange denominated deposits should be covered by SDIC. SDIC could pay out such deposits in Singapore dollars at the prevailing exchange rate at the time of failure. Time*: M; Priority**: M

* C = continuous; I (immediate) = within one year; M (medium term) = 2-5 years  
** H = high; M = medium; L = low

*Prepared by David S. Hoelscher (external expert, MCM) for the FSAP team; Singapore Technical Note on Crisis Management, Resolution and Safety Nets.*

### Roles of MOF, RSU structure, and operational independence
- MOF involvement:
  - 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.
  - The SDIC administers both the deposit insurance and policy owners’ protection schemes and is formally a “paybox”, responsible for the reimbursement of insured deposits.
  - Recent amendments expanded SDIC’s responsibilities to include the financing of resolution measures, but SDIC does not participate in the design of resolution strategies or take decisions on resolution actions.
- RSU organization and resourcing:
  - RSU replaced a prior ad hoc resolution-working group; RSU supports supervisory teams and reviews resolution plans, provides input on selection of resolution tools and operational steps, and provides independent review of bank-specific resolution plans.
  - RSU does not have full-time staff; draws on staff from policy, legal and supervision departments.
  - RSU chaired by the Assistant Managing Director (Policy, Risk and Surveillance).
  - RSU composed of three work streams: resolution policy, resolution execution and legal affairs.
  - Triggers and escalation: supervisors and RSU jointly determine need for triggering; cases requiring public funding or involving a D-SIB or systemic-impact bank escalate to the CMT.
  - Minister-in-charge approval required for implementation of resolution actions that include use of public monies, transfer of business of, or shares in, a failing institution to a third party, or restructuring of share capital.

### Strengthening RSU and independence considerations
- Organizational recommendations:
  - 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.
  - Roles and responsibilities of each area should be clearly defined; dedicated staff should specialize in the activities of each unit.
  - Internal policies should be identified to manage potential conflicts.
- Operational independence:
  - Final approval by the Minister-in-charge of MAS could compromise or appear to compromise the operational independence of MAS.
  - Although the Minister-in-charge is not involved in developing technical aspects of 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.

### Resolution toolkit details and operational gaps
- Pre-2017 powers included:
  - take operational control by replacing senior management;
  - transfer business (assets and liabilities) to a third party;
  - establish a bridge financial institution and asset management company;
  - cancel or restructure whole or part of the share capital;
  - transfer shares to a third party;
  - order wind down of a financial institution, subject to a Singapore court order.
- 2017 MAS Act expansions added powers including:
  - Bail-in: write-down or convert into equity unsecured subordinated debt, unsecured subordinated loans, contingent convertible instruments and contractual bail-in instruments; statutory bail-in does not apply to senior unsecured debt. MAS has discretion to depart from statutory creditor hierarchy.
  - Temporary stay: impose a temporary stay on termination rights of counterparties for up to 2 business days.
  - Creditor compensation: right to compensation where creditors and shareholders receive less in a resolution than in liquidation.
- Limitations and recommendations:
  - Statutory bail-in excludes senior unsecured debt; MAS views extending bail-in to senior debt as increasing contagion risk and investor uncertainty.
  - Recommendation: MAS should expand the bail-in regime to include senior unsecured debt securities to increase available funding in resolution and strengthen credibility of private sector–led resolution strategies.
  - RSU should develop detailed guidelines and playbooks for rapid establishment and implementation of a bridge bank; consider establishing licensed empty or shell bridge banks.

### Resolvability assessments, resolution plans, and stress testing
- MAS requires D-SIBs to submit information on critical functions and inter-dependencies; information requirements include branch network, Singapore-incorporated subsidiaries, material non-bank subsidiaries, business activities, operations within the group and outsourced to third parties, business lines and critical functions.
- Status:
  - MAS has completed the second round of resolution plans and resolvability assessments; group plans and resolvability assessments for four foreign D-SIBs assess local operations while home authorities lead group plans.
  - Detailed balance sheet plans are still under preparation; identification of granular critical functions, funding requirements, and need for structural changes are underway and should be accelerated.
- Recommendations:
  - Review resolution plans for internal and cross-institutional consistency and assess them in the context of a system-wide stress event.
  - Accelerate development of detailed balance sheet plans and funding strategies, include MAS management in deliberations on adequacy of plans, and expand consultations with industry.
  - Conduct system-wide stress tests using shocks consistent across the market to assess whole-system response.

### Creditor hierarchy and depositor coverage
- Creditor hierarchy in liquidation gives preference to deposits placed in Singapore; deposits placed outside Singapore rank equally with general creditors in liquidation.
- Recommendation: MAS should consider equal treatment for deposits located inside and outside of Singapore.
- SDIC membership and coverage:
  - Membership compulsory for all full banks and finance companies; wholesale banks excluded.
  - Maximum coverage level is SGD 75,000 per depositor per institution.
  - Coverage estimated to fully cover 91 percent of insured depositors.
  - DI Scheme covers only deposits denominated in Singapore dollars; foreign currency deposits are excluded.
  - As of March 2018, the DI Fund held approximately SGD 290 million.
  - The targeted DI Fund size is 0.3 percent of total insured deposits.
  - On April 1, 2019, the coverage level was raised to SGD 75,000; premium rates were increased to between 2.5 and 8 basis points.
  - SDIC has a standing liquidity facility allowing SDIC to borrow up to SGD 20 billion from MAS; procedures can mobilize the facility within one working day.

### Resolution funding design and safeguards
- Objective: limit public sector exposure; costs first borne by failing institution (shareholders and unsecured subordinated creditors).
- If additional resources needed, resolution financed by:
  - the deposit insurance (DI) fund, or
  - the newly created Resolution Fund.
- Resolution Fund features:
  - Will channel financial resources initially provided by MAS but then recovered from the industry.
  - 2017 amendments authorized MAS to use the DI Fund to finance the resolution of DI Scheme members; SDIC is not involved with decisions on use of its fund.
  - Safeguard on DI Fund: limit on the total amount of DI funds to what would have been paid out, net of estimated asset recoveries, in a depositor payout.
  - Primary source of funding will be loans from MAS channeled through the Resolution Fund.
  - Uses include making loans or discharging guarantees, (re)capitalizing a bridge bank or resolved institution, making payment of creditor compensation, and other purposes in support of a resolution measure.
  - The Resolution Fund is not a permanent entity but a financial account established by MAS for each financial institution in resolution; a trustee will administer the fund.
  - Funds drawn first from the DI Fund; if more funding required, trustee may obtain a loan from MAS and then recover sums withdrawn from the Resolution Fund from the industry on an ex-post basis to repay MAS loans.
  - Any use of the Resolution Fund will be recovered from the industry through imposition of levies on industry members.
- Safeguards:
  - Resolution Fund may only be used after losses imposed on shareholders and unsecured subordinated creditors to the fullest extent possible or appropriate.
  - Senior debt is exempt from the scope of the proposed bail-in regime; the Resolution Fund may need to be used when losses and resolution costs exceed capital and unsecured subordinated debt of the resolution entity.
- Recommended design revisions:
  - Government resources are the preferred source of recapitalization funding; central bank funds may be used temporarily but must be repaid by the government quickly.
  - Consider appointing a single trustee to administer all Resolution Funds established at any one time.
  - Develop and publish guidelines on the expected pace of recovery of public funds; recoveries should begin during relatively stable economic conditions and balance speed with market conditions.
  - Liquidity support for implementation of resolution tools such as purchase and assumption transactions is appropriate from the Resolution Fund, but ongoing liquidity support for a restructured institution should be provided directly by MAS once the institution is assessed to be viable.

### Insurance sector, FMIs, and safeguards
- Insurance:
  - Over 100 insurance companies in Singapore; MAS identified four systemically important ones representing approximately 80 percent of the industry’s assets.
  - These four firms are required to prepare recovery plans; MAS reviewed recovery plans and provided comments to be incorporated in recovery plans to be presented by the firms in 2019.
  - MAS powers include changing management, P&A operations, transfer of insurance contracts, administering contracts, and restructuring policy liabilities; 2017 Act established a bail-in regime for the insurance sector and temporary stay powers for reinsurance contracts (regulations under development).
- FMIs:
  - Full range of the resolution toolkit applies to FMIs.
  - MAS set requirements for preparing RRPs on all locally-incorporated FMIs and is working with institutions to review and refine those plans.
- Safeguards:
  - Introduction of a “no creditor worse off than in liquidation” (NCWOL) safeguard:
    - Creditors and shareholders receiving less in resolution than in liquidation have a right to compensation for the difference.
    - When MAS exercises resolution powers affecting creditors’ or shareholders’ rights, the Minister-in-charge of MAS will appoint an independent assessor to determine appropriate compensation.
    - Compensation available under foreign law, where MAS has recognized a foreign resolution action, will be counted as part of compensation.
    - All compensation payable under the MAS Act will be paid from the Resolution Fund.

### Crisis management, coordination, and simulations
- Financial Stability Coordinating Meeting (FSCM):
  - Inter-agency committee composed of representatives from MAS and the MOF to coordinate and execute policies to address an emerging crisis, particularly if public funds use is under consideration.
  - Serves as a venue for information exchange and policy coordination during stable times; in crisis, meets as frequently as needed.
  - Recommendation: consider more regular meetings (primarily at working-group level, periodically involving principal authorities) to identify risks and develop response scenarios, ensuring data needs and information channels are well established.
- Identification of systemic risk:
  - MAS monitors systemic risk across five sectors: banks, nonbank financial institutions, corporates, households, and the external sector.
  - Macro-prudential Surveillance Department is the key department tasked with monitoring systemic risk.
- Crisis simulations and industry engagement:
  - MAS conducts internal Business Continuity Planning and crisis management exercises including cyber-attacks, physical terrorism, and a pandemic outbreak.
  - MAS initiated simulations testing resolution planning; to date exercises have been at staff level, with plans to expand to senior management in MAS and selected financial institutions.
  - Industry Wide Business Continuity Exercise (IWBE):
    - Five exercises conducted thus far.
    - An average of 130 financial institutions participated in each run.

*International Monetary Fund — SINGAPORE (extracted content).*
*Source: 1sgpea2019003*

### EXECUTIVE SUMMARY __________________________________________________________________________ 4

### EXECUTIVE SUMMARY

### Institutional framework and responsibilities
- The Monetary Authority of Singapore (MAS) is the designated resolution authority for financial institutions, including holding companies and domestic branches of foreign banks.  
- MAS determines if the conditions for entry into resolution are met and designs and implements the resolution strategy.  
- The Ministry of Finance (MOF) plays a limited role in technical decisions concerning bank resolution, intervening when the use of public resources is contemplated.  
- The resolution functions in MAS are divided broadly between supervisory teams and the Resolution Unit (RSU):
  - Supervisory teams monitor banking institutions, develop resolution plans, and take the lead in implementing resolution plans.
  - The RSU comments and provides input into development of plans, formulates policies, builds expertise and institutional knowledge, and works with supervisory teams on recovery and resolution planning.
  - Either the supervisory team or the RSU may identify institutions that have failed or are about to fail based on a common supervisory dashboard of financial indicators.
  - Once a decision to resolve an institution is made, the RSU would formally escalate the case to the Crisis Management Team (CMT) (for resolution of an institution whose failure can have systemic impact or would require public resources) or to the Management Resolution Committee (MRC) (all other cases).
  - The RSU does not have full-time staff but draws on staff from various departments; MAS considers this flexible arrangement to leverage supervisory knowledge and avoid “silos.”

### recent legislative changes and resolution powers
- The 2017 amendments to the MAS Act strengthened the resolution framework and introduced enhanced resolution powers and a strengthened framework for recovery and resolution of domestic systemically important banks (D-SIBs).  
- The amendments are broadly consistent with the Financial Stability Board’s (FSB) Key Attributes for Effective Resolution of Financial Institutions and are generally applicable to all financial institutions.  
- MAS’s original suite of resolution tools included powers to:
  - take operational control of a financial institution,
  - transfer assets and liabilities to a third party,
  - establish a bridge institution and asset management company,
  - restructure share capital.
- The 2017 amendments introduced new tools including powers to:
  - require explicit recovery and resolution planning (RRP),
  - implement temporary stays,
  - bail-in some creditors,
  - conduct reverse transfer and onward transfer,
  - establish a cross-border recognition framework,
  - establish a creditor compensation framework,
  - establish a resolution funding framework.
- A key limitation: the bail-in powers do not extend to writing down or converting senior unsecured and uninsured creditor claims to equity; the report recommends extending bail-in to senior unsecured debt securities.

### operationalization and organization of resolution work
- The resolution tools are well designed, with the exception of limited bail-in scope, but further steps are needed to operationalize resolution plans:
  - Internal guidelines to operationalize the resolution tools have been established, but procedures, sequencing, and timelines should be further developed and expanded.
  - Issues to address include the phasing and timing of bail-in and coordination steps for cross-border resolution.
  - Advanced work on developing playbooks and guidelines explaining operational steps for executing resolution plans is warranted.
- Organizational recommendation: establish a core staff within the RSU dedicated to resolution work and, over time, transfer resolution planning to the RSU, given resolution and resolution planning are specialized activities requiring investment in time and resources.

### scope of resolution planning and depositor treatment
- MAS currently develops resolution plans for D-SIBs only.
- Recommendations regarding scope and content of planning:
  - Review resolution plans for each institution for internal consistency and cross-institutional consistency.
  - Consider extending resolution planning beyond D-SIBs to other banks.
  - Continue efforts to identify critical functions on a more granular or product level.
- Creditor hierarchy in liquidation under the Banking Act gives preference to domestic depositors; recommendation that depositors in branches of Singaporean banks located outside Singapore should be treated consistently with local depositors.

### resolution funding and use of public resources
- Funding arrangements aim to limit public sector exposure:
  - Losses first borne by equity holders and unsecured subordinated creditors.
  - When additional funds are required, the deposit insurance fund (DI Fund), built by ex-ante premiums from members, can be used to support resolution of members on an equivalent cost basis.
  - A Resolution Fund will be established to channel temporary public resources to the resolved institution; any MAS resources used in the Resolution Fund will be recovered from the industry.
- Recommendations and cautions:
  - Central bank funding should not be used as a source of solvency support; resolution funding should be done through government resources. If MAS funding is used for solvency support it should be only temporary and replaced by Government funding.
  - Develop guidelines for the conditions and the pace of recovery of resolution costs from the industry; publish the method and timeline for recovery of public funding.
  - Liquidity support channeled through the Resolution Fund should be phased out once the institution has access to market funding.
  - The Resolution Fund is allowed to provide liquidity support to the restructured institution; such support should be temporary and a preferable solution is to regularize the restructured entity’s access to MAS support functions quickly.

### cross-border cooperation and systemic considerations
- Cross-border cooperation is important: MAS is home regulator to three D-SIBs and host regulator for another four D-SIBs.
- MAS has signed or is negotiating memorandums of understanding (MoUs) with key host supervisory or resolution authorities of the D-SIBs to formalize crisis management and resolution cooperation.
- MAS participates in Crisis Management Groups (CMGs) for six global systemically important banks (G-SIBs) and regional CMGs for three other G-SIBs; MAS also signed multilateral institution-specific cooperation agreements (CoAgs) with CMG members and home resolution authorities.
- MAS offers liquidity functions to preserve financial stability:
  - Conducts daily money market operations.
  - Offers two Singapore Dollar liquidity facilities: the Intraday Liquidity Facility (ILF) and Standing Facility (SF).
  - Can provide emergency liquidity assistance (ELA).

### Deposit Insurance and SDIC role
- The Singapore Deposit Insurance Corporation (SDIC) operates the Deposit Insurance (DI) and Policy Owners’ Protection Schemes in Singapore.
- Recent amendments allowing DI funds to be used for resolution measures add new responsibilities to SDIC; recommendations include:
  - Explicitly recognize SDIC’s role in resolution and allow SDIC to participate in discussions relating to use of such funds.
  - Over time, SDIC should develop stronger analytical capacity and understanding on bank resolutions to perform its role effectively and participate more fully in resolution planning.
  - Foreign exchange denominated deposits should be covered by the deposit insurance regime; SDIC could pay out such deposits in Singapore dollars at the prevailing exchange rate at the time of failure.

### Key statistics and financial system structure (as of 2018Q2)
- The financial system is dominated by banks, with assets equal to about 600 percent of GDP.
- As of end-June 2018, there were 128 commercial banks with operations in Singapore, with total assets of SGD 2.6 trillion.
- Table 2. Banking System Structure as of 2018Q2 (system totals reproduced exactly):
  - System total: Local Number 4, Assets (In billions of Singapore dollars) 982.7; Foreign Number 124, Assets (In billions of Singapore dollars) 1,662.2; Total Number 128, Assets (In billions of Singapore dollars) 2,644.9
  - D-SIBs 1/: Local Number 4, Assets 982.7; Foreign Number 8, Assets 407.8; Total Number 12, Assets 1,390.5
  - Foreign branches: Local Number 0, Assets 0; Foreign Number 116, Assets 1,254.4; Total Number 116, Assets 1,254.4
  - Others: Local Number 0, Assets 0; Foreign Number 0, Assets 0
  - Source: MAS
  - 1/ There are seven D-SIBs banking groups comprising twelve banking entities:
    - Locally-headquartered D-SIBs: 1. DBS Bank Ltd (DBS) 2. Oversea-Chinese Banking Corporation Limited (OCBC) and Bank of Singapore Limited (BOS), a subsidiary of OCBC 3. United Overseas Bank Limited (UOB).
    - Foreign-headquartered D-SIBs: 1. Citibank – Citibank N.A. (Citibank), Citibank Singapore Limited (CSL) 2. HSBC – The Hongkong and Shanghai Banking Corporation Limited (HSBC), HSBC Bank (Singapore) Limited (HSBCBSL), Hang Seng Bank Limited 3. Maybank – Malayan Banking Berhad (Maybank) 4. Standard Chartered Bank – Standard Chartered Bank (SCB), Standard Chartered Bank (Singapore) Limited (SCBSL)

### Selected recommendations (timing and priority reproduced exactly)
- Institutional arrangements:
  - Establish a core staff within the RSU dedicated to resolution work and over time, transfer resolution planning to the RSU. Time*: I; Priority**: H
- Resolution powers:
  - Expand the scope of bail-in to include senior unsecured debt securities. Time*: M; Priority**: M
  - Continue to develop guidelines and playbooks for the new resolution tools. Staff should be trained, and processes tested. Time*: I; Priority**: H
- Recovery and resolution plans:
  - Require annual testing of recovery plans from D-SIBs using common stress assumptions across all banks. Time*: C; Priority**: M
  - Review the resolution plans for all institutions together, looking for common elements and assessing them in the context of a system-wide crisis. Time*: C; Priority**: M
  - Extend recovery and resolution planning to non-systemic institutions. Time*: M; Priority**: M
- Resolution funding:
  - Develop and publish the method and timeline for the recovery of public funding. Time*: I; Priority**: M
  - Liquidity support channeled through the Resolution Fund should be phased out once the institution has access to market funding. Time*: C; Priority**: M
- Crisis management:
  - The MAS-MOF Financial Stability Coordinating Meeting should meet on a regular basis to discuss systemic risk scenarios and plans to address such crises. Working Groups should meet regularly to review analytical tools and develop mechanisms for rapid policy response to a crisis. Time*: C; Priority**: M
  - Expand contingency planning for systemic crisis to include system-wide crisis simulation exercises for specific D-SIBs. Time*: C; Priority**: M
- Deposit insurance:
  - SDIC should be notified of emerging distress and participate in discussions relating to the resolution of DI Scheme members. Time*: I; Priority**: H
  - SDIC could continue to develop its analytical capacity so it may participate more fully in bank resolution discussions where DI Funds are to be used. Time*: M; Priority**: M
  - Foreign exchange denominated deposits should be covered by SDIC. SDIC could pay out such deposits in Singapore dollars at the prevailing exchange rate at the time of failure. Time*: M; Priority**: M

* C = continuous; I (immediate) = within one year; M (medium term) = 2-5 years  
** H = high; M = medium; L = low

*Prepared by David S. Hoelscher (external expert, MCM) for the FSAP team; Singapore Technical Note on Crisis Management, Resolution and Safety Nets.*

### 8.      The MOF plays only a limited role in the technical decisions concerning bank

### 8.      The MOF plays only a limited role in the technical decisions concerning bank

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

### D-SIB identification and supplementary requirements
- In April 2015, MAS introduced a framework for identifying and supervising D-SIBs (domestic systemically important banks).
- D-SIBs are banks assessed to have a significant impact on the stability of the financial system and proper functioning of the broader economy through interconnectedness and complexity.
- MAS replaced prior economic impact assessments with formal identification aligned to Basel Committee on Banking Supervision principles.
- MAS has identified seven banks as D-SIBs, based on quantitative and qualitative indicators including size, interconnectedness, substitutability and complexity.
- Supplementary regulatory requirements for D-SIBs include:
  - local incorporation of retail operations for foreign banks with significant retail operations,
  - recovery and resolution planning obligations,
  - liquidity coverage ratio requirements.
- Locally incorporated D-SIB higher capital requirements (minimum ratios):
  - Common Equity Tier 1 (CET1) capital adequacy ratio (CAR) of 6.5 percent,
  - Tier 1 CAR of 8 percent,
  - Total CAR of 10 percent.
- These compare with the Basel III minimum requirements of 4.5 percent, 6 percent and 8 percent respectively.

### Recovery planning (RRP)
- 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 specified recovery plan contents: measures to restore liquidity, capital, and to address medium-term vulnerabilities; processes to update the recovery plan on an annual basis or upon events materially impacting the plan.
- Approval/endorsement requirements:
  - recovery plan must be approved or endorsed by the bank’s board of directors (for locally-incorporated banks) or chief executive in Singapore (for foreign bank branches).
- Implementation progress:
  - MAS has completed five formal annual reviews of the recovery plans of the locally headquartered D-SIBs.
  - MAS has also reviewed the recovery plans of the four foreign-headquartered D-SIBs.
  - For each review, MAS provided comments and suggestions to be incorporated in subsequent recovery plan submissions.
- MAS should factor possible overlap of resolution plans and analyze implications for financial stability of D-SIBs’ resolution strategies in systemic crisis.

### Official liquidity support framework
- MAS liquidity tools and modalities:
  - daily money market operations to manage banking system liquidity and reduce excessive interest rate volatility, conducted with 13 primary dealers.
  - issuance of MAS Bills used in money market operations.
- Business-as-usual SGD liquidity facilities (eligibility: participant in MEPS+ and Global Master Repurchase Agreement with MAS):
  - MAS Intraday Liquidity Facility (ILF):
    - provides SGD on an intraday basis through repurchase transactions to manage payment timing mismatches and reduce payment gridlock risk in MEPS+.
    - rate currently set at 0 percent.
    - collateral: Singapore Government Securities and MAS Bills; MAS applies a haircut on collateral.
  - MAS Standing Facility (SF):
    - allows borrowing SGD against collateral (repurchase transactions, foreign exchange swaps or collateralized loans) or deposit SGD overnight.
    - borrowing rate is the MAS reference rate plus 50-basis points.
    - deposit rate is the MAS reference rate minus 50 basis points.
    - majority of SF transactions are overnight deposits; eligible collateral includes Singapore Government Securities, MAS Bills, high quality SGD corporate bonds, foreign currencies & foreign currency-denominated securities; MAS applies haircuts.
    - footnote: The reference rate is the weighted average of successful bids for MAS’s S$500m overnight clean borrowing conducted during MAS’s Money Market Operations on the same day.
- Foreign currency liquidity:
  - USD liquidity via USD-SGD foreign exchange swaps with primary dealers (overnight and term, usually not more than 3 months).
  - Two renminbi (RMB)-denominated facilities:
    - MAS RMB Facility: term RMB liquidity for trade, direct investments and financial stability purposes, funded by the MAS-People’s Bank of China (PBC) bilateral currency swap arrangement.
    - MAS Overnight RMB Liquidity Facility: funded internally, provides overnight RMB liquidity.
- Emergency Liquidity Assistance (ELA):
  - MAS has legal powers to provide ELA and has policies/mechanisms to provide back-stop liquidity; MAS has not had to provide ELA to date.
  - ELA eligibility:
    - can be extended to all banks licensed by MAS; other types of FIs are not granted ex-ante ELA eligibility but MAS may provide liquidity in extraordinary situations.
  - Key guiding principles:
    - The bank has to be assessed to be viable on a forward-looking basis at the point of ELA provision.
    - ELA will be provided only on a collateralized basis, and against a wide range of collateral.
    - ELA lending will generally be at a premium above normal market rates, but below rates observed during times of stress.
  - Decision and governance:
    - MRC comprising senior management from supervision, policy and legal determines viability based on statistical indicators and forward-looking evaluation.
    - MAS’s CMT will be triggered to discuss if ELA should be provided.
  - Collateral and safeguards:
    - MAS requires collateral and can expand eligible collateral in crisis; accepts only high-quality assets valued at market prices under normal conditions.
    - Appropriate haircuts will be imposed on collateral to safeguard MAS’s balance sheet.
    - MAS may take supervisory measures (e.g., limit risk-taking by ELA recipients).
  - MAS published its ELA framework in June 2019 to enhance market understanding and will work with banks to operationalize the framework (e.g., clarify terms and conditions).

### Organization of bank resolution within MAS
- Legal basis:
  - MAS governed by the MAS Act; functions include supervision and resolution of failing or likely to fail financial institutions.
  - MAS Act, Banking Act, Insurance Act, Securities and Futures Act give MAS powers to regulate and supervise FIs and to issue directions and guidelines.
  - Legal authorizations include Acts, Subsidiary Legislation, and Directions.
- Division of resolution responsibilities:
  - Supervisory teams monitor ongoing financial position, review recovery plans, and develop/periodically update resolution plans.
  - Resolution Support Unit (RSU) replaced prior ad hoc resolution-working group; RSU supports supervisory teams and reviews resolution plans, provides input on selection of resolution tools and operational steps, and provides independent review of bank-specific resolution plans.
  - Supervisory team together with RSU determines failure or likely failure based on a common supervisory dashboard of financial indicators.
- RSU structure and resourcing:
  - RSU does not have full-time staff; draws on staff from policy, legal and supervision departments.
  - RSU chaired by the Assistant Managing Director (Policy, Risk and Surveillance).
  - RSU composed of three work streams: resolution policy, resolution execution and legal affairs.
  - RSU responsibilities: formulating policies, building expertise and institutional knowledge, working with supervisory teams on recovery and resolution planning, representing MAS at international fora.
  - RSU staff divide time between resolution activities and duties in their home departments.
- Triggers, escalation and decision-making:
  - Triggers for escalation to CMT or MRC based on quantitative and qualitative indicators (not limited to balance sheet insolvency); quantitative indicators include capital, liquidity and credit indicators; qualitative triggers include governance issues, detrimental business conduct, loss of public or creditor confidence.
  - Supervisors and RSU jointly determine need for triggering; supervisors determine non-viability and identify a resolution strategy; RSU assesses viability of private solutions and public interest for resolution.
  - If supervisors and RSU recommend resolution, RSU presents proposal to MRC (chaired by Deputy Managing Director for Financial Supervision; includes heads of supervisory, policy, legal and technology risk and payments units).
  - Cases requiring public funding or involving a D-SIB or systemic-impact bank escalate to the CMT (chaired by MAS’s Managing Director; comprises senior management from supervisory and central banking functions).
  - In case of disagreement, RSU can independently escalate breaches in supervisory indicators to MRC/CMT for decisions; consideration could be given to authorizing supervisory staff to escalate independently if no agreement with RSU.
- Ministerial approvals:
  - Approval of the Minister-in-charge of MAS is required to implement resolution actions that include use of public monies, transfer of business of, or shares in, a failing institution to a third party, or restructuring of share capital of a failing institution.
  - The Minister-in-charge of MAS is not involved in operational and technical aspects but approves implementation of the resolution plan.
- Implementation of resolution:
  - Once approved by MRC or CMT, supervisors are responsible for implementing the resolution plan, supported by RSU and an intervention team with staff drawn from relevant MAS units.
- Benefits and limitations of the current arrangement:
  - Benefits:
    - Allows supervisors’ in-depth knowledge to inform resolution plans and avoids information silos.
    - RSU’s independent escalation authority ameliorates forbearance risks.
  - Limitations:
    - Conflicts of interest can arise when multiple functions are performed by one unit; potential delays in implementation if conflicts resolved only at MRC/CMT.
    - Resolution and resolution planning are highly specialized; not having dedicated staff may slow development of skills and procedures; supervisors may lack detailed skills/experience for complex resolutions.
    - Key Attributes call for an operationally independent unit responsible for resolution; independence need not be institutional but should be operational from other central bank functions.

*Source: 1sgpea2019003 - 8.      The MOF plays only a limited role in the technical decisions concerning bank*

### 32.      This organization of resolution functions should be strengthened. The RSU should have

### 1sgpea2019003 - 32.      This organization of resolution functions should be strengthened. The RSU should have

### Organizational structure and staffing of the RSU
- 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.
- Roles and responsibilities of each area should be clearly defined; dedicated staff should specialize in the activities of each unit.
- Internal policies should be identified to manage potential conflicts.

### Operational independence and ministerial approval
- Final approval by the Minister-in-charge of MAS could compromise or appear to compromise the operational independence of MAS.
- Although the Minister-in-charge is not involved in developing technical aspects of 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.

### Role of courts and legal risk
- Courts are not involved in triggering and implementing resolution of financial institutions; court orders are not required for MAS to exercise its resolution powers.
- 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,
  - imposition of a moratorium.
- Courts will not review the merits of MAS's decision but only whether MAS’s actions were within its legal authority.
- If a claim against MAS is successful (which can only arise where MAS’s actions are “ultra vires” and were not taken in good faith), remedial actions can include:
  - (i) a prohibitory order, preventing MAS from proceeding and requiring MAS to suspend implementation of the action,
  - (ii) a mandatory order to compel MAS to carry out its duties,
  - (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).
- The ability of the courts to reverse a decision of MAS introduces some uncertainty and could undermine financial stability if implemented resolution actions are overturned.
- Grounds for court reversal are limited to cases where MAS acted outside its scope of authority and in bad faith. No such ruling has been made to date.
- MAS has internal processes to ensure legality of its actions to forestall court challenges.

### Resolution toolkit (pre- and post-2017 MAS Act amendments)
- MAS determines resolution options in light of a medium-term or forward-looking assessment of viability, considering indicators including:
  - continued deterioration in financial condition (erosion of regulatory capital and/or assets detrimental to 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 to meet regulatory and licensing requirements on an on-going basis;
  - loss or likely loss of confidence by the public, financial markets, depositors, or creditors;
  - actual or likely failure of recovery measures, or recovery measures likely to have a material negative impact on the stability of the financial system, or inability of the institution to implement 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.
- Before the 2017 amendments, MAS had authority to:
  - take operational control by replacing senior management;
  - transfer the business (assets and liabilities) to a third party;
  - establish a bridge financial institution and asset management company;
  - cancel or restructure whole or part of the share capital;
  - transfer shares to a third party;
  - order wind down of a financial institution, subject to a Singapore court order.
- 2017 MAS Act expansions (to address large/global institutions and align with FSB Key Attributes) added powers including:
  - Bail in: 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. Statutory bail-in does not apply to senior unsecured debt. Bail-in can be exercised while the bank remains open; MAS has discretion to depart from statutory creditor hierarchy.
  - Temporary stay: power to impose a temporary stay on termination rights of counterparties for up to 2 business days.
  - Creditor compensation: right to compensation where creditors and shareholders receive less in a resolution than in liquidation.
- The scope of bail-in is limited and not fully aligned with international best practice:
  - Statutory bail-in excludes senior unsecured debt.
  - MAS views extending bail-in to senior debt as increasing contagion risk and investor uncertainty.
  - Resolution Fund could be used if bail-in is insufficient.
  - D-SIBs are subject to higher prudential requirements: Minimum capital requirements for D-SIBs in Singapore are 2% higher than the Basel III framework, while their current leverage ratios are comparable or in excess of the requirements established under the Total Loss -Absorbing Capacity (TLAC) standard (i.e., 6.75% of the Basel III leverage ratio denominator).
- Recommendation: MAS should expand the bail-in regime to include senior unsecured debt securities to increase available funding in resolution and strengthen credibility of private sector–led resolution strategies. Resolution plans by home authorities of D-SIBs located in Singapore may require bail-in of such creditors.

### Bridge banks, public ownership, and operationalization
- Establishing a bridge bank can be an effective tool when no private sector solution is available.
- RSU should develop detailed guidelines and playbooks for rapid establishment and implementation of a bridge bank.
- MAS can grant straight-through approval to license a bridge bank and is creating drawer templates; supervisory staff should consider establishing licensed empty or shell bridge banks:
  - Market concerns should be minimal if done during financial stability and if MAS explains it is strengthening its toolkit.
- Temporary public ownership is possible only under limited conditions:
  - Public resources used only after private sector solutions exhausted and MAS assesses other tools cannot meet objectives.
  - Losses generally imposed on equity holders and unsecured subordinated creditors before temporary public ownership.
  - Public sector–owned bridge bank expected to meet prudential requirements.
- Operationalization gaps remain despite alignment with Key Attributes (except bail-in scope):
  - Need further development of procedures, sequencing, timelines, phasing and timing of bail-in, cross-border coordination steps.
  - Continue to develop playbooks and guidelines, asset valuation steps in cross-border contexts, and funding strategies.

### Resolution plans and resolvability requirements
- MAS currently develops resolution plans only for D-SIBs; requires D-SIBs to submit information on critical functions and inter-dependencies, including feasibility of separating or isolating critical activities in a resolution:
  - Information requirements include branch network, Singapore-incorporated subsidiaries, material non-bank subsidiaries, business activities, operations within the group and outsourced to third parties, business lines and critical functions.
- Resolution plans are reviewed for internal consistency and should also be assessed in the context of a system-wide stress event.
  - RSU reviews and can propose changes or identify aspects to improve resolvability.
  - Supervisory teams and RSU should analyze implications if several D-SIBs target the same resolution strategy and same sources of capital.
- Status and recommendations:
  - MAS has completed the second round of resolution plans and resolvability assessments; group plans and resolvability assessments for four foreign D-SIBs assess local operations while home authorities lead group plans.
  - Plans largely cover list of critical functions, preferred resolution strategy, steps for executing stabilization tools and communication strategies; they do not include assumption of extraordinary funding assistance but may consider use of the Resolution Fund.
  - Development of plans and assessments should be accelerated: two rounds completed for all seven D-SIBs; gaps identified and lessons to be used for next round.
  - Detailed balance sheet plans are still under preparation; identification of granular critical functions, funding requirements, and need for structural changes are underway and should be accelerated.
  - MAS management should be included in deliberations on adequacy of plans to determine robustness of internal decision-making and implementation procedures.
  - MAS could expand consultations with industry on design and adequacy of plans.

### Critical functions, expansion of planning scope, and removing impediments
- Identification of critical functions:
  - Financial institutions expected to identify critical services including list of products with cross-border booking arrangements, related branches in other jurisdictions, and institutional cross-border arrangements such as treasury and IT services.
  - To date, identification focused on broad categories; next steps include methodologies to identify critical functions at detailed product level and procedures to determine systemic impact of discontinuing a function.
- Extensions of resolution planning should be considered:
  - Extend requirements beyond D-SIBs to other banks; MAS indicated resolution planning could be expanded to non-systemically important banks, applied proportionally (focus on crisis management plans, business continuity, contingency capital and funding plans); resolution plans for such institutions should include liquidation.
  - Extend resolution planning to nonbank financial institutions (permitted under law but nascent).
- MAS has power to require removal of impediments to orderly resolution (e.g., reduce complexity by requiring changes to practices, organization and structure). MAS has taken a consultative approach and has not yet used this power.

### Creditor hierarchy and deposit treatment
- Creditor hierarchy in liquidation gives preference to deposits placed in Singapore; deposits placed outside Singapore rank equally with general creditors in liquidation.
- Concerns:
  - Preference for domestic depositors could undermine coordinated responses and encourage ring-fencing by host jurisdictions.
  - Differences in treatment complicate coordination among host authorities.
- Recommendation: MAS should consider equal treatment for deposits located inside and outside of Singapore.

### Resolvability assessments and stress testing
- MAS conducts resolvability assessments as part of resolution planning to determine feasibility of orderly resolution; currently for D-SIBs with consideration to expand scope.
- Two rounds of assessments completed and another planned. Focus areas included:
  - (i) identifying information gaps, management and organizational issues,
  - (ii) clarifying critical functions and critical shared services,
  - (iii) analyzing capability to report information in times of crisis,
  - (iv) estimating capital and liquidity needs,
  - (v) examining operational continuity.
- For Singapore banks, MAS will coordinate with host resolution authorities to further develop group resolvability assessment.
- Financial institutions provided their estimates of funding needs in resolution based on their view of key risks and stresses; this should be complemented by system-wide stress tests using shocks consistent across the market to assess whole-system response.

*International Monetary Fund — SINGAPORE (extracted content).*

### 57.      MAS should continue to conduct resolvability assessments and take steps to address

### MAS should continue to conduct resolvability assessments and take steps to address identified barriers to resolvability

### Resolvability assessments and testing
- MAS should continue resolvability assessments to identify barriers that may be structural or relate to implementation steps of resolution strategies.
- The initial information collection process has been effective; testing of resolution plans should be conducted with senior management of MAS and selected institutions to strengthen crisis preparation and crisis management capacities.
- Specific issues to identify through assessments:
  - The limited scope of bail-in -able securities may pose a funding challenge.
  - For foreign-owned institutions, assessments should be performed in the context of parent resolution plans where bail-in may be more extensively relied on.

### Resolution Funding (Sections 58–64)
- Objective: limit public sector exposure to financial loss; costs first borne by the failing institution (shareholders and unsecured subordinated creditors).
- If additional resources are needed, resolution financed by the banking sector via:
  - the deposit insurance (DI) fund, or
  - the newly created Resolution Fund.
- Resolution Fund features and arrangements:
  - The Resolution Fund will channel financial resources initially provided by MAS but then recovered from the industry.
  - The 2017 amendments authorized MAS to use the DI Fund to finance the resolution of DI Scheme members; SDIC is not involved with decisions on use of its fund.
  - Safeguard on DI Fund: limit on the total amount of DI funds to what would have been paid out, net of estimated asset recoveries, in a depositor payout.
  - Primary source of funding will be loans from MAS channeled through the Resolution Fund, given the relatively small size of the DI Fund and its conditional use.
  - Uses of the Resolution Fund include:
    - 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.
  - The Resolution Fund is not a permanent entity but a financial account established by MAS for each financial institution in resolution; a trustee will 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 and then recover sums withdrawn from the Resolution Fund from the industry on an ex-post basis to repay MAS loans.
  - 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, subject to MAS determining no private sector solution exists and that shareholders and subordinated debt holders have absorbed losses.
  - Any use of the Resolution Fund will be recovered from the industry through imposition of levies on industry members.
- Safeguards and constraints:
  - 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.
  - Senior debt is exempt from the scope of the proposed bail-in regime; the Resolution Fund may need to be used when losses and resolution costs exceed capital and unsecured subordinated debt of the resolution entity.
- Recommended design revisions and considerations:
  - Central bank funding (MAS loans) may be expeditious but, based on international practice, government resources are the preferred source of recapitalization funding; central bank funds may be used temporarily in urgent situations but must be repaid by the government as quickly as possible.
  - A single trustee could be appointed to administer all Resolution Funds established at any one time to reduce administrative complication and risk of uneven treatment.
  - Develop and publish guidelines on the expected pace of recovery of public funds; recoveries should begin during relatively stable economic conditions and balance speed with market conditions.
  - Liquidity support for implementation of resolution tools such as purchase and assumption (P&A) transactions is appropriate from the Resolution Fund, but liquidity support for ongoing operations of a restructured institution should be provided directly by MAS rather than through the Resolution Fund once the institution is assessed to be viable.

### Resolution of nonbank financial institutions (Sections 65–68)
- Insurance sector:
  - Over 100 insurance companies in Singapore; MAS has identified four systemically important ones.
  - These four firms represent approximately 80 percent of the industry’s assets.
  - These companies are required to prepare recovery plans based on the resolution powers in the Act; MAS reviewed the recovery plans of the four firms and provided comments to be incorporated in recovery plans to be presented by the firms in 2019.
  - MAS currently has powers 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;
    - restructure policy liabilities of insurance companies to allocate losses to policyholders upon transfer of the insurance business.
  - MAS can require an insurance company to halt the sale of new policies and run off the existing portfolio through liquidation of assets.
  - The 2017 Act established a bail-in regime for the insurance sector and temporary stay powers for reinsurance contracts; regulations permitting use of such powers are under development.
  - Systemically important insurers will be resolved; non-systemically important firms may be wound up under corporate insolvency law.
- Financial market infrastructures (FMIs):
  - Full range of the resolution toolkit applies to FMIs.
  - MAS has set requirements for preparing RRPs on all locally-incorporated FMIs and is working with institutions to review and refine those plans.
  - The resolution regime does not include sector-specific powers for FMIs; in the case of CCPs, MAS can enforce rulebooks by using powers to take control of a financial institution.

### Safeguards (Section 69)
- Introduction of a “no creditor worse off than in liquidation” (NCWOL) safeguard:
  - Creditors and shareholders receiving less in resolution than in liquidation have a right to compensation for the difference.
  - When MAS exercises resolution powers affecting creditors’ or shareholders’ rights, the Minister-in-charge of MAS will appoint an independent assessor to determine appropriate compensation.
  - Compensation available under foreign law, where MAS has recognized a foreign resolution action, will be counted as part of compensation.
  - All compensation payable under the MAS Act will be paid from the Resolution Fund.

### Crisis management regime — institutional arrangements (Sections 70–76)
- Financial Stability Coordinating Meeting (FSCM):
  - An inter-agency committee composed of representatives from MAS and the MOF to coordinate and execute policies to address an emerging crisis, particularly if public funds use is under consideration.
  - Serves as a venue for information exchange and policy coordination during stable times; in crisis, meets as frequently as needed to focus on joint decision-making and execution of crisis response.
  - Under the MAS Act, MAS can share information with domestic and foreign authorities with respect to resolution, subject to safeguards for confidentiality.
  - The FSCM considers strategies and plans to be activated during crises and evaluates effectiveness through simulations and exercises; works with other 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; chairmen may convene a meeting in the absence of a recommendation from MAS. MAS is likely to call a meeting when joint crisis management actions may be required, including commitment or use of public funds.
  - Recommendation: consider more regular meetings (primarily at working-group level, periodically involving principal authorities) to identify risks and develop response scenarios, ensuring data needs and information channels are well established.
- Identification of systemic risk:
  - MAS monitors systemic risk across five sectors: banks, nonbank financial institutions, corporates, households, and the external sector.
  - Linkages identified through analysis of regulatory and market-based data; the Macro-prudential Surveillance Department is the key department tasked with monitoring systemic risk.
  - MAS has a framework to identify, on an ex-ante basis, banks whose failure would have a significant impact on the domestic economy and financial markets; identification considers interconnectedness and significance of linkages with the real economy.
  - MAS may trigger resolution even for institutions not previously assessed as systemically important if failure could have a broader impact.
- Crisis simulations:
  - MAS conducts internal Business Continuity Planning and crisis management exercises with scenarios including cyber-attacks, physical terrorism, and a pandemic outbreak.
  - MAS has initiated simulations testing resolution planning, including tabletop exercises to identify information gaps and clarify roles; to date, these exercises have been at staff level, with plans to expand to senior management in MAS and selected financial institutions.
  - Conducting crisis simulations is essential to finalize resolution plans; MAS is encouraged to accelerate development of simulations and finalize operational guidelines and playbooks for resolution of complex institutions.
  - Industry engagement: MAS organized the Industry Wide Business Continuity Exercise (IWBE) in partnership with the Association of Banks in Singapore (ABS).
    - Five exercises have been conducted thus far.
    - An average of 130 financial institutions participated in each run.
    - Objectives: identify means of maintaining financial stability in the face of major operational disruptions and to refine communication and coordination processes.

### Cross-border cooperation (Sections 78–83)
- Importance:
  - Cross-border cooperation is essential given the large presence of foreign banks and Singapore’s global interconnectedness.
  - MAS is home regulator to three D-SIBs and host regulator for another four D-SIBs; MAS is also host regulator for a large number of branches of foreign firms.
- Supervisory colleges, CMGs, and MOUs/CoAgs:
  - MAS conducts regular supervisory colleges for the three home D-SIB banking groups to share information on RRPs, recovery plan assessments, and preferred resolution strategies.
  - MAS has signed or is in the process of signing MOUs with key host supervisory/resolution authorities providing for information sharing and cooperation in times of crisis, potentially including sections on recovery and resolution plans.
  - For banks with a significant presence in Singapore, MAS participates in their CMGs or regional CMGs and supervisory colleges to coordinate information sharing and update progress on resolvability.
  - MAS has signed CoAgs with resolution authorities responsible for financial institutions in Singapore that are part of a G-SIB: six bilateral CoAgs and three multilateral, regional CoAgs (within the APEC region). CoAgs focus on cooperation and information exchange and provide high-level principles on resolution strategies.
- Status and challenges:
  - Frequency and intensity of coordination has increased, but differing preparedness levels among home and host jurisdictions constrain effective cooperation.
  - Effective resolution of a failed cross-border firm requires a broadly consistent resolution toolkit; intensified efforts at implementing resolution planning in jurisdictions where Singaporean banks have subsidiaries may be warranted.
- Cross-border recognition framework:
  - The 2017 Amendments establish a statutory framework enabling MAS to recognize, fully or in part, the resolution action of a foreign resolution authority; the framework does not require formal reciprocity.
  - MAS will determine financial conditions in affected subsidiary or branch and whether Singaporean prudential regulations permit application of resolution powers.
  - MAS will ensure any recognized 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.

*IMF staff summary of chapter content.*

### 84.      The recognition of foreign resolution actions must be initiated by the foreign

### 1sgpea2019003 - 84.      The recognition of foreign resolution actions must be initiated by the foreign

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

### SDIC role, mandate, and governance
- The SDIC operates the deposit insurance and policy owners’ protection schemes and is designated as a simple pay-box responsible for the payout of depositors in a liquidated member institution.
- The formal objective is the protection of small-scale depositors rather than a broader objective of ensuring financial stability.
- Recent decision expanded the use of the DI Fund to cover part of the costs of resolution, making SDIC effectively a "pay-box plus insurer".
- SDIC contributes to resolution funding but has no say in the use of those funds; MAS determines use with the Minister-in-charge’s approval.
- SDIC is a public company limited by guarantee, operationally independent, and has its own Board of Directors and management.
- The Board of Directors is directly accountable to a cabinet-ranking official, currently the Minister-in-charge of MAS.
- The Board and management control SDIC’s operations and day-to-day decisions, including recruitment and determination of salary scales and packages.
- The Board is composed of six Directors, all appointed by the members of SDIC and may be drawn from the private sector; Directors must be independent of covered institutions.
- A chief executive, appointed by the Board, is responsible for day-to-day management.
- Active private banks are not permitted to serve on the Board.
- Footnote: As a company limited by guarantee, SDIC has no shareholders; it has Members who each provide a guarantee of a nominal amount. These Members are not DI Scheme members and are appointed by the Minister-in-charge of MAS.

### Membership and coverage
- Membership in the deposit insurance system is compulsory for all full banks and finance companies.
- Both locally incorporated institutions and foreign branches are included in the deposit insurance system.
- Wholesale banks are excluded.
- All MAS licensed direct life and general insurers (other than captive or specialist insurers) are required to be members of the Policy Owners’ Protection Scheme unless exempted by MAS.
- The maximum coverage level is SGD 75,000 per depositor per institution.
- Coverage is estimated to fully cover 91 percent of insured depositors.
- The DI coverage level is applied equally to all members.
- The DI Scheme only covers deposits denominated in Singapore dollars; foreign currency deposits are excluded.
- Shareholder deposits are covered although deposits by other banks are not.

### Design feature recommendations for SDIC
- Cover foreign-exchange denominated deposits in the deposit insurance system to align with IADI Core Principles; SDIC could pay out such deposits in Singapore dollars at the prevailing exchange rate at the time of failure to avoid exchange losses for SDIC.
- Note: MAS views covering foreign-exchange denominated deposits as increasing costs while offering little additional protection because of the low proportion of small-scale depositors holding foreign-currency denominated deposits.
- Exclude deposits of large and controlling shareholders from coverage, consistent with international best practice that controlling shareholders should not be protected by deposit insurance.
- SDIC should participate in decision-making where the DI Fund may be used; currently SDIC participates only once the CMT implements a resolution plan that requires SDIC funding.
- Update the MOU on information sharing with MAS to provide SDIC with early access to supervisory warning once an institution is considered close to failure or about to fail.
- Over time, SDIC should continue to develop its capacity and analytical capacity concerning bank resolutions.

### DI Fund size, premiums, and liquidity backstops
- As of March 2018, the DI Fund held approximately SGD 290 million.
- The targeted DI Fund size is 0.3 percent of total insured deposits.
- On April 1, 2019, the coverage level was raised to SGD 75,000.
- Accordingly, premium rates were increased to between 2.5 and 8 basis points.
- The target level of the fund would remain at 0.3 percent of total insured deposits.
- Monte Carlo estimates conclude that the Fund is adequate at a confidence level of 99.9 percent.
- If the DI Fund is insufficient to payout deposits in a failed bank, SDIC may levy additional premiums on members.
- SDIC has a standing liquidity facility for emergency funding allowing SDIC to borrow up to SGD 20 billion from MAS.
- Procedures for activating the credit line are streamlined and it can be mobilized within one working day; if necessary, the liquidity agreement limit can be revised.
- Premium contributions are paid on an ex ante basis; all members pay an annual risk-based premium between 2.5 and 8 basis points of their insured deposit base, depending on whether they are locally incorporated and their prevailing asset maintenance ratio (“AMR”).
- For foreign bank branches, AMR measures the holding of sufficient quality assets (e.g., cash, government securities, deposits with MAS and mortgage loans) that may be used to meet insured depositors’ claims.
- The AMR is used as a proxy for the recovery rate but does not provide an indicator of risk in the system.
- Recommendation: MAS should consider revising the premium framework and adopt a more risk-based approach to premium determination.

### Payout processes, operational readiness, and subrogation
- SDIC is able to meet the payout target of seven working days for failures of small or medium sized banks.
- Banks can provide deposit data in a format that allows for rapid processing and SDIC can quickly produce information on a single-customer view basis.
- Payout for larger, more complex banks is more challenging; current payout is made by sending checks to depositors.
- For larger banks, writing a large number of checks would delay the payout process; SDIC is developing an electronic payment solution.
- Recommendation: SDIC should accelerate development of the electronic payment solution and apply that mechanism for the payout of all banks; activities could include identifying appropriate agent banks and conducting adequate public relations so depositors are aware of new procedures.
- SDIC is subrogated to the rights of insured depositors and has a claim on recovered assets of the failed bank for the amount of DI payouts made.
- SDIC’s claims and premium contributions due and payable by the failed bank are accorded priority over uninsured deposits.
- SDIC conducts regular simulation exercises with all DI Scheme members to ensure operational readiness to provide information within a day of payout being triggered.
- SDIC has run three simulations covering the payout process end-to-end; these simulations last seven to ten days and include selected DI Scheme members, MAS and SDIC with the objective to test effectiveness and efficiency of each stage of the payout process.

*International Monetary Fund — DEPOSIT INSURANCE SYSTEM (selected excerpts)*

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_Source: https://www.imf.org/-/media/files/publications/cr/2019/1sgpea2019003.pdf_