Singapore banks in a crash: capital, liquidity and the post-2008 rules

Why do Singapore banks matter in a stock market crash?

DBS, OCBC, and UOB together account for about half of the Straits Times Index by weight (Wikipedia), so bank health and index health move together. DBS was founded on 16 July 1968, reported assets of S$743.4 billion in 2022, and had Temasek as a 29% shareholder as of 31 March 2023.

In a crash banks sit on two lines. On one side, borrowers repay less and asset prices fall. On the other, depositors and lenders decide whether to stay. Capital absorbs the first line, and liquidity and deposit protection manage the second. The sections below take each rule in turn, using figures from MAS notices.

What capital must Singapore banks hold against a crash?

MAS Notice 637 sets the capital adequacy ratios for banks incorporated in Singapore. A bank designated as a domestic systemically important bank, or D-SIB, must keep a Common Equity Tier 1 ratio of at least 6.5%, a Tier 1 ratio of at least 8%, and a total capital ratio of at least 10% (Notice 637 amendment of 14 June 2021). Other banks follow the Basel III minimums.

Basel III itself requires Common Equity Tier 1 of at least 4.5% of risk-weighted assets, plus a conservation buffer of 2.5% and a leverage ratio of at least 3% (Wikipedia). It is a post-2008 standard, issued in 2010 in response to deficiencies that the 2008 crisis revealed. Capital absorbs losses first, so higher ratios give more room before depositors are exposed.

How does a capital conservation buffer help in a crash?

A conservation buffer sits above the minimum ratios. When a bank’s ratios fall inside the buffer range, MAS Notice 637 applies minimum capital conservation ratios that limit distributions. The constraints grow stricter as ratios approach the minimum, and they are minimal at the top of the range.

The Notice also states that the buffer may be drawn down, yet a bank should not choose to operate within the range in normal times outside periods of stress. A buffer works like a reserve tank: it is there for the crash, and using it in calm periods removes the protection. A reader can compare a bank’s reported ratio with the minimums to see the distance.

What liquidity rules protect Singapore banks in a crash?

The Liquidity Coverage Ratio asks a bank to hold enough high-quality liquid assets to cover 30 days of net cash outflows (Basel III, Wikipedia). MAS Notice 649 requires a bank incorporated and headquartered in Singapore to keep a Singapore dollar LCR of at least 100%, and an all-currency LCR of 60% from 1 January 2015, rising 10 percentage points a year to 100% by 2019.

Notice 649 also sets a minimum liquid assets framework for banks outside the LCR regime: liquid assets of at least 16% of qualifying liabilities. Basel III adds a Net Stable Funding Ratio, which asks for stable funding over a one-year period of stress. Liquidity rules answer the question that a crash raises first: can the bank pay what it owes this month?

How are deposits protected in a Singapore bank crash?

On 16 October 2008 the government guaranteed all Singapore dollar and foreign currency deposits of individuals and non-bank customers at licensed banks, finance companies, and merchant banks, until 31 December 2010, backed by S$150 billion of reserves (MOF and MAS joint statement). The reason given was a level playing field, after other jurisdictions in the region announced guarantees.

Today the Deposit Insurance Scheme insures deposits up to S$100,000 per depositor per scheme member, with insured deposits at one member aggregated (SDIC). Monies placed under the CPF Investment Scheme and the CPF Retirement Sum Scheme are insured separately up to S$100,000. A depositor with balances above the limit can check how each balance is covered.

How did Singapore banks perform in the 2008 financial crisis?

MAS reported in its 2008/2009 annual report that Singapore banks had very low non-performing loans, minimal exposure to toxic assets, and sound capital. It attributed this partly to financial institutions and their supervision being relatively more conservative, with no venture into complex instruments. Singapore did not need extraordinary measures to maintain stability in the financial system.

The same report states that the economy still saw its deepest recession in late 2008 and early 2009, with output about 10% below its peak by the first quarter of 2009. Sound banks did not stop the recession, and they kept the recession from becoming a banking crisis. The detailed economic record appears on the page on how the 2008 financial crisis hit Singapore.

How can you read a Singapore bank’s strength before a crash?

Take five numbers from a bank’s published report and compare them with the rules above: the Common Equity Tier 1 ratio against the 6.5% minimum for a D-SIB, the total capital ratio against 10%, the liquidity coverage ratio against 100%, the share of non-performing loans, and the deposit mix. Record each with its date. As of October 2026 each number is public.

The EQOS Asia method page explains how a structural score combines such inputs, and the Λ simulator lets you test a bank-heavy exposure under a soft landing, a correction, and a crash. A 30-minute pre-diagnostic through the contact page applies the scoring to your own case.

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About the author

Stéphane Jambu

President, EQOS Forecast Asia

Stéphane Jambu leads EQOS Forecast Asia and works as a consultant in e-commerce, search visibility, and AI. LinkedIn profile