2. SINGAPORE BANKING SECTOR – AN
INTRODUCTION
Singapore is a flourishing financial centre of international repute servicing not
only its domestic economy per se but also the entire Asia Pacific region.
The banking industry is a key player in the country’s financial market
segment, soon emerging as one of the strongest in the world.
Factors such as a sound economic and political environment, conducive legal
and tax policies, reputation for integrity, and strict enforcement against crime
and money laundering, have contributed to Singapore’s status as an
International Finance Centre – the third largest in Asia, after Japan and Hong
Kong.
Today there are as many as 108 foreign banks and 6 local banks that
dominate the banking scene.
3. TYPES OF BANKING
1.Commercial banking (catering to businesses and corporations),
2.Retail banking (catering to individual members of the public) and
3.Private banking (catering to HNWIs) services.
4. TYPES OF BANKS
1.Local Banks
2. Foreign Banks –
1. Full Banks – provide the whole range of banking business
approved under the Banking Act. Six of the foreign banks
operating in Singapore have been awarded Qualifying Full Bank
(QFB) privileges. These banks include:
HSBC, Citibank, Standard Chartered, Maybank, ABN AMRO
and BNP Paribas.
2. Wholesale Banks – engage in the same range of banking
activities as full banks, except Singapore Dollar retail banking
activities. All wholesale banks in Singapore, operate as
branches of foreign banks. Examples: ING bank, National
Australia Bank, Barclays Bank, Fortis Bank, Deutsche Bank etc.
5. 3. Offshore Banks – engage in the same activities as full and wholesale
banks for businesses transacted through their Asian Currency Units (an
accounting unit, which banks use to book all foreign currency transactions
conducted in the Asian Dollar Market). The banks’ Singapore dollar
transactions are separately booked in the Domestic Banking Unit (DBU). All
offshore banks in Singapore, operate as branches of foreign banks.
Examples: ICICI Bank Ltd, Korea Development Bank, Bank of Taiwan, Bank
of New Zealand, Canadian Imperial Bank of Commerce etc.
4. Merchant banks – provide corporate finance, underwriting of share and
bond issues, mergers and acquisitions, portfolio investment
management, management consultancy and other fee-based activities.
Most merchant banks have, with MAS’ approval, established ACUs, through
which they compete with commercial banks in the Asian Dollar Market. In
their DBU, they may accept deposits or borrow only from banks, finance
companies, shareholders and companies controlled by their shareholders.
Examples: Credit Suisse Singapore Ltd, Barclays Merchant Bank Singapore
Ltd, ANZ Singapore Ltd, Axis Bank Ltd etc.
6. TYPES OF LENDING
1. Residential Real Estate Lending:
Long Term Amortising Loans
Flexible Revolving Facility
Multicurrency Loans
We offer a range of interest rate options, including:
SGD term loans based on the Singapore Swap Offer Rate
(SOR)
Cost of Funds-based interest rates for revolving facilities and
multicurrency loans
The ability to lock in interest rates for 1, 3, 6, 9 and 12 months
7. 2. Commercial Real Estate Financing
We provide our clients with commercial property
financing through OCBC Bank, in various major
cities around the world.
3. Loans on Insurance Policies
We provide financing for Universal Life Insurance
single premium policies issued by approved
insurance companies.
8. TRENDS IN LENDING POLICIES
Total bank lending in Singapore rose 1.9 percent in December from November
2012 .
Total loans and advances, including bills financing, rose to S$481.74 billion in
November from S$479.42 billion in October.
Singapore's total bank lending continued to rise in November, the latest figures
from the Monetary Authority of Singapore .
Bank lending to businesses decreased slightly to S$276.98 billion from S$278.1
billion in the previous month.
Loans extended to consumers totaled S$204.76 billion, up slightly from S$201.36
billion in October.
9. LENDING POLICIES - CONTINUED
Of the $37.1 billion of syndicated loans this year, $31.4 billion have been to
property, energy or resource companies, Bloomberg data show.
Loans to agriculture and mining companies jumped 320 percent in October from
October 2011, according to figures from the Monetary Authority of Singapore
released Nov. 30.
Loans to manufacturers rose 52 percent while building and construction lending
increased 23 percent.
When compared to last year, there is an increase in the overall amount of activity
in commercial real estate lending.
10. LENDING POLICIES - CONTINUED
A major commercial property investment trend has been some increasing activity
due to the current decline in viable residential investing options. Due to many
investors who would rather avoid property ownership, the lack of real estate in
business opportunity investing is an attractive aspect.
Average auto loans on the rise
As the government aims to curb the car population further, the supply of
certificates of entitlement (COE), which are required for car ownership in
Singapore, has declined. This has resulted in an increase in the price of new cars
in Singapore and lower registration rates. COE for bigger cars above 1,600 cc
even surged past S$80,000 in March 2012 – a development which caused
average auto loan size to soar. In addition, high average loan size can also be
attributed to growing demand for luxury cars such as Porsches and BMWs in
Singapore.
11. OBSERVATIONS
Consumer lending remains positive despite economic
slowdown
The economy in Singapore has been negatively affected by
global economic uncertainty. However, demand for consumer
loans continues to increase, albeit at a slower pace than
before. Housing loan demand is slowing gradually in 2012 as
the impact of the cooling measures and expected economic
downturn start to sink in. Other personal loans have fared
fairly well, especially following the boom in the pawnbroker
area due to the doubling in the price of gold.
12. Consumer lending performance set to improve over
forecast period
As a result of the new rules to curb excessive property
investment and the car population in Singapore, both housing
and auto loans growth rates are expected to decline during the
first years of the forecast period. Therefore, consumer lending
is expected to slow although the number of loans will continue
to increase. Despite this, property developers are engaging in
promotion and marketing to entice buyers while in the auto
industry banks and finance companies are giving incentives via
higher commissions to car dealers and offering cash rebates
and free first-month instalments to car buyers. As a result, in
the long run consumer lending performance is expected to
improve, with growth rates within the area set to rise.
13. Mixed response to tighter enforcement of
moneylenders
The government has implemented additional rules to
improve protection for vulnerable borrowers from
moneylenders. These rules include using Effective Interest
Rates, extending interest rate caps for larger groups of
borrowers and abolishing upfront fees and all alternatives to
unsecured loans. However, this might result in
moneylenders refusing to lend to unprofitable lower-income
borrowers – a development which in turn may force the
latter to resort to borrowing from unlicensed moneylenders.
