MAS calls for vigilance on possible systemic risks
By Arthur Poon
FINANCIAL institutions and investors should always be vigilant about possible systemic risks, even though the economy, stock market and property sector may look rosy now.
Said Mr Heng Swee Keat, the managing director of the Monetary Authority of Singapore (MAS), yesterday: ‘The current benign global environment of low inflation, low risk premiums and low volatility in financial markets has been unusually long. Indeed, it is in times of apparent tranquillity that we need to look for the potential risk areas and plan for contingencies.’
Yesterday, at the inaugural annual conference of the Berkeley-National University of Singapore Risk Management Institute, he also highlighted the danger that investors may not be fully aware of their exposure to a particular type of risk given, for instance, the increasing complexity of financial instruments.
Among other risk concerns raised recently are the huge capital inflows into the region from hedge funds and private equity firms, as well as banks’ growing housing and construction loan portfolios.
‘The surge in capital flows into this region will have to be efficiently managed so that they do not become a source of risk to financial and macroeconomic stability,’ Mr Heng said.
He added that MAS’ challenge as a regulator is to allow capital flows to occur, while ensuring that appropriate risk management practices are in place.
In terms of increased risk exposure to property-related loans, a check of the three local lenders’ first-quarter financials revealed that they have not increased their loans to the building, construction and housing industries significantly as a proportion of total loans.
For instance, United Overseas Bank’s housing loans as a proportion of total loans have increased only marginally from 23.8 per cent as at Dec 31 to 24.3 per cent as at March 31. The figure for building and construction was up 0.4 percentage point to 10.3 per cent.
At OCBC Bank, housing loans actually fell from 29.7 per cent to 28.5 per cent. But building and construction loans rose to 15.6 per cent.
In DBS’ case, both sets of figures fell.
Source : The Straits Times, 07 July 2007
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