Singapore's central bank is getting less picky about how banks raise funds after recording a net loss of of 9.2 billion Singapore dollars (US$6.34 billion) in its last financial year that ended in March, badly hurt by the global downturn. The loss equalled about 3.5 per cent of the central bank's average assets, said Monetary Authority of Singapore (MAS) managing director Heng Swee Keat.
MAS made a profit of 7.44 billion Singapore dollars in the previous year and its total assets currently stand at 264.75 billion Singapore dollars, according to the Wall Street Journal. Singapore's 2008 gross domestic product was 257.41 billion Singapore dollars, according to the MAS annual report, available on its website.
MAS is not bullish about the economy at all even after a report showed the gross domestic product increased an annualized 20.4 percent last quarter from the previous three months, the first growth in a year. The sustainability of the recovery is "uncertain", said MAS chairman Goh Chok Tong in the bank's annual report today, reports Bloomberg.
More interesting is this Wall Street Journal report:
Singapore's central bank announced new steps that will give banks more options to increase their liquidity, while saying its monetary policy remains appropriate to support the economy.
The Monetary Authority of Singapore's new measures aim to help banks better manage their risks and liquidity profiles.
Effective immediately, the central bank will accept triple A-rated Singapore dollar- denominated debt securities issued by sovereigns, organizations that aren't tied to any one sovereign country such as the World Bank, and state-backed companies as collateral.
(MAS managing director Heng said these will be accepted in addition to Singapore government securities as collateral in the MAS standing facility. The facility was introduced in June 2006 to allow banks to improve day-to-day liquidity management by providing a channel to place excess funds with, or to borrow from, MAS directly, says the MAS annual report.)
The measures are aimed at giving financial institutions more a flexible pool of collateral and are also a pre-emptive measure to meet any liquidity problems faced by them in the future.
MAS managing director Heng Swee Keat said the central bank will also enter cross-border collateral backing agreements with more central banks to accept high-rated foreign currencies and government debt securities as collateral.
Last month, the MAS said it had signed a memorandum of understanding with the Dutch central bank under which banks from both countries can ask for liquidity assistance.
Bloomberg adds:
MAS managing director Heng Swee Keat said: “Given that there remain stresses in the global financial system and job markets in the major economies continue to weaken, the domestic economy is likely to witness slow and uneven growth, rather than sharp and decisive recovery.”
Singapore’s economy is forecast to contract as much as 6 percent this year as demand for goods and services eases amid the island’s deepest recession since independence 44 years ago.
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