7. These risks could be accentuated by the high degree of interconnectedness of
Singapore’s financial system:
The predominance of foreign branches creates exposure to their parent banks (although sound
parents would provide greater stability).
There is no clear separation between offshore and domestic financial transactions.
Cross-border interbank flows are large (Figure 3); and there is a growing negative net funding
position of Singapore banks with respect to all major regions of the world.
Indeed, based on BIS locational data, the negative net funding gap appears to have increased
significantly since the global financial crisis, with liabilities that are largely short-term. This intensive
activity appears to reflect foreign banks’ use of Singapore as a center for liquidity management and
the distribution of their products in the region. However, these claims could also point to the
availability of cheap U.S. dollar funding.
8. Singapore has addressed most recommendations made by the 2004 FSAP (Table 2).
These include: strengthening the macroprudential framework, completing the review of the
regulatory minimum capital requirements for local banks, and enhancing the risk-based capital
framework for insurers. There is still scope for greater independence of MAS.