Treatment of Singapore Banks' Crypto Asset Exposure and Capital Adequacy

Ms He Ting Ru asked the Prime Minister (a) what are MAS' requirements as to the prudential treatment of Singapore banks' crypto asset exposure; and (b) what are the risk-weighting requirements applicable to crypto asset exposures in assessing Singapore banks' capital adequacy.

Singapore-incorporated banks' exposures to crypto assets are insignificant, contributing less than 0.05% of their total risk weighted assets.

The Basel Committee on Banking Supervision (BCBS) is working to finalise a framework for the prudential treatment of banks' exposures to crypto assets. MAS contributes actively to this work, which seeks to ensure that banks maintain adequate capital and liquidity for such exposures. BCBS has issued two rounds of consultation thus far and will finalise the framework around the end of 2022.

Pending the finalisation of the framework, MAS requires Singapore-incorporated banks to apply a 1,250% risk weight for exposures to riskier crypto assets, such as Bitcoin and Ether. This is the highest risk weight under BCBS' capital framework. Based on MAS' minimum total capital adequacy requirement of 10% for systemically important banks incorporated in Singapore, this means that Singapore-incorporated banks are required to hold $125 of capital against an exposure of $100 to a crypto asset like Bitcoin. For less risky crypto assets, such as tokenised corporate bonds that meet a set of conditions to ensure that they pose the same level of financial risks as traditional corporate bonds, the prudential treatment is similar to that applied to the traditional non-tokenised asset.