MAS orders DBS to set aside regulatory capital of $1.6b after latest disruption
Source: Straits Times
Article Date: 06 May 2023
Author: Aqil Hamzah
DBS will also need to apply a multiplier of 1.8 times to its risk-weighted assets for operational risk, up from the 1.5 times multiplier previously applied in 2022.
A disruption to DBS Bank’s digital banking and ATM services on Friday and an earlier widespread disruption on March 29 mean the additional capital requirement it must set aside now stands at about $1.6 billion.
The Monetary Authority of Singapore (MAS), in a statement on Friday night, said the capital requirement takes into account the one imposed in February 2022, which required Singapore’s largest bank to set aside about $930 million in regulatory capital.
MAS added that DBS Bank will now need to apply a multiplier of 1.8 times to its risk-weighted assets for operational risk, up from the 1.5 times multiplier previously applied in 2022, after it suffered its worst outage in more than a decade in November 2021.
This means the bank must set aside an additional amount of about $670 million in regulatory capital. This refers to the amount of capital banks have to set aside as a buffer in case of unexpected losses, as well as to keep themselves solvent in times of crisis.
MAS added that it may adjust the size of the multiplier depending on the outcome of ongoing reviews.
Although the incident on March 29 appears to be separate from the one on Friday, MAS said it will require the special board committee set up by DBS Bank to oversee both incidents.
The committee was set up on March 31 to look into the cause of the March 29 disruption to the bank’s digital banking services.
The statement said: “MAS had then directed DBS Bank to conduct a comprehensive review, including an assessment of the adequacy of management oversight, staff competencies, operational processes, system resiliency, and architecture design for its digital banking services.”
During the March 29 incident, customers were unable to access online banking services from about 8.30am to 5.30pm, in what was DBS Bank’s second disruption to digital banking services in 16 months.
Friday’s disruption, which marks the third one in 18 months for the bank, was resolved in about 45 minutes.
MAS said it has also asked DBS Bank to take immediate steps to improve the resiliency and recoverability of its existing system, in order to minimise disruption of its services to customers.
Ms Ho Hern Shin, who is MAS deputy managing director of financial supervision, said in the statement that DBS Bank had fallen short of the central bank’s expectations for banks to deliver reliable services to their customers.
Describing the repeated inconveniences caused to the public as “unacceptable”, she said the latest penalty imposed on DBS Bank shows how seriously MAS views the matter.
She said: “DBS Bank must spare no effort in dealing with the underlying issues leading to these disruptions.”
DBS chief executive Piyush Gupta, in a statement late on Friday night, apologised for the recent digital disruptions and said the bank is committed to doing better.
He said: “Following the March 29 incident, the bank convened a special board committee to oversee a full review of our technology resiliency with an independent external expert.
“We will complete the review as a matter of utmost priority and implement all recommendations expeditiously.”
Source: Straits Times © SPH Media Limited. Permission required for reproduction.