Singapore’s central bank said today local lenders have “adequate buffers” to cope with higher interest rates after Moody’s Investors Service cut its outlook for the banking system on concern borrowing costs may climb.
Moody’s lowered its outlook to negative from stable yesterday, citing rapid loan growth and rising real estate prices. Record home prices amid low interest rates have prompted the government to widen a four-year campaign to curb speculation prices in Asia’s second-most expensive housing market.
“MAS has been concerned that some borrowers are at risk of being overstretched, especially when interest rates rise,” the Monetary Authority of Singapore said in an e-mailed statement. “However, the local banks are not at risk.”
Singapore’s banks undertake regular stress tests on their own and those coordinated by the MAS, and have enough capital to cope with the ’’inevitable upturn’’ in borrowing costs, the central bank said.
The MAS has been monitoring risks and has taken pre-emptive measures for the property market, it said. The central bank is also watching banks’ credit underwriting practices to ensure they remain “prudent,” the authority said.