Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

There's so little banks get right these days, it's hard to pinpoint the one thing they might have got wrong. But with Singaporean lenders, the task is relatively easy.

Using just two exhibits, it's possible to show the city-state's three homegrown banks weren't exactly sleeping through the commodities meltdown that's now come back to bite them. Instead, they perhaps took the deliberate view that the risk of permanently low interest rates was a bigger threat to their shareholders than lending money to riskier oil-services clients.

Start with Exhibit 1, which is a market capitalization-weighted share price chart for the last five years of 14 out of the island's 15 most-indebted offshore oil-services companies, according to Moody's.

Markets Saw This Coming
Singapore's oil-services companies have been in decline for two years
Source: Bloomberg

The 15th name on the rating company's list is Swiber Holdings. The provider of construction services for oil and gas projects shocked Singapore last week by announcing a winding-up plan, which it later changed to a court-directed effort to survive. DBS, sitting on a S$700 million ($522 million) exposure to Swiber and its units, will probably ratchet up its loss provisioning for the entire oil-services sector when it announces its quarterly results Monday.

But miserable as it is, the Swiber saga is no canary in the coalmine. As Exhibit 1 shows, rising stress in the industry has been evident to equity markets for two years now. It's impossible the bankers just missed it. So why didn't they provide for losses earlier? That answer lies in Exhibit 2, which shows what part of their balance sheets is cash and cash equivalents.

I Want to Break Free
Cash as a percentage of total assets plunged as Singapore banks got desperate to earn returns
Source: Bloomberg

Notice how balance sheets have become less liquid for all three lenders over the past five years, especially DBS. It's no accident, but a quest to eke out returns in a low interest-rate environment. Raising loan-loss provisions could have called into question the wisdom of chasing credit risk.

Spreading the pain for banks' shareholders over a couple of years of accelerated loss provisioning would have been the better thing to do. But that could have muted the near-doubling of DBS's share price between 2012 and the middle of last year. About half of that gain has survived the despondence that's set in since. The affair with credit risk may be souring, but love's labor isn't entirely lost. Not yet.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Andy Mukherjee in Singapore at

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Katrina Nicholas at