MAS ups DBS' additional capital requirement to S$1.6 billion after successive disruptions

SINGAPORE: The Monetary Authority of Singapore (MAS) has imposed an additional capital requirement on DBS Bank in the wake of two successive service disruptions in the space of just over a month.

Online banking and ATM services by Singapore's largest lender were disrupted by a "system issue" on Friday (May 5), following a similar day-long outage on Mar 29 - although DBS said the incidents were unrelated.

On Friday night, MAS said DBS would now need to apply a multiplier of 1.8 times to its risk-weighted assets for operational risk, bringing its total additional regulatory capital to approximately S$1.6 billion (US$1.2 billion).

This is up from the multiplier of 1.5 times - translating to S$930 million - imposed by MAS in February 2022 after DBS was also hit by a major, two-day disruption in November 2021.

"MAS may subsequently vary the size of the multiplier depending on the outcome of ongoing reviews," said the regulator in its latest statement.

MAS' deputy managing director (financial supervision) Ho Hern Shin said the repeated inconvenience caused to the public was "unacceptable" and that DBS had "fallen short" of its expectations for banks to deliver reliable services to customers, mirroring comments made after the Mar 29 incident.

"The additional capital requirement imposed at this time underscores the seriousness with which MAS treats this matter," Ms Ho added.

"DBS Bank must spare no effort in dealing with the underlying issues leading to these disruptions.”

Capital requirements are standardised regulations that determine how much liquid capital banks must hold for a certain level of assets. A higher capital requirement may inhibit an institution’s ability to invest.

DBS REVIEW TO COVER LATEST DISRUPTION

At DBS' annual general meeting on Mar 31, chief executive Piyush Gupta apologised for the service disruption days earlier, while chairman Peter Seah announced that a special board committee had been set up to investigate, with external experts brought in to help.

MAS on Friday noted that it had then directed DBS 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.

"Although the causes of the March and May incidents appear distinct from each other, MAS has now required the review to cover the May incident as well," it said.

The regulator added that it has also required DBS to take immediate steps to improve the resiliency and recoverability of its existing system via enhanced monitoring, more comprehensive testing and additional system redundancies. 

In response to MAS, the bank's CEO Gupta said on Friday: "We apologise for the digital disruptions that have recently occurred. Our customers rightly expect more of us and we are committed to doing better."

He added that the review by the special board committee would be completed "as a matter of utmost priority" and that DBS would "implement all recommendations expeditiously".

DBS added that MAS' latest action would have an incremental 0.3 per cent point impact on the bank's Mar 31 Common Equity Tier 1 capital ratio, reducing it from 14.4 per cent to 14.1 per cent.

The ratio compares a bank's capital against its assets. 

Earlier this week, DBS reported a stronger-than-expected 43 per cent jump in first-quarter profit to a new high from a year earlier on a higher net interest margin, sustained business momentum and resilient asset quality.