MAS Now Requires DBS to Set Aside an Additional $930 Million in Capital After Its Nov 2021 Outage

By
Chloe Tan
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DBS users, remember when you couldn’t use digital banking for three days in November 2021?

Yep, DBS is still suffering the repercussions of that. And they’ve just been required to set aside an additional $930 million in capital.

Here’s what this means for DBS.

MAS Review of November Disruption

Last November, Singapore’s biggest bank suffered its worst digital banking disruption, from 23 to 25 November.

The disruption, which the bank had found stemmed from a problem with its access control servers, led to customers being unable to log in to the bank’s Internet banking platform and mobile app.

The Monetary Authority of Singapore (MAS) noted weaknesses in the bank’s management of the incident and their recovery procedures to restore services, which led to the prolonged disruption.

MAS has since told DBS to appoint an independent expert to properly review this incident. The bank will have to solve all issues found in the review and implement mitigatory measures so that a similar disruption will be handled efficiently in the future.

DBS has stated that they’ll continue to review their systems and processes with the expert over the next few months. They will ensure to have seamless and uninterrupted access to online banking services 24/7.

They’ve also told The Straits Times that the bank has since made improvements to their access control server system since November. Their current focus is on improving diagnostics and recovery protocols.

Increased Capital Requirement Will Affect DBS’ Capital Ratios

MAS said that DBS will need to apply a 1.5 times multiplier to its risk-weighted assets for operational risk.

This basically means that the bank will have to put aside an additional $930 million in regulatory capital, as a buffer to cover unexpected losses and keep themselves afloat in a crisis.

This sum of $930 million is four times higher than the $230 million that DBS had to set aside for a similar disruption back in 2010.

This new requirement won’t affect DBS’ dividend policy. The bank’s common equity tier 1 (CET-1) ratio would have been 13.4% at the end of September. The CET-1 ratio measures a bank’s core equity capital against its total risk-weighted assets.

DBS said that its ratio is at the upper end of its target CET-1 range, so the new requirement won’t affect its dividend policy.

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However, it will affect their capital ratios. FYI, capital ratios are used to measure a bank’s financial strength and its ability to withstand risks.

The requirement will affect DBS’ capital ratios by 0.4 percentage point, until remedial actions are completed. MAS will review the additional capital requirement again when they’re satisfied that DBS has rectified all shortcomings.

MAS stated that they require all financial institutions to have complete controls and processes to ensure that their systems are reliable, so that essential financial services can be delivered to customers.

They will continue to take appropriate supervisory action if any institution is found to fall short of their expectations.

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Chloe Tan
Email: [email protected]