SINGAPORE: Despite the slowing economy, most households and companies in Singapore have “ample financial buffers” to weather potential challenges, the Monetary Authority of Singapore (MAS) said in its latest Financial Stability Review released on Tuesday (Nov 29).

However, the banking regulator cautioned that households should stay financially prudent and manage their debts to ensure they have sufficient funds for retirement.

“In particular, households should consider their housing choices carefully, as retirement adequacy could be compromised should households overstretch their finances to purchase more expensive housing,” it said.

MAS also said that household balance sheets have strengthened and the property market has stabilised after macroprudential measures were introduced to cool the real estate market.

But “there is still some way to go to entrench these gains”, so that households are more resilient to interest rate and income shocks, it added.

BANKS, COMPANIES RESILIENT DESPITE CHALLENGES: MAS

Singapore’s financial sector is still strong and companies have remained resilient with “healthy financial buffers”, the regulator said.

“The pressures thus far have been contained within specific sectors, for example oil-related industries buffeted by low oil prices and shipping firms, but banks have been actively managing such risks,” MAS said.

Still, companies should take steps to reduce potential vulnerabilities, especially if they have significant leverage or foreign currency risks, and maintain clear communication with investors, it added.

Banks have seen positive resident loan growth, although non-resident lending has contracted amid slowing economic activity in the region.

“While non-performing loans have risen, particularly in manufacturing as well as the transport, storage and communications sectors, banks have adequate loan provisions and strong capital and liquidity buffers built up over the years that will enable them to ride through current challenges,” MAS said.

It added that banks here have strong capital and liquidity positions, “well above MAS regulatory requirements”.

WEAK GLOBAL GROWTH, RISING POLITICAL RISKS

The regulator warned that “headwinds from the global environment” have increased, with prolonged weak global growth, uncertainty over interest rates and rising political risks some of the risks that will weigh on corporates and households and affect bank profitability.

“While strong policy action and reforms have helped to stabilise China’s financial markets, challenges remain as financial system vulnerabilities continue to rise, with potential spillovers to the region,” MAS said.

Rising political risks and anti-globalisation sentiment will also increase market volatility and pose challenges to effective policy-making, it added.

MAS deputy managing director Ong Chong Tee said: “Stress tests show that Singapore’s financial institutions, corporates and households are able to weather the present challenging environment.

“We should all stay vigilant to guard against the risks highlighted in the report, given the global macroeconomic uncertainties,” he said.

- CNA/cy