THE Monetary Authority of Singapore (MAS) on Sunday stepped out to clarify that Singapore has not received “large flows” of bank deposits from Hong Kong to Singapore.
Besides stating that the total amount in foreign currency deposits is “much less” than what had been earlier cited in some media reports, MAS added in a statement that the growth in such deposits has come from “diverse sources and for varied reasons”.
This comes as several media reports have focused on stronger foreign currency deposits in Singapore seen in April in the domestic banking unit (DBU) – one of two accounting ledgers used by banks here – to conclude that “large flows” of deposits were moving from Hong Kong to Singapore, with MAS calling such reports “incorrect”.
MAS said total foreign currency non-bank deposits in Singapore’s banking system stood at S$781 billion at the end of April this year, 20 per cent higher than a year ago.
With that context, it noted that media reports showing that foreign currency deposits at Singapore’s banks jumped almost four-fold on a year-on-year basis in April this year, were focused solely on deposits found on just the DBU. This focus is “not meaningful”, said MAS, as these make up under 5 per cent of the total of foreign currency deposits.
The other accounting ledger where more foreign currency deposits are captured is known as the Asian currency unit (ACU).
“It is not meaningful to look at only the foreign currency deposits in the DBUs as they make up less than 5 per cent of the total of such deposits across both the DBUs and ACUs,” said the regulator.
MAS further noted that the strong growth in foreign currency deposits in Singapore this year has come from a variety of sources – domestic, regional, and beyond the region. “No single region or country source dominates,” it said.
MAS added that there are some “well-known global drivers” of this deposit growth amid the current economic slump related to the Covid-19 outbreak. These include central bank actions that increase liquidity in the financial system, banks and corporate treasuries raising their liquidity profiles, and a higher level of precautionary savings by households.
“Other financial centres have also seen significant deposit growth,” it said.
The DBUs and ACUs are ledgers of the same bank held separate for regulatory purposes.
MAS announced in 2015 that the two DBU and ACU ledgers would be merged as it said there was no longer a meaningful purpose for the separation, with legislative amendments to do away with the DBU-ACU divide passed in Parliament in January this year. The operational date of the merger of the two ledgers, however, has not been announced.