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On Friday, the Monetary Authority of Singapore (MAS) released its interpretation of the Basel II rules for Singapore. The formalisation of the rules follows a three year consultation process. The Singapore Basel II rules will come into effect on 1st January 2008.
The MAS implementation of Basel II appears to be very close to the standard Basel II interpretation as released in 2005 and 2006. The ruling will apply to all Singapore-incorporated banks, and, in contrast to a number of other jurisdictions, MAS does not intend to require banks to adopt specific approaches from among those that are available under Pillar 1 (Basic, Standardised, IRB, AMA, etc), but expects each bank to adopt the approaches that match with its risk profile.
MAS has worked closely with the Singapore-incorporated banks to assess the impact of Basel II and determine how best to adapt the proposals for Singapore, and the MAS’ Basel II rules were released after a long consultation process which began in 2004. The sixth and final phase of consultation concluded in October 2007.
Although the Basel II-recommended two year floor levels are present in the implementation, one important consideration is that the affected banks are given the choice of continuing to calculate their regulatory capital requirements for the period 1 January 2008 to 31 December 2008 according to the old rules.
It is noticeable that the writers of this document have taken into account many of the comments regarding the original Basel II document and have developed a simpler presentation as well as incorporating an extensive 20 page glossary.
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