The Monetary Authority of Singapore (MAS) has imposed an additional capital requirement on DBS Bank following the widespread unavailability of its digital banking services between Nov 23 and 25 last year.
With this, DBS Bank is required to apply a multiplier of 1.5 times to its risk-weighted assets for operational risk. This means the bank will have set aside an additional amount of around $930 million in regulatory capital to guard against such risks.
The amount – which is based on DBS’ reported financial statements as at Sep 30 2021, is four times higher than in 2010 when the bank encountered a similar disruption.
At that time, the central bank had applied a multiplier of 1.2 times to DBS’ operational risk weighted assets. This is equivalent to around $230 million in additional regulatory capital.
MAS noted a prolonged duration of the disruption due to deficiencies in DBS’ incident management and recovery procedures to restore its digital banking services.
The 2-day disruption left many customers unable to access online banking services. DBS attributed this to a problem with its access control servers, but stressed that there was no cyberattack.
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"DBS must rectify all shortcomings identified from the review and implement measures to ensure that any future disruption to its digital banking services is resolved quickly and adequately," MAS stressed in a Feb 7 statement.
The additional capital requirement will be reviewed when it is satisfied that the bank has addressed the identified shortcomings.
“MAS requires financial institutions to have robust controls and processes to ensure the reliability and resilience of their IT systems and the continuous delivery of essential financial services to their customers,” stresses Marcus Lim, assistant managing director for banking and insurance at MAS.
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He added that the central bank will take appropriate supervisory action against any financial institution that falls short of regulatory expectations.
Responding to MAS’ announcement, DBS chief Piyush Gupta noted that customers rightly expect seamless and uninterrupted access to online banking services for 24/7 in this digital era.
“This is something we take seriously. Since the November incident, DBS has taken a series of actions to improve the resilience of our services and incident response. These actions are but a starting point,” he emphasised.
"Over the course of the next few months, together with an independent expert, we will continue to review our systems and processes to ensure that we do better going forward,” added Gupta.
DBS says the penalty will have a 0.4 percentage-point impact on the group's capital ratios till remedial actions are completed.
Inclusive of the capital impact arising from its acquisition of Citi's consumer banking business in Taiwan, DBS' pro-forma common equity tier 1 (CET-1) ratio as at Sep 30, 2021, would be 13.4%. The pro-forma ratio is at the upper end of DBS's target CET-1 range and will have no impact on dividend policy, the bank added.
Shares in DBS closed up 53 cents or 1.47% at $36.48, before the announcement on Feb 7.
Cover image: Bloomberg
