“A large part of the general provision management overlay was set aside during Covid. Back then, we communicated that changes to the overlay, including any reversal, will depend on how the situation pans out. Stress tests of our portfolio resulted in an estimated expected credit loss (ECL) figure that was consistent with what we had set aside at that point in time,” said Chng Sok Hui, group CFO of DBS Group Holdings during its results briefing on Feb 13.
The tentacles of the US Reform Law in 2018 did not reach our shores. Fortunately for Singapore, our local banks are required to conduct stress tests regularly and comply with the Basel Committee for Banking Supervision’s (BCBS) liquidity and capital ratios. The local banks are also likely to be largely untouched by Credit Suisse Group's woes as they have stated their exposures are insignificant.
The local banks have just emerged from the pandemic during which they set aside large amounts of general provisions and increased their management overlays. Despite the improving credit environment in 2022, the banks have written back only very modest amounts of the general provisioning or GP. Still, the overlays remain untouched.
