Singapore’s DBS told to set aside S$230 million more for operational risk

The Singapore Monetary Authority (MAS) has asked the DBS Group to set aside S$230 million (US$170.5 million) additional regulatory capital for operational risk following the breakdown of the bank's network on July 5.

Analysts said the demand for regulatory capital shows that the MAS is sending a message to all banks operating in the city-state that it will not tolerate banking services disruptions in one of Asia's main banking centers.

Banking services at the Singapore branches and automated teller machines at DBS and its unit, POSB, were disrupted following technical problems last month. The services were restored within a few hours. See “Huge IT failure at Singapore bank” and “IBM employee fingered as culprit in massive DBS outage”.

Singapore, which is the Asian headquarters for many private banks such as Credit Suisse, competes against Hong Kong in the fields of wealth management and funds.

"This incident has revealed weaknesses in DBS Bank's technology and operational risk management control," the central bank said in a statement.

MAS also highlighted several steps DBS should take to ensure such incidents are avoided.

The central bank also said it has recently written to the CEOs of all financial institutions to remind them of maintaining robust technology risk management systems.

"MAS will not hesitate to take appropriate supervisory action against any financial institution which fails to meet the standards," it said.

DBS said in a statement the additional regulatory capital would result in the bank's pro-forma Tier 1 capital and total capital adequacy ratio to come down by 0.2 percentage points to 12.9 percent and 16.3 percent respectively.

"DBS would like to assure customers that taking into account the regulatory capital charge, our total capital adequacy ratio is still comfortably above the required levels," DBS CEO Piyush Gupta said in the statement.

DBS, which conducted an investigation with its main vendor IBM to determine what caused the first such major disruption for the bank, said it has taken several steps to prevent such breakdowns in the future.

"DBS is deeply sorry for the outage and once again, my apologies to our customers for all the inconvenience caused," Gupta said in the statement.