Singapore bank stocks fell sharply at market open on March 17, 2023, as investors feared the crisis at Credit Suisse and recent U.S. bank failures could spread globally. The selloff hit DBS, OCBC, and UOB before they partially recovered after Credit Suisse secured a $54 billion lifeline from the Swiss National Bank. The Monetary Authority of Singapore said local banks have “insignificant exposures” to the collapsed U.S. institutions and remain well-capitalized.
The Credit Suisse crisis and market reaction
Credit Suisse shares plunged up to 30% on March 15 after its largest shareholder, Saudi National Bank, said it would not make additional investments due to regulatory limits. The cost of insuring Credit Suisse’s debt against default soared to levels not seen since the 2008 financial crisis.
The Swiss National Bank stepped in with a 50 billion Swiss franc loan facility. Credit Suisse shares then surged at least 30% in pre-market trading. But the damage to sentiment was done.
Singapore’s Straits Times Index fell 0.55% to 3,155.54 by 5 p.m. local time. The three major local banks initially dropped more than 1% before trimming losses. OCBC closed down 0.98% at S$12.15. DBS fell 1.27% to S$32.55. UOB slipped 0.71% to S$28.00.
U.S. bank failures add to global jitters
The Credit Suisse scare came on the heels of two U.S. bank collapses. Silicon Valley Bank failed on March 10 after a run on deposits. Signature Bank in New York was shut down by state regulators on March 12.
U.S. regulators intervened to guarantee all deposits at both banks. The Federal Reserve created a new Bank Term Funding Program offering up to $25 billion in one-year loans to banks on lenient terms. Silvergate Bank, a crypto-focused lender, also announced it would voluntarily liquidate.
Kelvin Tay, chief investment officer for Asia-Pacific at UBS, said markets face three inter-related challenges: bank solvency, liquidity, and profitability.
“Fears about bank solvency are obviously exaggerated because the majority of banks, including European banks, have solid liquidity positions, and depositors are still well-protected,” Tay said.
He warned that if funding conditions remain difficult for a long period, some banks may need central bank support. That is why Credit Suisse caused alarm when its largest shareholder ruled out more help.
Singapore banks seen as insulated
Analysts said Singapore banks are different from Credit Suisse. Glenn Thum, an analyst with Phillip Securities Research, noted that the customer bases are very different.
“Credit Suisse’s clients tend to be wealthy individuals and businesses. While Singapore banks’ clients tend to be small and medium-sized businesses and regular savers,” Thum said. “The entire risk and exposure to Singaporean banks is therefore little.”
Thum acknowledged the broader market impact. He said loan growth could slow further, which might affect Singapore bank earnings. But he described the direct risk as minimal.
The Monetary Authority of Singapore issued a statement on March 16 saying local banks have “insignificant exposures” to the collapsed U.S. institutions. MAS added that Singapore banks have adequate capital and regularly test their resilience.
“Their funding bases are steady and diverse, supporting strong liquidity situations,” MAS said. “These elements will help companies to withstand any strains brought on by anticipated changes in the world economy.”
Broader implications for Asian markets
Asian stock markets broadly declined on March 17, though losses were less severe than earlier in the week. Investors remain on edge about potential contagion from both the U.S. and European banking sectors.
The Credit Suisse rescue by the Swiss central bank provided a temporary floor. But questions persist about the health of other European banks with similar business models. The U.S. regional banking sector also faces continued deposit outflows and unrealized bond losses.
Singapore’s position as a regional financial hub means its banks are not immune to global sentiment shifts. But regulators and analysts alike stressed that the city-state’s banks operate with conservative risk management and strong capital buffers.
The events of mid-March 2023 served as a reminder that banking crises can cross borders quickly. Singapore’s banks took a hit on paper but avoided the direct exposure that sank Credit Suisse and Silicon Valley Bank. The question now is whether the global financial system can absorb these shocks without a broader crisis. For Singapore, the answer so far appears to be yes, but markets will remain watchful in the weeks ahead.
