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No single region or country source dominates growth in foreign currency deposits in Singapore: MAS

SINGAPORE – The strong growth in foreign currency deposits in Singapore this year has come from a variety of sources – domestic, regional, and beyond the region.

No single region or country dominates, said the Monetary Authority of Singapore (MAS) on Sunday (June 7), adding that media reports last week suggesting that there were large flows of deposits from Hong Kong to Singapore were incorrect.

“Total foreign currency non-bank deposits in Singapore’s banking system stood at $781 billion at the end of April this year, 20 per cent higher than a year ago,” said the MAS in a statement.

Media reports, which said that foreign currency deposits at Singapore’s banks had jumped almost fourfold on a year-on-year basis in April this year, appeared to have focused on such deposits in just the domestic banking units (DBUs) and ignored the Asian currency units (ACUs), it said.

“It is not meaningful to look at only the foreign currency deposits in the DBUs as they make up less than 5 per cent of the total of such deposits across both the DBUs and ACUs,” said MAS.

The DBUs and ACUs are accounting ledgers of the same bank held separately for regulatory purposes.

MAS had announced in 2015 that the two ledgers would be merged as there was no longer a meaningful purpose for the separation.

Legislative amendments to do away with the DBU-ACU divide were passed in Parliament in January this year, and will come into operation at a date to be announced, said MAS.

MAS was responding to media reports last week suggesting that there were large flows of deposits from Hong Kong to Singapore.

Wire agencies, including Reuters and Bloomberg, had last week cited MAS data in reports which said that foreign-currency deposits at local banks almost quadrupled from a year earlier to a record $27 billion in April.

The reports said this suggested that the jump in Singapore bank deposits reflected investors’ risk aversion and inflows from other markets, including Hong Kong.

MAS said there are some well-known global drivers of this deposit growth amid the current Covid-19 related economic slump, including central bank actions that increase liquidity in the financial system, banks and corporate treasuries raising their liquidity profiles, and a higher level of precautionary savings by households.

It added: “Other financial centres have also seen significant deposit growth.”

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