Singapore central bank cautious over US subprime issues
According to TODAY Online:
The profitability of Singaporean banks could be hurt by renewed concerns over the US subprime mortgage crisis, or if the world’s biggest economy slips into a recession, the central bank here said.Three local banks have already set aside 434 million Singapore dollars (301.39 million US) in extra provisioning for losses on collateralised debt, the Monetary Authority of Singapore (MAS) said late Monday.
It said a renewal of risk aversion could impact further on local banks, resulting in trading losses and further writedowns on assets held as collateralised debt obligations (CDO).
“In addition, interest income may decline should a US recession materialise and dampen loan demand,” it said in a review of the local financial system.
CDOs are securities backed by a range of assets including bonds, mortgages, car loans and credit card debt.
MAS also held its view that next year’s outlook was “more uncertain” due to a sluggish US economy which would impact on Singapore’s trade-led economy.
“The external outlook for 2008 is more uncertain,” MAS said. “The housing sector-induced weakening of the US economy will weigh somewhat on the global and hence Singapore’s growth outlook.”
For 2008, Singapore is tipped to grow by 4.5 to 6.5 percent compared with a 7.5 to 8.0 percent expansion this year, the MAS said.
“The slower growth largely reflects the anticipated short-term weakness in external demand, particularly in the first-half of the year.“
Last month, Singapore lifted its 2007 growth targets to 7.5 to 8.0 percent from 7.0 to 8.0 percent after the economy grew at a faster pace in the three months to September.
The city-state also raised its growth outlook for 2008 to 4.5 to 6.5 percent from 4.0 to 6.0 percent. — AFP
