NON-PERFORMING LOANS

Mr Chuang Shaw Peng asked the Deputy Prime Minister if he will give an update on levels of non-performing loans, both local and foreign, at Singapore banks.

BG Lee Hsien Loong: MAS has been making these figures available on its website (www.mas.gov.sg) on a quarterly basis (please see attached table at Appendix A (Cols. 1813 - 1814). As at 31st March 1999, the 5 local banking groups had a gross exposure of S$34.7billion (12.5% of their total assets) to Malaysia, Indonesia, Thailand, Korea and the Philippines. This was a marginal increase over December 1998 (S$34.2 billion), but a decrease in exposure from September 1998 (S$ 35.8 bn).

Appendix A - Regional Exposure and NPLs of Singapore Incorporated Banks (Cols. 1813 - 1814)

The non-performing loans [NPLs] of the 5 local banking groups to these 5 countries amounted to 24.3% of their loans to these countries as at 31st March 1999. This figure has gone up, compared with 23.3% in December 1998 and 17.8% in September 1998. Including domestic loans and other global loans, the total NPLs of the local banks amounted to 8.0% as at 31st March 1999.

NPL levels are high as local banks only write off the NPLs when all avenues to recover the loans have been exhausted. Restructured loans are classified as NPLs by local banks. Loans which are adequately collateralised and that are not in arrears in interest or principal repayments are also classified as non-performing if they have weak financials. This has resulted in local banks reflecting a higher NPL figure than is the actual case.

Local banks have set aside substantial provisions, amounting to 72% of their regional bank and non-bank NPLs as at 31st December 1998. These provisions and the collateral backing the regional NPLs in aggregate exceed the regional NPLs outstanding. The level of NPLs does not threaten the financial health of any of the local banks.