(Bloomberg) -- Singapore's financial regulator is carrying out additional stress tests on banks to assess whether the current restrictions on dividends need to be extended.
The central bank wants to make sure lenders are a “source of strength” for the economy as “quite a bit of uncertainties remain,” Monetary Authority of Singapore Managing Director Ravi Menon said during a briefing on its annual report on Wednesday. The stress tests will “very much guide our decision going forward” and the MAS will advise on its decision “very shortly.”
Although concerns that defaults among weaker companies could strain banks' profitability and capital positions haven't materialized, problem loans can take time to surface, Menon said.
Singapore's cautious stance on dividend payouts comes as major U.S. banks announce plans to raise dividends after amassing cash piles that easily meet regulatory requirements. Regulators in the U.K. and Australia also eased restrictions on dividends payout last year.
The MAS last July asked banks to cap their 2020 dividends at 60% of 2019 levels to ensure a sufficient flow of loans during the coronavirus pandemic. The regulator made the request as a preemptive measure after stress tests showed that local banks were resilient, it said at the time.
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