Bondholders get the upper hand under Singapore's proposed bail-in regime

It's one of the most investor-friendly in the world.

Senior bank creditors will get the upper hand under Singapore's proposed statutory bail-in regime.

The regime, applicable only to subordinated creditors and excluding senior unsecured creditors, legacy subordinated debt and deposits, aim to strengthen Monetary Authority of Singapore (MAS)’s powers to resolve failed banks while maintaining critical bank functions.

"The proposed bail-in regime excludes all existing and prospective senior debt, deposits, and interbank liabilities, making it one of the most investor-friendly in the world for non-subordinated debtholders," said Eugene Tarzimanov, Moody's Vice President and Senior Credit Officer.

"As such, and if implemented, Singapore's regime will be credit positive for senior unsecured bondholders, because they will not be subject to bail-in outside of bank liquidation," he added.

Moody’s said that MAS' investor-friendly approach reflects the authority's concerns over systemic contagion if losses were to be imposed on senior bondholders.

"MAS's resolution regime, if and when coupled with the total loss-absorbing capacity (TLAC) requirement -- which is currently only applicable with some exceptions to a handful of global systemically important banks -- would create an incentive for the Singapore banks to issue more subordinated debt," Tarzimanov noted.

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