Why Singapore banks are worried over rising unemployment rates

It's predicted to jump to 2.4%.

According to Nomura, the greater issue for the banks is that unemployment rates remain low and interest rates are stable. Our economics team expects unemployment rates to rise slightly to 2.4% in 2014 from 1.9% this year while SIBOR is forecast to increase by 10bp to 0.48%.

Here's more from Nomura:

As such, we do not foresee major asset quality risks at least until end-2014. To be prudent, we build in a modest rise in credit costs to 32bp by FY15F from 23bp in FY12.

By way of comparison, the charge-off rate rose to a peak of ~100bp during the global financial crisis of 2008.

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