What kept key sectors resilient amidst elevated financial stability risks?

Businesses specifically strengthened their financial positions despite increased uncertainty and market volatility.

Corporates, households, and banks in Singapore have remained resilient over the past year, thanks to their strong financial positions, according to the Monetary Authority of Singapore (MAS).

“Singapore’s financial conditions have been mildly supportive with interest rates and hence borrowing costs declining amidst expansions in credit and money supply,” MAS said in its Financial Stability Review.

“Overall bank credit quality was strong as most corporates benefitted from the firmer-than-expected domestic growth momentum, whilst households were supported by stable income growth,” it added.

Specifically for corporations, their financial positions have strengthened over the past year despite a surge in uncertainty and market volatility in April, which has since receded. Firms’ debt-servicing capacity has improved alongside resilient corporate earnings and a more accommodative financing environment.

Strong earnings have also enabled firms to continue to accumulate cash buffers.

For households, their financial resilience is supported by firm financial asset growth. Debt-servicing capacity has been healthy, underpinned by stable income growth and lower mortgage rates, MAS said.

Strong capital and liquidity positions remained in the banking sector, whilst insurers remained well-capitalised and investment funds managed liquidity risks well.

“MAS’ stress tests show that the corporate and household sectors have adequate buffers to manage shocks to incomes and financing costs,” the report said.

“Most firms and households are expected to stay resilient under stress given the current strength of their balance sheets,” it added.

However, MAS noted that a small proportion of corporates and households that are more leveraged or have thinner buffers may face debt-servicing pressures and cashflow constraints. They should remain vigilant to downside risks given uncertainty in the macroeconomic environment.

For banks and insurers, the results of the Industry-wide Stress Test (IWST) 2025 exercise showed they are in a strong position to withstand severe macrofinancial shocks.

“Nevertheless, banks should continue to maintain sound credit risk management practices and adequate provisioning buffers amid the uncertain macroeconomic environment. Risks may manifest as sharp repricing shocks, with the potential to cause spikes in investment fund redemptions or impose capital losses on insurers,” MAS said.

“Investment funds should thus continue to monitor liquidity risks whilst insurers should remain vigilant and closely monitor their capital and liquidity positions, and business strategy risks amidst continuing market volatilities,” it added.