MAS Launches Consultation on Updated Liquidity Risk Guidelines for Banks

Key Takeaways

• MAS Proposal: The Monetary Authority of Singapore (MAS) has issued a consultation on updated Guidelines on Liquidity Risk Management for banks, merchant banks, and finance companies.
• Replacing 2013 Standards: The new Guidelines build on the 2013 Guidelines, which will remain applicable to other financial institutions.
• Lessons from 2023 Turmoil: The updates incorporate supervisory insights and global lessons from the 2023 banking turbulence, emphasizing the need for robust stress testing and contingency planning.
• Types of Liquidity Risk: The Guidelines focus on Funding Liquidity Risk but highlight the importance of considering Market Liquidity Risk alongside it.
• Transition Timeline: Following the consultation, the Guidelines will take effect six months after final publication, with submissions due by 29 September 2025.

Deep Dive

The Monetary Authority of Singapore (MAS) has issued a consultation paper proposing updated Guidelines on Liquidity Risk Management for banks, merchant banks, and finance companies in Singapore. The move marks the first major revision since 2013, reflecting lessons learned from supervisory reviews and recent global banking turmoil.

The 2013 Guidelines, still applicable to all financial institutions in Singapore, will continue to govern insurers, capital markets firms, and other non-bank institutions. But MAS is now tailoring a more detailed framework for banks and related entities, given their inherent exposure to liquidity risks from maturity transformation.

Stronger Expectations After 2023 Market Stress

The proposed Guidelines draw on the Basel Committee’s Principles for Sound Liquidity Risk Management and Supervision and incorporate observations from the 2023 banking turbulence, when deposit outflows at several global banks exposed gaps in liquidity preparedness. MAS said the updates are intended to clarify supervisory expectations, strengthen stress testing requirements, and ensure banks have operationally ready contingency funding plans.

Liquidity stresses, MAS noted, can materialize “at short notice.” To that end, the Guidelines emphasize the need for banks to hold appropriate buffers, develop robust governance frameworks, and test their ability to respond to stress events. The paper also includes “good practices” observed across the banking sector, presented in boxed examples for reference.

Scope and Proportionality

The consultation highlights two core types of Liquidity Risk: Funding Liquidity Risk, the inability to meet cash flows and collateral needs, and Market Liquidity Risk, which can compound funding stress when positions cannot be liquidated at prevailing prices. While the Guidelines focus on Funding Liquidity Risk, MAS stressed that both types must be considered together.

The Guidelines will apply on a group basis to locally incorporated banks, covering their subsidiaries and branches in Singapore and overseas. MAS emphasized that institutions should apply the expectations proportionately, based on their size, nature, and complexity.

Consultation and Transition

MAS is inviting comments on three areas: clarity of the proposed Guidelines, whether additional aspects of Liquidity Risk Management warrant guidance, and feedback on the proposed six-month transition period before the rules take effect. Written submissions are due by 29 September 2025, and will be published unless respondents request confidentiality.

Once finalized, the updated Guidelines will come into effect six months after publication.

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