Analytical review of the commercial banking sector in Singapore

Early 1970s was a new era in the banking history of Singapore. To develop Singapore into a financial centre, the Government encouraged internationally well-established and reknowned banks and other financial institutions to set up offices in the Republic. In view of the need to consolidate their financial positions in order to meet new challenges, several local banks were reorganised. The United Overseas Bank (UOB) acquired shares in Chung Khiaw Bank in 1971 and took over Lee Wah Bank in December 1972. On the other hand, the Overseas Chinese Banking Corporation (OCBC) acquired shares in the Four Seas Communication Bank and the Bank of Singapore. Prior to 1971, only one type of commercial bank was permitted in Singapore. These commercial banks carried out a whole range of banking services regardless of their country of incorporation. With the establishment of the Monetary Authority of Singapore (MAS) on 1st January 1971, issuance of other types of licences for banks to engage in specialised lines of banking business were introduced. This is a strategy to attract more internationally established and reknowned financial institutions to set up offices in Singapore and, at the same time, to prevent unnecessary competition in the domestic banking sector. The MAS sits at the apex of the Singapore financial system. It performs all functions of a central bank except that of issuing currency which is the responsibility of the Board of Commissioners of Currency of Singapore (BCCS). As the central bank, the MAS continually seeks to promote substained and stable growth of the economy in general and of the financial sector in particular. It is noted that there are various books written on financial markets in general and some on the local financial institutions. However, much of the information is outdated. There is definitely a lack of published material covering the financial analysis of banks. This project attempts to perform an analytical review of the local banking sector and in particular, emphasis would be placed on the Big Four Banks. The report begins with a review of the role of the MAS in terms of its regulatory functions as well as the protection that it provides to the local banks against undue competition from the foreign banks. It then deals with an overview of the local banking industry followed by a comparative analysis of the local banks. Both absolute as well as relative comparison on the local banks with respect to profitability, liquidity and gearing are discussed. The project also includes separate reviews of each of the Big Four Banks to provide information on the characteristics, strengths and weaknesses, products and services, relative financial position as well as their future direction.BUSINES