Singapore's Financial System Has Sufficient Buffers to Deal With Shocks, MAS Says

By Megan Cheah

SINGAPORE--Singapore has enough financial strength to withstand growing global financial stability risks stemming from rising capital costs, surging artificial-intelligence investment and persistent inflation, the city-state's central bank said.

Stress tests done by the Monetary Authority of Singapore showed that corporates and households have sufficient buffers to manage shocks to earnings, income and financing costs. However, these sectors should remain vigilant to adverse events, MAS said Tuesday.

"Most firms and households have strong balance sheets and are expected to remain resilient under stress," the central bank said. Still, some highly leveraged firms or those with thinner liquidity buffers could come under strain.

The global cost of capital has continued to climb, reflecting higher sovereign borrowing needs, corporate demand for debt and heightened macroeconomic uncertainty, it said. "A persistently higher cost of capital could test global financial resilience," it said.

Banks and insurers are also well-capitalized and able to withstand severe macro and financial shocks, while investment funds have sufficient liquidity to meet redemption requests under stress, MAS's top-down stress tests showed.

Lenders, funds and insurers should retain their risk-management practices, sound liquidity positions and buffers amid the uncertain macroeconomic environment, the MAS added.

Pressure stemming from robust AI demand and elevated energy prices have prompted a pivot to monetary policy tightening in some economies, and higher interest rates could affect Asian markets unevenly.

In particular, economies with AI-related investment and exports are better placed to absorb higher borrowing costs, while those with weaker AI linkages and larger fiscal or current account deficits could be more affected by tighter global financial conditions, it said.

Singapore has largely remained resilient, given the broadly supportive financial conditions, such as easing borrowing costs, MAS said.

The city-state's latest exports data showed it benefits from robust AI demand for related electronics products. An acceleration in global AI-related capital expenditure also led the city-state to raise its 2026 economic growth forecast to between 4.5% to 5.5%, from a range of 2.0% to 4.0%.

The central bank regularly conducts assessments of Singapore's financial system to identify potential vulnerabilities.

Amanda Lee contributed to this article.

Write to Megan Cheah at megan.cheah@wsj.com

(END) Dow Jones Newswires

September 22, 2026 01:14 ET (05:14 GMT)