Singapore’s financial regulator on Wednesday banned DBS Group from acquiring latest business ventures or reducing the scale of its local branch network for six months, because it steps up efforts to get the lender to resolve a spate of disruptions to its digital banking services.
The changes will be sure that the bank continues to deal with restoring the resilience of its digital banking services, the Monetary Authority of Singapore said on Wednesday. The motion was taken following repeated and prolonged disruptions to DBS banking services this 12 months, most recently last month.
Singapore DBS and Citi customers are unable to use online services in the event of a data center outage
Singapore DBS and Citi customers are unable to use online services in the event of a data center outage
Continued disruptions – there have been at least five this year – led some analysts to previously raise the prospect of tougher penalties such as fines. MAS has already punished DBS by raising capital requirements twice in over a year.
Lawrence Loh, director of the Center for Governance and Sustainable Development at the National University of Singapore, described the ban as “firm but fair” and providing the bank with space to “focus on much-needed infrastructure improvements.”
He noted that the bank merged with Citigroup’s consumer banking division, effectively making it the largest foreign bank in Taiwan even after technology disruptions earlier in the year.
“It is probably right that the priority now should be keeping order at home and protecting consumer interests, rather than engaging in expansion activities even in different parts of the world,” he said.
Nizam Ismail, founding father of Singapore-based consultancy Ethikom Consultancy, said the move, while appearing “unprecedented and harsh”, was not surprising given the “widespread and significant” implications for the broader economy.
“These disruptions have also occurred several times despite previous regulatory interventions imposed by MAS,” he said. “It is believed that these service disruptions do not bode well for Singapore’s drive to digitize financial services.”
DBS shares have lost 2.6 percent this 12 months through Wednesday’s close, compared with a 2.7 percent loss within the Bloomberg Asia-Pacific Banks Index and a 5.4 percent decline in Singapore’s benchmark Straits Times Index.
Singapore requires banks to be sure that any unplanned downtime that affects their operations or customer support doesn’t exceed 4 hours in a one-year period.
An outage on the weekend of October 14 prevented DBS customers from accessing many services, including online banking and money withdrawals from ATMs. The disruptions, which also affected the local unit of Citigroup, followed similar events that DBS had not been in a position to deal with to date.
Following the disruption in mid-October, MAS ordered DBS and Citi to conduct a radical investigation into why they didn’t get better their systems inside the required time-frame. While the outage occurred attributable to a technical issue on the Equinix data center utilized by lenders, MAS said it expects banks to have agreements with data center providers that take into consideration the corporate’s system availability requirements.
“There are some bank-specific issues that they need to address and they are addressing it,” Menon said. “They will do it and we will hold them accountable.”
Singapore’s Lawrence Wong replaces Tharman at central bank wealth fund GIC
Singapore’s Lawrence Wong replaces Tharman at central bank wealth fund GIC
Data released in April showed that seven banks considered systematically essential to Singapore – which include DBS and Citi – reported 17 disruptions to digital banking services that lasted greater than an hour since 2018.
Menon said that despite the apparent DBS outages, he didn’t see it as a systemic problem affecting your entire economic system.
“It is not that the entire banking system is prone to failure,” he said. “If you look at the entire banking system, I don’t think we have a problem.”
