Feedback Sought on Proposed Framework for Ex-post Resolution Levies for Banking Sector

On 1 July 2025, the Monetary Authority of Singapore (“MAS“) issued the Consultation Paper on Proposed Framework for Ex-post Resolution Levies for Banking Sector (“Consultation Paper“) to obtain feedback on the proposed framework for imposing ex-post levies on banks, merchant banks and finance companies (collectively, “Banks“) to recover the costs of resolving a distressed Bank under Division 10 of Part 8 of the Financial Services and Markets Act 2022 (“resolution costs“). The Consultation ended on 31 July 2025.

In particular, MAS consulted on the following aspects of the proposed ex-post levies framework, which will be effected through regulations:

1. Computation approach: The use of average uninsured deposit balances to compute the levies, and for the resolution levies of Banks within the banking sector to be proportionate to their share in the Singapore market;

2. Computation and collection timelines: The timing for computing levies, and the period for collecting levies; and

3. Entry/exit: The respective treatment for collecting levies from exiting Banks and new entrants to the banking sector.

Levies Based on Proportion of Uninsured Deposit Balances of Banks

MAS sought comments on the following proposals:

1. Computation approach – uninsured deposits: To use the uninsured deposit balances of a Bank as the reference basis to impose levies on the banking sector to recover the resolution costs. This is because a Bank with large amounts of uninsured deposits is expected to be the most exposed to deposit flight (upon the liquidation of a systemically important financial institution in the market) and would have benefitted the most from the stability bolstered by resolution measures; thus, it follows that each Bank should pay a levy that is directly proportionate to its share of the uninsured deposits of all Banks.

2. Computation approach – averages: To determine the uninsured deposit balances for each Bank as: (i) the average of four calendar quarter-end uninsured deposit balances of the Bank immediately preceding the resolution event, to account for seasonal or temporary fluctuations; and (ii) for newly established Banks with only two or three quarter-end data points, the average of those available data points.

3. Computation approach – proportionality: To charge proportionate levies to all Banks, rather than to exempt smaller Banks from the levies or to charge larger Banks a progressively larger proportion of the levies.

Levy Computation and Collection Timelines

MAS sought comments on the following proposals:

1. Levy collection – start date: To begin levy collection approximately two years after the Resolution Fund obtains funding to carry out its mandate of funding resolution measures taken in respect of a distressed Bank, with MAS having the flexibility to determine such collection commencement date. This is because deferring the collection of the levies for too long would mean that the Resolution Fund would incur higher overall borrowing costs, which would in turn be charged back to the industry.

2. Levy collection – duration: To collect levies from the Banks over a period of five to 10 years. MAS will have the flexibility to adjust the collection period based on the final resolution costs incurred and the prevailing economic conditions. A Bank may also request deferment of the payment of the levies and/or an extension for the payment period in exceptional circumstances.

Treatment for Banks that have Ceased Operations

MAS sought comments on the following proposals:

1. Exit – cessation of operations after levy imposition: To require Banks that cease their operations after the imposition of the levies to make lump sum payments of outstanding levies before exiting. This is because a licensed Bank that had been carrying on business in Singapore prior to the resolution event, but that ceases operations after the imposition of the levies, would also have benefited from the resolution measures taken; thus, it is equitable for such Bank to continue repaying its share of the resolution costs.

2. Exit – voluntary exit before two-year mark: To compute and impose a lump sum levy on Banks that voluntarily exit the Singapore market before the two-year mark for levy computation.

Treatment for New Entrants

MAS sought comments on the proposal to exempt a new entrant to the Singapore market after a resolution event from paying levies to recover resolution costs. This is because the resolution measures would have been taken before such new entrant’s entry into the market.

Levy Computation when the Deposit Insurance (“DI”) Fund Contributes to the Resolution Fund

MAS sought comments on the proposal that if the DI Fund is used to contribute to the Resolution Fund and the equivalent cost criterion is met, the DI Fund should be used to offset the resolution levies for Deposit Insurance Scheme Members (“DISMs“) as a collective group by the amount in the DI Fund (i.e. resolution levy discount). This is because the DI Fund is a ready and standing pool of funds, such that using the DI Fund for resolution can help to reduce the resolution levy burden by repaying any loans taken by the Resolution Fund more quickly, and by lowering the interest costs to the Resolution Fund. Further, this proposal recognises that only the DISMs have paid for DI Fund premiums prior to the resolution; thus, any benefits from using these DI Fund premiums should accrue primarily to the DISMs (and not to non-DISMs).

MAS also sought comments on any other views regarding the proposed use of the DI Fund in the resolution of a DISM.

For more information on the proposals and the rationale for the same, please refer to the Consultation Paper.