Japan’s central bank, the Bank of Japan (BOJ) and the Singapore’s financial regulator, the Monetary Authority of Singapore (MAS) have set up a cross-border collateral arrangement which the MAS has said will enhance financial stability in Singapore.
Under the new bilateral arrangement, eligible financial institutions operating in Singapore will be able to source Singapore dollar liquidity from the MAS by pledging Japanese government securities.
This act widens the range of acceptable collateral that qualifies for MAS’ liquidity facility, and permits greater flexibility in the liquidity management of eligible financial institutions operating in Singapore.
This facility would logically seem most useful to Japanese institutions operating in Singapore, as they are most likely to be in possession of Japanese government securities on their balance sheet, but the arrangement applies equally to local and international firms based in Singapore.