MAS’ Information Paper on Governance and Risk Management of Commodity Financing

Commodity trading plays a significant role in Singapore’s economy, accounting for 4.5% of the nation’s gross domestic product. In light of recent financial challenges faced by several commodity traders, including Hin Leong Trading Pte Ltd, following the impact of crashing oil prices and the COVID-19 pandemic on fuel demand, The Straits Times reported that a working group comprising of around 20 banks in Singapore, European lenders and government bodies has been set up to improve transparency and lending standards in the sector.

Following massive unpaid debts by Hin Leong and Agritrade International, banks, such as HSBC, DBS, and OCBC, have already tightened credit and increased the scrutiny of loans, contributing to a decrease in trade volumes. Similarly, the Financial Times reported Singapore’s rigorous efforts to combat fraud in commodity trading, including steps to digitalise documentation for increased transparency. In this context, we are pleased to share the latest updates from the Monetary Authority of Singapore’s (MAS) information paper on the governance and risk management of commodity financing (CF).

The information paper details the MAS’s observations and supervisory expectations from thematic inspections conducted on selected banks in 2024. These inspections evaluated the effectiveness of banks’ governance and risk management in their CF activities, focusing particularly on lending standards and practices in the oil and gas sector. Key areas inspected include governance and management oversight, customer-level controls and monitoring, and transactional-level controls and monitoring.

We have summarised the MAS’ supervisory expectations. Click on the button below to read more.