MAS urges banks to limit exposure or cut ties with clients over clear environmental breaches linked to haze
It expects lenders to look at material environmental risks arising from clients’ activities and exposures
[SINGAPORE] Banks should take “stronger measures” against customers who clearly breach environmental laws, including limiting exposures or exiting the relationship, said the Monetary Authority of Singapore (MAS).
In a statement on Wednesday (Oct 28), MAS said it expects banks to “identify, assess, manage and monitor” material environmental risks arising from their activities and exposures, which include risks associated with pollution and deforestation.
This includes taking into consideration relevant information released by the National Environment Agency under the Transboundary Haze Pollution Act.
The comments come amid growing scrutiny of firms linked to the region’s haze crisis. It also follows shortly after Senior Minister K Shanmugam urged the senior leadership of Singaporean companies allegedly linked to haze-related activities to assess their operations and supply chains.
Earlier in October, during the height of the haze situation in Singapore, banks in the city-state told The Business Times that they could reduce funding or exit relationships with errant companies, based on a “zero-tolerance” approach to open burning and deforestation practices among the companies they finance.
MAS said that it “supports the local banks’ clear stance against burning practices and notes that they will take strong action where warranted”.
It expects banks to “take appropriate measures” to mitigate heightened environmental risks, which may include imposing conditions, reviewing financing terms, limiting further exposures or reassessing the customer relationship.
Where customers may be linked to activities contributing to haze, banks should engage them and obtain sufficient information to understand their role and involvement, including whether adequate measures are in place to prevent, detect and stop fires, MAS said.
The financial regulator has reinforced its supervisory expectations with banks in light of the current situation. These are set out in the Guidelines on Environmental Risk Management issued in 2020 and Guidelines on Transition Planning issued in March 2026.
In the guidelines for environmental risk management, MAS said the board of directors and senior management play critical roles in incorporating environmental considerations into a bank’s risk appetite, strategies and business plans in both the short and longer term.
The bank should also develop a risk management framework to manage environmental risk “in a systematic and consistent manner”, as well as identify material environmental risk at both customer and portfolio levels.
Environmental risk should be part of each customer’s assessment process for credit facilities or capital markets transactions, particularly for sectors with higher environmental risk, said MAS.
Transactions with higher environmental risk should be subject to the bank’s enhanced due diligence, which may include site visits to the customer and separate review by in-house or external personnel with environmental risk expertise, the guidelines stated.
Banks should also, at least on an annual basis, disclose its approach to managing environmental risk in a manner that is “clear and meaningful” to its stakeholders.
