The stricter regulations regarding the balance each account holds and upcoming Savings Bonds for Singapore banks might be increasing the competition for the lending rate in an attempt to get more fixed deposits.
There is also apparently a shortage of funds on deposits for banks to enable lending, which may have also have encouraged the increase in competition for liquidity. As a result of the new rates, if you were to deposit approximately $25,000 SGD into a fixed rate deposit account for one year, now earns:
1.46% interest at Maybank.
1.6% interest at OCBC.
Both rates have an interest increase of around 0.26% to 0.8% annually. The head of South-east Asia research at Credit Suisse, commented that a reason for the promotions could be to prepare for the sale of the Singapore Savings Bonds (SSB), which could attract investments that would normally be deposited into a fixed deposit account. The bonds offer investors a higher profit over a longer period of time.
Singapore Savings Bonds at the new rate will start being issued in October this year and have a term of up to 10 years. They offer revenues linked to long-term Singapore Government Securities, which have been between 1-3% over the last ten years.
Head of emerging Asia economics at Bank of America Merrill Lynch, Dr Chua Hak Bin, stated:
‘the sale of Singapore Savings Bonds would build competition for sales retail deposits and pressure rates higher’.
Which is a great advantage for consumers and businesses alike.