Singapore bank margins hit as SGD tightening triggers 'safe-haven flush'

Stronger SGD attracts global capital seeking safety from Middle East instability.

A stronger Singapore dollar (SGD), combined with lower US policy rates, could support capital inflows into SGD assets, according to Credit Sights, a Fitch Solutions service.

This could be reinforced by safe-haven inflows related to the Middle East conflict, resulting in ample banking system liquidity and lower Singapore Overnight Rate Average (SORA).

These developments follow Singapore's decision to tighten its monetary policy in April 2026, the first time since 2022, allowing for a stronger SGD in response to heightened inflation risks, noted Credit Sights.

As a result, Singapore banks’ net interest margins (NIMs) are expected to remain under pressure.

“While we expect banks’ NIMs to remain under pressure, banks have been—and are likely to continue—deploying excess funding into [high quality liquid assets or HQLA] to support net interest income,” Credit Sights said.

“In addition, capital inflows should support wealth-related income, while lower rates should continue to help mitigate credit risks,” it added.