Singapore regulator reinforces banks' management of haze-related environmental risks

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Singapore regulator on haze risk

Highlights

The Monetary Authority of Singapore instructs banks to integrate haze-related environmental risks, including pollution and deforestation, into risk management and customer due diligence.
Banks must obtain sufficient information from clients linked to haze activities, assess fire prevention measures, and implement mitigation or exit strategies for high-risk exposures.
MAS reinforces that environmental risk management, referencing 2020 and 2026 guidelines, is a supervisory priority with stronger actions required for breaches of environmental laws.

Supervisory expectations for haze-linked exposures

As reported by the Monetary Authority of Singapore, banks are expected to factor in environmental risks arising from their activities and exposures, including risks associated with pollution and deforestation, when managing haze-related issues. The regulator says lenders should also take into account relevant information released by the National Environment Agency under the Transboundary Haze Pollution Act.

When customers may be linked to activities contributing to haze, banks should engage them and obtain enough information to understand their role and involvement. That includes assessing whether adequate measures are in place to prevent, detect and stop fires.

Where heightened environmental risks are identified, MAS says banks should take appropriate mitigating steps. These can include imposing conditions, reviewing financing terms, limiting further exposures or reassessing the customer relationship, while clear breaches of environmental laws warrant stronger action, including limiting exposures or exiting the relationship.

Implications for Singapore's banking sector

MAS says it supports the local banks' clear stance against burning practices and notes that they will take strong action where warranted. The statement strengthens the regulatory signal that environmental risk management is part of core banking supervision, not a separate sustainability exercise.

The expectations are set out in the Guidelines on Environmental Risk Management issued in 2020 and further elaborated in the Guidelines on Transition Planning issued in March 2026. In light of the current situation, MAS says it has reinforced these supervisory expectations with banks.

Our earlier article on Malaysia’s need to strengthen its fiscal buffers highlighted warnings that recurring global shocks — including climate-related disruptions — should be treated as a standard part of economic planning. It outlined how rising spending commitments and persistently high borrowing costs can squeeze policy space, reinforcing the case for broader revenue measures and more targeted subsidies to preserve room to respond to crises.

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