Chart of the Day: Here's the real deal behind bad loans in Singapore

Manufacturing is the biggest culprit.

Singapore banks have seen an increase in non-performing loans (NPLs) in recent quarters, according to the Monetary Authority of Singapore’s (MAS) latest Financial Stability Review (FSR).

In particular, the NPL ratio for the manufacturing sector almost doubled to 4% in the third quarter, compared to just 2.5% in the same period last year.

“There are some signs of asset quality deterioration. Banks with significant exposures to trade-related sectors that have been affected by the regional slowdown could face higher credit quality risks,” said the report.

The overall NPL ratio has ticked up to 1.5% from 1.1% a year ago, the report noted, but asset quality remains generally healthy, the MAS said.

“Banks should maintain prudent underwriting standards and set aside adequate provisions to withstand higher NPLs should the global economy remain sluggish for a prolonged period,” the report noted.