CAPITAL MANAGEMENT

corporate values that reflect ethical behaviours management, and DBS’ employees.
9 Reputational risk and practices throughout DBS.
We recognise that creating a sense of

AND PLANNING
DBS views reputational risk as an outcome of At DBS, we have policies in place to protect the shared value through engagement with key
any failure to manage risks in our day-to- day consistency of our brand and to safeguard our stakeholder groups is imperative for our brand
activities/ decisions, and from changes in the corporate identity and reputation. and reputation.
operating environment. These risks include:
Read more about our stakeholder engagement on
Risk methodologies page 76.
• Financial risk (credit, market and liquidity
Under the various risk policies, we have
risks) Capital capacity is allocated on two dimensions: in discretionary distributions, the Group
established a number of mechanisms for Processes, systems and reports
• Inherent risk (operational and business/ Objective by business line and by entity. Capital has not resumed share buybacks since its
ongoing risk monitoring. Our units are responsible for the day-to- day
strategic risks) allocations by business line are set as part of suspension at the end of March 2020.
management of reputational risk, and ensure The Board of Directors (Board) is responsible
These mechanisms take the form of risk the budget process and monitored throughout
9.1 Reputational risk that processes and procedures are in place to for setting our capital management objective, Refer to Note 32 to the financial statements for details
limits, key risk indicators and other operating the year. Return on regulatory capital is one
management at DBS identify, assess and respond to this risk. This which is to maintain a strong capital position on the movement of share capital during the year.
metrics, and include the periodic risk and of several metrics used to measure business
DBS' approach to reputational risk includes social media monitoring to pick up consistent with regulatory requirements
control self-assessment process. Apart from performance. Capital allocations by entity seek Additional Tier 1 capital
management comprises the following building adverse comments on DBS. Events affecting under the Monetary Authority of Singapore
observations from internal sources, alerts to optimise the distribution of capital resources • DBS Group Holdings Ltd, on 7 September
blocks: DBS’ reputational risk are also included in our (MAS) Notice to Banks No. 637 “Notice on
from external parties/ stakeholders also serve across entities, taking into account the capital 2021, redeemed USD 750 million 3.60%
reporting of risk profiles to senior management Risk Based Capital Adequacy Requirements
as an important source to detect potential adequacy requirements imposed on each Non-Cumulative, Non-Convertible Perpetual
Policies and Board-level committees. for Banks Incorporated in Singapore” (MAS
reputational risk events. In addition, there are subsidiary in its respective jurisdiction. Capital Capital Securities First Callable in 2021.
Notice 637) and the expectations of various
Risk methodologies policies relating to media communications, is allocated to ensure that each subsidiary is
9.2 Reputational risk in 2021 stakeholders including customers, investors
social media and corporate social responsibility able to comply with regulatory requirements as Tier 2 capital
DBS’ priority is to prevent the occurrence of and rating agencies. The Board articulates this
Processes, systems and reports to protect DBS’ reputation. There are also it executes its business strategy in line with our • DBS Group Holdings Ltd, on 3 March
a reputational risk event, instead of taking objective in the form of capital targets. This
escalation and response mechanisms in place strategy. 2021, issued RMB 1,600 million 3.70%
mitigating action when it occurs. In relation objective is pursued while delivering returns
Policies for managing reputational risk. Subordinated Notes due 2031 and Callable
to the two-day digital disruption in November to shareholders and ensuring that adequate During the course of the year, these
DBS adopts a four-step approach for While the respective risk policies address 2021 which impacted the Bank’s reputation, capital resources are available for business in 2026.
subsidiaries did not experience any
reputational risk management, which is to the individual risk types, the Reputational concerted efforts were made to recover the growth and investment opportunities as well impediments to the distribution of dividends. • DBS Group Holdings Ltd, on 10 March
prevent, detect, escalate and respond to Risk Policy focuses specifically on our banking services as soon as possible and to as adverse situations, taking into consideration 2021, issued USD 500 million 1.822%
reputational risk events. stakeholders’ perception of how well DBS keep customers updated on the recovery our strategic plans and risk appetite. Subordinated Notes due 2031 and Callable
As reputational risk is a consequence of manages its reputational risks. Stakeholders progress via various communication channels. Capital structure in 2026.
Our dividend policy is to pay sustainable
the failure to manage other risk types, the include customers, government agencies and Following the incident, management has
dividends that grow progressively with • DBS Group Holdings Ltd, on 19 April
definitions and principles for managing regulators, investors, rating agencies, business initiated remedial measures to improve We manage our capital structure in line with
earnings. With the lifting of regulatory 2021, redeemed HKD 1,500 million 3.24%
such risks are articulated in the respective alliances, vendors, trade unions, the media, the resilience of our services and incident our capital management objective and seek
restrictions on 28 July 2021, we reverted Subordinated Notes
risk policies. These are reinforced by sound the general public, the Board and senior response, with due consideration given to to optimise the cost and flexibility offered by
dividend to its pre-pandemic level of SGD 0.33
regulatory requirements and expectations. various capital resources. In order to achieve Refer to Notes 31, 32 and 33 to the financial
per ordinary share from the second quarter statements as well as the Main Features of Capital
this, we assess the need and the opportunity
of FY2021. In line with our dividend policy, the Instruments document (https://www.dbs.com/
to raise or retire capital. The following capital investors/fixed-income/capital-instruments) for the
Board has recommended a final dividend of
transactions were undertaken during the year. terms of the capital instruments that are included in
SGD 0.36 per ordinary share, a 9% increase Eligible Total Capital.
from the previous payout. This will bring the
Common Equity Tier 1 capital
total ordinary dividend for the year to SGD 1.20
• DBS Group Holdings Ltd, on 24 May 2021,
per share. Barring unforeseen circumstances,
issued 5,967,122 ordinary shares pursuant
the annualised dividend going forward would
to the Scrip Dividend Scheme in respect of
be SGD 1.44 per share. The Scrip Dividend
the 2020 final dividend. This added SGD 171
Scheme will not be applied to the final
million to ordinary share capital.
dividend.
• DBS Group Holdings Ltd, on 25 June 2021,
issued 5,786,801 ordinary shares pursuant
Process to the Scrip Dividend Scheme in respect of
the interim dividend for the first quarter of
Our capital management objective is the year ended 31 December 2021. This
implemented via a capital management and added SGD 171 million to ordinary share
planning process that is overseen by the capital.
Capital Committee. The Chief Financial Officer
chairs the Capital Committee. The Capital • The Scrip Dividend Scheme was not applied
Committee receives regular updates on our to the interim dividend for the second
current and projected capital position. A key and third quarters of the year ended 31
tool for capital planning is the annual Internal December 2021.
Capital Adequacy Assessment Process (ICAAP) • As at 31 December 2021, the number of
through which we assess our projected capital treasury shares held by the Group was
supply and demand relative to regulatory 20,872,531 (2020: 25,874,461), which was
requirements and our capital targets. The 0.81% (2020: 1.01%) of the total number
ICAAP generally has a three-year horizon and of issued shares net of treasury shares.
covers various scenarios, including stress In response to the MAS’ direction on 28
scenarios of differing scope and severity. July 2021 to exercise continued prudence

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 The table below analyses the movement in Common Equity Tier 1, Additional Tier 1 and Tier 2 capital during the year.
Capital adequacy ratios
Statement of changes in regulatory capital for the year ended 31 December 2021 As at 31 December 2021, our Common Equity Tier 1 (CET1) capital adequacy ratio (CAR) was 14.4% which was above our target ratio of around 13.0%
± 0.5%. Our CET1, Tier 1 and Total CAR comfortably exceeded the CAR requirements under MAS Notice 637 of 9.0%, 10.5% and 12.5% respectively
(this includes the capital conservation buffer but excludes the countercyclical capital buffer).

SGD million As at 31 December 2021, our consolidated leverage ratio stood at 6.7%, well above the 3.0% minimum ratio set by the MAS effective 1 January 2018.
Common Equity Tier 1 capital Refer to “Five-Year Summary” on page 190 for the historical trend of Tier 1 and Total CAR. Refer to the Group’s Pillar 3 disclosures published on DBS
Opening amount 44,786 website (https://www.dbs.com/investors/default.page) for details on our RWA.

Issue of shares pursuant to Scrip Dividend Scheme 342

Profit for the year (attributable to shareholders) 6,805
Dividends paid to shareholders(1) (2,734)
SGD million 2021 2020
Cost of share-based payments 134
Common Equity Tier 1 capital 49,248 44,786
Purchase of treasury shares (16)
Tier 1 capital 51,640 48,188
Other CET1 movements, including other comprehensive income (69)
Total capital 58,207 53,937

Closing amount 49,248

Risk-weighted assets (RWA)
Common Equity Tier 1 capital 49,248
Credit RWA 294,665 269,249
Market RWA 23,448 27,932
Additional Tier 1 capital
Operational RWA 24,578 23,915
Opening amount 3,402
Total RWA 342,691 321,096

Redemption of Additional Tier 1 capital instruments and others (1,010)

Capital Adequacy Ratio (CAR) (%)
Common Equity Tier 1 14.4 13.9
Closing amount 2,392
Tier 1 15.1 15.0
Tier 1 capital 51,640
Total 17.0 16.8

Tier 2 capital
Minimum CAR including Buffer Requirements (%)(1)
Opening amount 5,749
Common Equity Tier 1 9.1 9.1
Effective Tier 1 10.6 10.6
Movements in Tier 2 capital instruments 666
Effective Total 12.6 12.6
Movement in allowances eligible as Tier 2 capital 152

Of which: Buffer Requirements (%)

Closing amount 6,567
Capital Conservation Buffer 2.5 2.5
Total capital 58,207
Countercyclical Buffer 0.1 0.1
Note:
(1) Includes distributions paid on capital securities classified as equity Note:
(1) Includes minimum Common Equity Tier 1, Tier 1 and Total CAR of 6.5%, 8.0% and 10.0% respectively

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 The chart below analyses the drivers of the movement in Common Equity Tier 1 (CET1) CAR during the year.
Regulatory change
Group Common Equity Tier 1 (CET1) CAR The minimum CAR requirements based on MAS Notice 637 have been fully phased in from 1 January 2019 and are summarised in the table below.

From 1 January 2019

and beyond
2.1% -0.9% Minimum CAR %
0.1% 0.02% -1.0%
0.2% -0.03% 14.4% Common Equity Tier 1 (a) 6.5
13.9% Capital Conservation Buffer (CCB) (b) 2.5
Common Equity Tier 1 including CCB (a) + (b) 9.0
Tier 1 including CCB 10.5
Total including CCB 12.5

Maximum Countercyclical Buffer (1) 2.5

Note:
(1) The countercyclical buffer is not an ongoing requirement and is only applied as and when specified by the relevant banking supervisors. The applicable magnitude
will be a weighted average of the jurisdiction-specific countercyclical buffer requirements that are required by national authorities in jurisdictions to which a bank
has private sector credit exposures. The Basel Committee expects jurisdictions to implement the countercyclical buffer during periods of excessive credit growth.
Of the jurisdictions where we have material private sector credit exposures, Hong Kong has applied a countercyclical buffer of 2.5% from 1 January 2019, reducing
to 2.0% from 14 October 2019 and 1.0% from 16 March 2020 and remained unchanged thereafter.

The MAS has designated DBS Bank as a domestic systemically important bank (D-SIB). Under the MAS’ framework for identifying and supervising
D-SIBs, the higher loss absorbency requirement for locally incorporated D-SIBs is met by the foregoing minimum ratios being two percentage points
higher than those established by the Basel Committee. The Basel Committee has developed an indicator-based methodology for identifying global
systemically important banks (G-SIBs) on which higher loss absorbency requirements will be imposed. While we are not a G-SIB, we are required to
Dec 2020 Profit for Dividends Issue of Other CET1 Credit RWA Market RWA Operational Dec 2021
CET1 the year paid to shares movements RWA CET1 disclose the set of indicators which are included in the Group’s Pillar 3 disclosures published on DBS website (https://www.dbs.com/investors/default.
(attributable shareholders(1) pursuant page).
to to Scrip
shareholders) Dividend On 7 May 2019, the MAS first released a consultation paper on “Proposed Implementation of the Final Basel III Reforms in Singapore”, seeking
Scheme
feedback on proposed revisions to the capital requirements and leverage ratio requirements for Singapore-incorporated banks to align with the Basel
Note: III reforms. On 7 April 2020, the MAS announced that the implementation date of the Basel III reforms had been deferred by one year to 1 January
(1) Includes distributions paid on capital securities classified as equity 2023 to enable banks to prioritise their resources in response to COVID-19. On 25 March 2021, the MAS released a consultation paper on “Draft
Standards for Credit Risk Capital and Output Floor Requirements for Singapore-incorporated banks” to seek further feedback. The revised standards
are expected to take effect from 1 January 2023, with transitional arrangements provided for implementation of the output floor till 1 January 2028.
On 13 September 2021, the MAS released a consultation paper on “Draft Standards for Market Risk Capital and Capital Reporting Requirements for
Singapore-Incorporated Banks”, seeking feedback on the draft standards. The MAS intends to implement the revised standards for market risk capital
for supervisory reporting purposes from 1 January 2023, and for the purposes of compliance with capital adequacy and disclosure requirements from
1 January 2023 or later.

With effect from 1 July 2021, MAS Notice 637 was amended to specify that the transitional arrangements for the adoption of the standardised
approach for counterparty credit risk (“SA-CCR”) and the revised capital requirements for bank exposures to central counterparties will cease on
31 December 2021. It also reflects amendments setting out an alternative treatment for the measurement of derivatives exposures for leverage
ratio calculation, using a modified version of SA-CCR as well as other amendments to implement technical revisions to the credit risk framework.
Further amendments to MAS Notice 637 were made with effect from 18 August 2021 to implement the framework for the treatment of major stake
investments in financial institutions at the Solo level.

With effect from 31 December 2021, MAS Notice 637 was amended to incorporate edits in relation to the insertion of a new charge to be held by
the Housing and Development Board under the Prime Location Public Housing model. Further amendments effective from 1 January 2022 were
also made to MAS Notice 637 to: (a) incorporate clarifications to the SA-CCR framework and the revised capital requirements for bank exposures to
central counterparties, (b) implement revisions to the internal ratings-based approach application process and (c) implement technical revisions to the
disclosure framework.

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