Foreign funds seek stability in Singapore as geopolitical tensions boost deposit growth and wealth management flows.

Deposit Growth Reaches Record Highs

Singapore's banking system recorded total deposits of $1,628.64 billion in March 2026, up from $1,608.49 billion in February 2026, according to CEIC data. The new record extends a sustained upward trend that reflects the city-state's growing role as a repository for global capital. Deposits have registered robust growth over the past year, with the Monetary Authority of Singapore's (MAS) Financial Stability Review 2024 noting that this expansion was largely driven by higher deposits from individuals. Non-bank deposits now constitute more than 80% of the banking system's total funding, providing a stable base that underpins the sector's capacity to supply credit to the economy.

The trajectory of deposit accumulation has been consistent across recent quarters, with the March 2026 figure representing a $20.15 billion month-on-month increase. This growth is not a transient spike but the continuation of a pattern that has seen Singapore's banking system absorb inflows from both domestic savers and international investors seeking a regulated and politically neutral jurisdiction.

Foreign Funds and Safe-Haven Appeal

Foreign currency deposits have been a key driver of this expansion, particularly during episodes of global market stress. The ASEAN+3 Macroeconomic Research Office (AMRO), in its 2024 Annual Consultation Report on Singapore, found that foreign currency deposits—whether measured in absolute amounts or as a share of total deposits—tend to rise during periods of heightened market stress. AMRO cites the taper tantrum of May 2013, the onset of the COVID-19 pandemic in March 2020, and the Federal Reserve's hiking cycle of 2022-2023 as specific episodes where this pattern was observed.

The mechanism is straightforward: when global uncertainty spikes, investors and corporations move funds to jurisdictions perceived as safe, and Singapore's regulatory credibility and political neutrality make it a primary destination. A UOB report cited by Asian Banking & Finance explicitly states that "heightened geopolitical uncertainties have reinforced Singapore's safe-haven appeal, driving deposit growth and wealth management inflows into local banks."

The impact on bank earnings is measurable. SGX data show that the combined non-interest income of DBS, OCBC, and UOB rose to $5.16 billion in Q1 2026, driven by wealth management flows, trading, and fee income. This diversification away from net interest income has helped the banking trio maintain resilience even as regional benchmark rates ease. The three banks have also increased their combined weight within the Straits Times Index to more than 50% in recent years, reflecting sustained investor confidence.

%Source: Orionmano Industries

The US dollar plays an outsized role in this dynamic. AMRO reports that USD deposits account for approximately 30% of deposits in Singapore's three major locally-incorporated banks (DBS, OCBC, and UOB). USD loans, by contrast, represent only about 20% of total loans, with their share declining due to higher US borrowing rates and a stronger US dollar. This imbalance between USD deposit inflows and USD loan demand has contributed to the surplus liquidity conditions in the banking system.

Liquidity and Loan Dynamics

The combination of robust deposit growth and tepid loan demand has created a US dollar liquidity surplus in Singapore's banking system. AMRO's analysis shows that the loan-to-deposit (LTD) ratio for both Singapore dollars and foreign currencies has continued to fall, indicating that banks are holding excess liquidity relative to their lending activity. The MAS Financial Stability Review 2024 confirms that both SGD and FCY LTD ratios remain below 100%, and banks maintain comfortable liquidity positions.

The surplus is most pronounced in US dollars. AMRO's estimates of the USD LTD ratio for domestic systemically important banks (D-SIBs) show a sharp decline from pre-pandemic levels. Banks with surplus US dollars are likely swapping them into other foreign currencies to meet loan demand in those currencies, but the overall picture is one of abundant liquidity rather than credit-driven expansion.

Lending to Singapore residents has accounted for most of the recovery in overall loans to non-bank entities, with broad-based increases in property-related and information & communications sectors. However, lending denominated in USD has continued to weigh on aggregate loan growth, constrained by elevated US interest rates and the stronger dollar. Cross-border lending to non-resident, non-bank entities has remained stable, with banks intermediating funds primarily to Developed Asia and Europe.

The outlook for deposit inflows remains positive but not unconstrained. Ongoing geopolitical uncertainties—from tensions in the Middle East to trade fragmentation risks—are likely to sustain safe-haven demand for Singapore's banking system. However, slowing global growth and the eventual transition toward an easing cycle in developed market interest rates could moderate the pace of deposit accumulation. The banking sector's average growth rate of 4.7% for 2021-2024, noted by MAS Managing Director Chia Der Jiun, provides a benchmark for assessing future trajectory. For now, Singapore's banking system continues to demonstrate its capacity to attract and retain foreign funds, reinforcing its position as a safe haven in an uncertain world.