Managing risks amidst macroeconomic headwinds and geopolitical tensions

Global economic growth remained resilient in 2024, despite uncertainty in the macroeconomic environment. Inflationary pressures eased, leading to rate cuts by central banks from Q3, while unemployment remained low by historical standards. However, pockets of concern remained. Interest rates remained elevated and continued to pressure leveraged households and corporates. Real estate, including in Hong Kong and China, faced refinancing headwinds, price moderation, and reduced office demand due to shifts to work-from- home. Sluggish recovery in the sector would continue to weigh on related industries such as construction and metals. The global automotive sector, particularly electric vehicles, were impacted by oversupply and intense price competition. In China, while the government expanded incentives to stimulate consumer spending and mitigate deflationary pressures, the impact of these measures would take time to percolate through the economy.

Geopolitical tensions between US and China and the Russia-Ukraine and Middle East conflicts also amplified macroeconomic uncertainties and heightened market volatility, with potentially negative implications for our portfolio.

Amidst these challenges, we maintained vigilance on our credit portfolio through reviews and stress tests. A risk scenario planning framework was introduced that allowed targeted early warning triggers to be established, along with action plans. While increased delinquencies in unsecured consumer loans in key markets and the Singapore micro-SME credit program were observed, these were mitigated through proactive strengthening of collection efforts and portfolio optimisation through enhanced onboarding criteria. The SME portfolio was extensively reviewed and continued to be mostly secured with acceptable financing quantum. Large corporates, benefiting from strong financial positions, were less impacted.

Overall, credit quality remained resilient, with a low non-performing loan rate at 1.1% and specific allowances at SGD 559 million. Corporate exposure was mainly to larger names and top industry players. Unsecured consumer credit loans were limited, representing less than 2% of Group exposures. Residential mortgages, primarily in Singapore and Hong Kong, consisted mainly of owner-occupied properties with strong collateral and low loan-to-value ratios. We remain prudent on client selection and credit underwriting criteria.

In response to the elevated market volatility, we conducted scenario stress tests on our portfolio of marketable assets which comprised mainly investment-grade instruments in the US, China, Singapore, India and Australia. The stress tests confirmed that the book remained well- diversified and resilient against potential adverse market rate movements.

Optimising liquidity amidst market volatility

In 2024, we further strengthened our funding profile, emphasising liquidity, stability and resilience. Initiatives to diversify funding sources and maintain robust liquidity reserves (particularly in USD) included diversifying our deposit base across various customer segments and currencies. We refined our liquidity risk management framework, addressing the potential risk of digitally accelerated deposit outflows observed during the 2023 US Banking Crisis. This included validating that our liquid asset reserves were adequate to handle severe outflows.

Strengthening financial crime surveillance and customer protection against scams

We remain committed to proactively mitigating financial crime risks, investing in enhanced surveillance capabilities and leveraging artificial intelligence / machine learning (AI/ ML). Our multi-layer surveillance framework continued to adapt to the evolving financial crime environment, enabling timely action on detected risks and intelligence sharing with the industry. Our efforts and commitment yielded results, including being cited as a “good example” by the UN Special Rapporteur relating to controls on Myanmar flows. Our anti-scam measures were enhanced to better protect our customers, such as moving away from SMS OTP for digibank logins to more phishing-resistant authentication approaches and improving the customer journey for our digiVault (a ‘money lock’ feature). We started incorporating behavioural science concepts into our fraud surveillance framework, resulting in up to 50% increase in success rate of intercepting unauthorised scam flows.Read more about “Preventing Financial Crime” in the Sustainability Report.

Delivering on enhanced technology risk management and resilience

We completed remediation work under the Technology Risk Management Uplift programme (T-Up), improving service availability and service recovery. These enhancements are being extended to all our core markets. We continued to focus on further strengthening risk governance and controls in the areas of resiliency, change management and incident management post T-Up.

The implementation of enhanced oversight significantly improved the resilience of DBS’ digital services. Key components included the establishment of an Architecture Review Committee and a Testing Centre of Excellence to strengthen the rigour of software development and testing. This, coupled with end-to-end service monitoring, enabled early detection of potential issues and rapid response, allowing for prompt customer notification and a substantial reduction in unscheduled downtime. The number, severity and duration of actual incidents in 2024 were significantly reduced. As part of the increased rigour implemented for system resilience, we successfully completed a technology disaster recovery drill involving the flipping of key systems from our primary to our secondary data centre and running the systems for seven days before flipping them back. We also conducted exercises for three other potential disruption scenarios to further strengthen our operational rigour in the event of an actual disruption.

We have enhanced our technology risk governance with strategic investments in specialised resources and improved capabilities across technology, risk management and audit. An enhanced technology risk and control library with more than 150 controls and an independent Thematic Risk Review programme were implemented. Third-party risk management was strengthened through the establishment of a dedicated Technology Vendor Governance and Strategy (TVGS) programme and committee, providing senior management oversight.

Read more in the CIO statement.

Fortifying defences against cyber attacks

We remain committed to strengthening our cybersecurity defences against increasingly sophisticated threats. Our comprehensive multi-layered defence-in-depth approach, encompassing employees, customers and third parties, ensured continuous monitoring and validation of our security controls. Significant investments in Distributed Denial of Service (DDoS) mitigation and the replacement of less secure OTP logins with digital tokens had enhanced our resilience against cyber- attacks and significantly reduced the risk of customers’ credentials being phished. These measures contributed to safeguarding the availability of our digital channels and protecting customer access.

We continued to enhance our cyber-defence through advanced security measures including multi-factor authentication, micro- segmentation and continuous monitoring. An enhanced employee awareness program led to a 30% increase in staff reporting phishing attempts and a completion rate of 100% for cybersecurity training. Our commitment to international best practices was evidenced by our ISO 27001 and Singapore Cyber Trust Mark (Advocate level) certifications.

Our active participation in industry collaborations such as the Association of Banks in Singapore (ABS) Standing Committee on Cyber Security (SCCS) and Financial Services Information Sharing and Analysis Centre (FS-ISAC) allowed us to proactively address emerging threats and share best practices. We are currently actively pursuing post-quantum readiness to mitigate future technological risks.

Transforming risk management with Generative AI (Gen AI) and analytics

In 2024, DBS significantly advanced its use of AI/ ML, integrating Gen AI across various business and control functions. Our risk management approach was enhanced through Gen AI-powered co-pilot assistants which leveraged our knowledge bases (including risk management policies), boosting productivity of our risk professionals. Applications such as auto-completion of ESG risk questionnaires increased efficiency and consistency. We also continued to embed Gen AI capabilities into workflows (such as debt collections) to streamline processes and improve decision-making.

Our advanced analytics capabilities had evolved beyond Gen AI. By leveraging network graph analysis to identify potentially fraudulent credit applicants, we had significantly strengthened our defences against financial crime.

Recognising the new risk dimensions introduced by Gen AI (e.g. model bias, data privacy), a robust governance framework was established. The Data Management Office led a taskforce to develop a Gen AI playbook for responsible use cases, encompassing end-to-end risk and control assessments for applications with potentially material impacts. A cross-functional Responsible Data Use Committee, reporting directly to the Risk Executive Committee, provides oversight, ensuring responsible and secure AI implementation.

Sustaining enhancements to climate risk management

In 2024, DBS significantly enhanced its climate risk management capabilities. The implementation of an enhanced corporate ESG risk score enabled proactive identification and management of borrower- level climate transition and physical risks, including potential reputational risks. This provided improved portfolio-level oversight and control of high-ESG-risk credit exposures. A more robust ESG database streamlined reporting, ensuring alignment with evolving disclosure standards and timely communication to investors and stakeholders. Ongoing enhancements to our climate transition and physical risk scenario analysis allowed for more accurate assessment of potential vulnerabilities and financial impact, informing effective mitigation strategies.

Read more about “Responsible Financing” in the Sustainability Report.

Growing new business in digital assets

DBS adopted a disciplined, risk-managed approach to digital asset growth, serving digital asset companies within defined risk parameters and employing robust controls such as on-chain surveillance (monitoring activities on the block chains) to manage digital asset-related risks. In 2024, new business included partnerships with stablecoin issuers and the launch of crypto options trading and structured notes. As digital assets permeate across the Bank’s franchise, a Group Digital Asset Ecosystem Council was established to evaluate business priorities and provide risk oversight.