Singapore may permit virtual banks to operate in the city-state, following in the footsteps of Hong Kong, said DBS chief executive.

If virtual banking licenses were handed out in Singapore, it would step up the competitive pressures faced by incumbent lenders. However, those who have upgraded their digital capabilities should not fear this new form of competition, said DBS chief executive Piyush Gupta.

«To my mind, that's just basically giving a few more banking licenses,» said Gupta, who was speaking in an interview with Bloomberg (behind paywall). Virtual banks could typically generate $100 income at 25 to 30 percent of operating costs, according to experts. In comparison, DBS's cost-to-income ratio stood at 44 percent last year.

Possible Challenges

In the interview, Gupta does not see a problem with having virtual banking licenses in Singapore unless these virtual banks are allowed to operate on more lenient terms than incumbents, such as lower capital requirements held.

«The real challenge is if the regulators create an unlevel playing field, and let the new bank licensees come in and do banking on different terms,» he said. However, he felt that most regulators «don't seem to be inclined» to do that.