The Singaporean central bank's proposal for a total loss-absorbing capacity (TLAC) framework could impact banks' support ratings, Fitch Ratings said in a Thursday release.

The "aa-" government support rating for the country's three major local banks are in line with their viability ratings, serving as a backstop to their AA- issuer default ratings, Fitch said.

The rating agency may not consider government support for markets with credible banks resolution and expectations of senior debt being bailed in.

With this, the equilibrium between DBS Group Holdings (SGX:D05) and DBS Bank's ratings may shift if Fitch removes government support as a factor.

The Monetary Authority of Singapore's propose external TLAC of 14% of risk-weighted assets of local domestic systemically banks is below the 18% minimum for global ones, Fitch said.

The central bank also does not push for a TLAC leverage ratio requirement given the smaller size of varied risk profiles of the domestic banks.

The proposal will also not force United Overseas Bank (SGX:U11) and Oversea-Chinese Banking (SGX:O39) to issue any additional debt, reflecting the wider flexibility in the proposed ways for banks to meet the TLAC requirement, Fitch said.