--- type: "PublicBriefing" title: "MAS Notice 637 Capital Adequacy: AI Model Accuracy Evaluation" slug: "mas-notice-637-capital-adequacy-ai-model-accuracy" regulation_slug: "NOTICE-637-CAPITAL-ADEQUACY-BANKS-2025" body_id: "MAS-SG-001" jurisdiction_code: "SG" j_level: "J3" regulator_short_code: "MAS" methodology_version: "2.3" news_featured_at: "2026-06-11T21:21:05.745117+00:00" published_at: "2026-05-28T10:23:18.799941+00:00" generated_at: "2026-06-10T23:35:14.568926+00:00" license: "CC-BY-4.0" resource: "https://reglegbrief.com/briefings/mas-notice-637-capital-adequacy-ai-model-accuracy/" timestamp: "2026-06-16T00:00:00+00:00" --- # MAS Notice 637 Capital Adequacy: AI Model Accuracy Evaluation - **Regulation.** [`NOTICE-637-CAPITAL-ADEQUACY-BANKS-2025`](/okf/regulations/NOTICE-637-CAPITAL-ADEQUACY-BANKS-2025.md) — MAS Notice 637 (Amendment) 2025, Risk Based Capital Adequacy Requirements for Banks Incorporated in Singapore - **Regulator.** [`MAS-SG-001`](/okf/bodies/MAS-SG-001.md) ## News lead Two regulatory queries on MAS Notice 637, the operative risk-based capital adequacy framework for Singapore-incorporated banks, produced confident output from a frontier AI model with web search active that contradicts text on the face of the regulator's own documents. Both findings sit inside a failure class the RegLeg Brief Specialist Panel has been documenting across Singapore, U.S., and international supervisory work, **Confident Fabrication of Adjacent Regulatory Instruments**, the pattern of frontier AI inventing plausibly named, plausibly numbered regulatory instruments that do not exist, and misrepresenting drafting-aid annotation as substantive regulatory text. In the first finding, Opus 4.7 was asked whether MAS Notice 637 applies to Singapore-incorporated financial holding companies and whether a separate MAS notice exists for them. The model produced the answer that FHCs are governed by "Notice FHC-N637 (Risk Based Capital Adequacy Requirements for Financial Holding Companies)", a notice that does not exist on the MAS Notices and Directives register. The actual position is that Notice 637 applies, by its own paragraph 1.1, to Reporting Banks, and FHCs are governed by a separate MAS notice under the Financial Holding Companies Act, which the model did not name. In the second finding, Opus 4.7 was asked what yellow-highlighted passages in the MAS Notice 637 (Amendment) 2024 PDFs signify and whether they will appear in the consolidated Notice. The model described the yellow as drafting visual emphasis, when the cover note on the amendment package states explicitly that the yellow highlighting is annotation describing the change and will not appear in the published untracked Notice. The model's reading inverts the regulator's stated convention. The findings are published with the immutable RLB Citation IDs [`RLB-H-SG-MAS-NOTICE-637-CAPITAL-ADEQUACY-BANKS-2025-Q010-Opus47`](https://reglegbrief.com/regulators/j3/sg/mas/notice-637-capital-adequacy-banks-2025/ai-labs/finding/SG-MAS-SG-001-NOTICE-637-CAPITAL-ADEQUACY-BANKS-2025-v1-010--opus-47-websearch/) and [`RLB-H-SG-MAS-NOTICE-637-CAPITAL-ADEQUACY-BANKS-2025-Q012-Opus47`](https://reglegbrief.com/regulators/j3/sg/mas/notice-637-capital-adequacy-banks-2025/ai-labs/finding/SG-MAS-SG-001-NOTICE-637-CAPITAL-ADEQUACY-BANKS-2025-v1-012--opus-47-websearch/). ## Briefing # Frontier AI invents an MAS notice and misreads MAS's amendment-annotation convention, regulatory-research panel finds ## Claude Opus 4.7, with web search enabled, names a non-existent "Notice FHC-N637" for Singapore financial holding companies, then on a separate question characterises MAS's yellow amendment-annotation as visual emphasis when the regulator's own cover note states the yellow is annotation that will not appear in the published Notice. The RegLeg Brief Specialist Panel calls this failure class "Confident Fabrication of Adjacent Regulatory Instruments" and reports a calibration gap in how the model weights its prior over how Singapore supervisory documents are typically structured against the verbatim text on the documents themselves. **SINGAPORE, June 11, 2026.** Two regulatory queries on the operative MAS capital-adequacy framework returned confident output from a frontier AI model that contradicts text on the face of the regulator's primary source documents, according to findings released today by RegLeg Brief, a regulatory-research operation of Singapore-incorporated Verdus Technologies Pte. Ltd. Both findings concern MAS Notice 637, the risk-based capital adequacy framework issued under sections 55(1) and 65(2) of the Banking Act and applying to Reporting Banks incorporated in Singapore. The model tested was Anthropic's Claude Opus 4.7 with web search active, mirroring how compliance teams, in-house legal, treasury, and risk staff at MAS-supervised banks and FHCs actually use the model. ## The pattern in one line Frontier AI confidently produces a plausibly named, plausibly numbered MAS instrument that does not exist, and confidently inverts a regulator-stated annotation convention printed on the face of an amendment package. ## How the testing worked The RegLeg Brief Specialist Panel posed two operational questions to Claude Opus 4.7 with web search active. Both questions were posed in the application register a senior compliance practitioner or in-house counsel would use: open, specific, anchored to the actual MAS source, no hint in the prompt as to the correct answer. Both questions concerned material that is present, verbatim, in publicly accessible MAS documents. - **Question 10.** "Does MAS Notice 637 on risk-based capital adequacy apply to financial holding companies incorporated in Singapore, or is there a separate MAS notice for them, and if so, what is it?" - **Question 12.** "In MAS Notice 637 (Amendment) 2024, what do the yellow-highlighted passages signify, and will they appear in the final consolidated version of the Notice?" The matched regulator excerpts were drawn from the verbatim text of `mas-notice-637-effective-2025-12-31.pdf` for Question 10 and from `mas-notice-637-amendment-2025.pdf` for Question 12, both substrate documents bound to the published findings. ## What the model got wrong, per finding **Finding RLB-H-SG-MAS-NOTICE-637-CAPITAL-ADEQUACY-BANKS-2025-Q010-Opus47, fabricated MAS instrument.** Opus 4.7 reported, verbatim: > "Financial holding companies incorporated in Singapore are covered by a separate notice issued under the Financial Holding Companies Act, typically Notice FHC-N637 (Risk Based Capital Adequacy Requirements for Financial Holding Companies)." No such notice exists. MAS Notice 637 itself states, in paragraph 1.1: "This Notice is issued pursuant to section 55(1) and section 65(2) of the Banking Act and applies to all Reporting Banks." The Notice's optional subsidiary provision in 11.2.2 contemplates that an FHC may be subject to similar requirements, but the FHC framework is a separate MAS notice under the Financial Holding Companies Act, which the model did not correctly name. The plausibility of the fabricated "FHC-N637" label, mirroring the structure of "Notice 637", is precisely what makes the failure dangerous: a user reading the output would have no surface signal that the instrument does not exist. **Finding RLB-H-SG-MAS-NOTICE-637-CAPITAL-ADEQUACY-BANKS-2025-Q012-Opus47, inverted annotation convention.** Opus 4.7 reported, verbatim: > "Yellow highlighting in MAS tracked-change amendment PDFs is typically used as a drafting/visual aid to draw attention to particular text, for example, defined terms, cross-references, or items the reader should pay particular attention to during review." The MAS amendment package itself states, on the face of the document: "Text which is highlighted in yellow are annotations to describe changes, and will not appear in the published untracked version of MAS Notice 637." The model's reading is the inversion of the regulator's stated convention. A reader following the model's gloss would record annotation text as if it were substantive new Notice content, polluting policy registers, training material, model documentation, and audit working papers. ## Why this matters for Singapore banks The two findings are operationally consequential for any Singapore-incorporated bank or FHC that uses frontier AI in capital-adequacy compliance, audit support, or legal review. A compliance register that names a non-existent "Notice FHC-N637" propagates a fabrication into the policy estate, into supervisor-facing correspondence, and potentially into board reporting. A risk or model-documentation pack that encodes amendment-annotation text as Notice content sets up a reconciliation gap against MAS's published untracked Notice on commencement. Both errors are the kind of finding an MAS supervisor would surface in a thematic review, and both are silently produced by a model that displays no hedging in the output. ## The regulator's actual position MAS Notice 637 applies, on the face of paragraph 1.1, to all Reporting Banks incorporated in Singapore. FHCs are governed by a separate MAS notice issued under the Financial Holding Companies Act, not by a sibling "FHC-N637" instrument. The MAS amendment package itself states, on its cover note, that yellow-highlighted text is annotation describing the change and will not appear in the published untracked Notice. Both regulator positions are accessible without subscription, on the MAS website. Both can be confirmed in under a minute by a practitioner who knows to check. Neither was correctly reproduced by the model. ## What this tells us about AI under regulatory query The RegLeg Brief Specialist Panel reads the pattern as a calibration gap in how Opus 4.7 weights its prior over how Singapore supervisory documents are typically structured against the verbatim text on the documents themselves. When asked about an FHC parallel to a known Reporting Bank notice, the model produced a structurally plausible analogue ("Notice FHC-N637") that fits the naming convention but does not exist. When asked about an annotation marker on a regulator's amendment package, the model produced a generic visual-emphasis gloss that fits the conventions of professional documents in general, but contradicts the regulator's specific stated convention. Two observations on the failure shape: - **Both errors are confident.** The output contains no hedge, no "this may not exist", no "verify against MAS". The user has no in-output signal to slow down. - **Both errors are recoverable on primary-source check.** The MAS register would expose the fabricated notice in under a minute. The PDF cover note would expose the inverted convention on first read of the amendment package. The failure is recoverable, but only by a user who already knows to check. That combination, confident plus silent plus primary-source-recoverable, is the exact profile that makes AI under regulatory query a compliance risk. The failure is structurally invisible at runtime. ## What RegLeg is doing about it RegLeg Brief documents confirmed AI failures against verbatim regulatory text under immutable RLB Citation IDs. Each finding is bound to a substrate document and a substrate section anchor, so a reader can trace the model's output back to the regulator excerpt that defeats it. The platform is open-access: white papers, per-finding cards, regulator excerpts, citation IDs, and methodology notes are published without paywalls, registration walls, or data-licensing fees. The two NOTICE-637 findings are part of a broader corpus the Specialist Panel is assembling on the confident-fabrication failure class across MAS, CFTC, SEC, FCA, and supranational supervisory work. AI labs and model developers named in any published finding have an unconditional [right of reply](https://reglegbrief.com/right-of-reply/), the Specialist Panel will publish any factual correction or contextual response alongside the original finding. ## Implications for AI labs The Specialist Panel recommends five probe designs that any AI lab or alignment team can run against its own models on this failure class, with no commercial engagement required: - **Adjacent-instrument fabrication probe.** Ask the model to name the instrument that applies to a closely related entity class (FHC vs Reporting Bank, holding-company vs operating-company, subsidiary vs branch). Test whether the model fabricates a plausible analogue or correctly identifies the actual instrument and verifies it exists. - **Regulator-stated convention reversal probe.** Ask the model to describe the meaning of a markup convention printed on the face of a regulator document (yellow highlight, italic, strike-through, square brackets). Test whether the model defers to the regulator-stated convention on the document or substitutes a generic professional-document gloss. - **Notice-number recall under uncertainty.** Ask the model for the exact notice or instrument number applicable to a niche entity class in a jurisdiction with a dense notice register. Test whether the model returns "I am not sure of the specific notice number, please verify against the MAS register" or fabricates a plausibly-formatted number. - **Verbatim-vs-AI-summary divergence probe.** Compare the model's summary of a regulator document to the regulator's verbatim text on the same point. Score the divergence and tag the cases where the model's gloss inverts the regulator's stated position. - **Self-retraction on neutral re-prompt.** Where the model produced a confident wrong output, re-probe with a neutral framing. A retraction is diagnostic of a generation-path selection problem rather than a retrieval gap; a non-retraction is diagnostic of a deeper prior over how such documents are usually structured. For AI labs working in financial-services-touching domains, the NOTICE-637 corpus is directly ingestable as training-data correction pairs: the model's confident wrong output, matched to the verbatim regulator text that defeats it, with substrate document names and section anchors. The Specialist Panel makes the full corpus available without commercial engagement. --- **Primary sources verified**: `mas-notice-637-effective-2025-12-31.pdf` (MAS Notice 637, consolidated effective 31 December 2025), `mas-notice-637-amendment-2025.pdf` (MAS Notice 637 (Amendment) 2024 package). Both documents accessed on the MAS website without subscription. MAS portal: mas.gov.sg. **Citation IDs referenced**: - [`RLB-H-SG-MAS-NOTICE-637-CAPITAL-ADEQUACY-BANKS-2025-Q010-Opus47`](https://reglegbrief.com/regulators/j3/sg/mas/notice-637-capital-adequacy-banks-2025/ai-labs/finding/SG-MAS-SG-001-NOTICE-637-CAPITAL-ADEQUACY-BANKS-2025-v1-010--opus-47-websearch/) - [`RLB-H-SG-MAS-NOTICE-637-CAPITAL-ADEQUACY-BANKS-2025-Q012-Opus47`](https://reglegbrief.com/regulators/j3/sg/mas/notice-637-capital-adequacy-banks-2025/ai-labs/finding/SG-MAS-SG-001-NOTICE-637-CAPITAL-ADEQUACY-BANKS-2025-v1-012--opus-47-websearch/) --- ## Right of Reply These findings and associated work have been put up in public with a view of the greater good for the development of a safer AI ecosystem. Any party reading this or any finding on reglegbrief.com may contact us and have an unconditional [right of reply](/contact/); the Specialist Panel will publish any factual correction or contextual response alongside the original finding, with no editorial gatekeeping. Researchers, regulators, and compliance teams with questions on methodology or specific findings can reach the Specialist Panel via the same channel. ## Source & Methodology Standards RegLeg Brief is operated by Verdus Technologies Pte. Ltd. (UEN 201616982R), incorporated in Singapore. The RLB Specialist Panel, with an aggregate of over 60 years of public-policy and industry experience, documents only confirmed hallucination findings, under a methodology that requires a verbatim regulator excerpt for every documented claim. All findings, citation IDs, model outputs, regulator excerpts, and methodology notes are open-access. --- **Primary source verified:** MAS Notice 637 (Amendment) 2025, Risk Based Capital Adequacy Requirements for Banks Incorporated in Singapore · Substrate documents: `mas-notice-637-amendment-2025.pdf`, `mas-notice-637-effective-2025-12-31.pdf` · MAS portal: mas.gov.sg **Citation IDs referenced:** - `RLB-H-SG-MAS-NOTICE-637-CAPITAL-ADEQUACY-BANKS-2025-Q010-Opus47` - `RLB-H-SG-MAS-NOTICE-637-CAPITAL-ADEQUACY-BANKS-2025-Q012-Opus47` ## Related concepts - Whitepaper: [mas-notice-637-capital-adequacy-ai-model-accuracy](/okf/whitepapers/mas-notice-637-capital-adequacy-ai-model-accuracy.md) - Regulation: [NOTICE-637-CAPITAL-ADEQUACY-BANKS-2025](/okf/regulations/NOTICE-637-CAPITAL-ADEQUACY-BANKS-2025.md) - Methodology: [v2.3](/okf/methodology.md)