Latest BNM measures to Curb Excessive Household Debt (July 2013)

Hot from oven. Bank Negara Malaysia (BNM) today announce some measures to address the alarming household debt among Malaysians. As reported, household debts have continued to increase at a strong pace, averaging at an annual rate of 12% over past 5 years. While this has been supported by positive income and employment conditions, in the more recent period, there has been a growing trend in the offering of financial products that are not in the long-term interest of consumers.


What does this mean?
This includes extended financing tenures of up to 45 years for house financing and 25 years for personal financing!!! Wow... Is it too long the tenure? While this may reduce the monthly repayments, in the long run, this increase the overall debt burden of households. If we don't stop this kind of practice, it will encourage excessive debt accumulation by households and increase the vulnerability of this sector.

Hence, BNM has to take actions...
The implementation of a set of measures aimed at avoiding excessive household indebtedness and to reinforce responsible lending practices by key credit providers. These measures, which take effect immediately, complements the earlier measures introduced since 2010 to promote a sound and sustainable household sector.



What are the measures?
  1. Maximum tenure of 10 years for financing extended for personal use;
  2. Maximum tenure of 35 years for financing granted for the purchase of residential and non-residential properties;
  3. Prohibition on the offering of pre-approved personal financing products.


Who will be affected the most?
For sure, borrowers (excessive one) will be short-handed. However, those good quality borrowers will not be affected. Meanwhile, the hands of financial institutions once again being tighten further. It will definitely impact the loans growth, but with a more quality growth. Property sector will face some minimal impacts, given most of the loan approved is within 35 years of financing.


For Finance Malaysia, this is good news for our country's financial sector. Excessive household debts, coupled with poor quality loans, will endangers the financial system. Worth to highlight here is the pre-approved loan is being banned now. Long time ago, Finance Malaysia is very uncomfortable with such offerings, with the intention to "indulge" bank clients to borrow. Now, we are relieve. Do you agree?

Comments

Post a Comment

Popular posts from this blog

Exclusive Interview: 2011 8TV Hot Chef (美食型男) Jason Cha

Image
Dubbed as one of the most handsome guy among the participants of popular 8TV shows Hot Chef ( 美食型男 ), Jason emerged as the ultimate winner, not by his look, but his cooking skills. Since then, he became a familiar face in Malaysia. Did you recognize Jason shopping at Mid Valley lately? In order for us to understand more about him, below are some of the his personal details: Full Name            : Cha Kian Heng Age                      : 34 Hometown           : Ipoh, Perak Status                  : Married Hobby                  : Collecting Thai Amulets Favourite Foods : Italian Pizza with many many cheese Favourite Sports : Badminton Favourite Sportsman : Fernando Torres (football player of Spain and Chelsea currently) The Interview: Q: What makes you decided to join the 8TV's 2011 Hot Ch...
Read more

Career Lessons from Breaking Bad

Image
AMC's Breaking Bad ended with a bang last Sunday, leaving viewers generally content and definitely shell shocked. Though the ride is over, we can finally look back at the series and reflect on how we can learn from both Heisenberg's victories and mistakes. How can a meth kingpin help you and your future careers? Here are some takeaways : 1. Be hard to replace   : Find a specific skill set and make sure you are good enough that nobody can quickly take your place. Whether it be modeling, analysis, writing, communication, or even a certain product with a 99.1% purity, having a specific niche or strength can ensure job security. Just try not to kill fellow associates to eliminate competition. 2. Associate with the right people : If you are the smartest person in the room, you're in the wrong room. Surround yourself with people who you believe can bring out the best in you. Doing business with a high school dropout and drug addict will certainly lead to complications in the fut...
Read more

Things We Now Know

The poor are losing ground in the new Obama world.  The facts are showing up even in the halls of collectivist extremes like the New York Times.  The rich are getting richer and poor are being locked in place.  Big government is throttling the economy and the hopes and dreams of lower and middle class Americans. Today's Wall Street Journal's article by Simon Constable lays out some of the simple and obvious facts of the Obama era: "The richest 20% of households account for 38% of spending, according to government data for 2011, the latest available.  Compare that with 2003 when the top earners spent 26% of the total."  The article goes on to say..."it could get even worse."  It will. Who really benefits when the regulators strangle the banks?  Do banks really need to get much more conservative in their lending practices?  Why does the government know best?  How far can you stretch the FDIC guarantees before American banking is simply a subsid...
Read more