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

"You Can Keep Your Existing Health Insurance"

I wondered about this statement at the time Obama made it.  Clearly, by changing all the rules of health care insurance and mandating conformity, it was unlikely that the vast majority of Americans would not find themselves forced by 'The Affordable Care Act' to have to deal with a completely different health insurance plan and completely different set of health care providers. I now understand what Obama meant.   He was speaking to his immediate family and (politician) friends.  They are exempt from the "Affordable Care Act."  Clearly what he meant to say was: "if you are exempt from Obamacare, like me and my family, you can keep your existing health insurance."  He never meant to mislead.
Read more

Why Gold and Silver? Why Online Store?

Image
Are you first time gold and silver buyers? Why don't you invest in these popular metals? If you did so, you have had a wonderful investing experience after 2008 global financial crisis. But, do you really understand these metals? Were they really precious (especially now)? Traditionally, gold and silver were one form of exchange. Because of the invention of fiat money, they were being turned into some short of "back-up" currency , in case our fiat money system go burst. It's natural when things go wrong, gold and silver tends to appreciate in value. In other words, people hold precious metals to preserve the value of their assets. 3 Reasons Why Gold and Silver... Still hot in demand , especially by emerging affluent Chinese. Traditionally, Chinese loves gold. They bought it for events such as new born baby, new year, wedding and even funeral ceremony. Strengthening USD ??? Yes. It's a correct reason also. Why? Because of news that US going to stop QE3, USD is str...
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