BNM's Guidelines On Financing Crucial For A Stable Economy

KUALA LUMPUR, March 21 (Bernama) -- The Guidelines on Responsible Finance introduced by Bank Negara (Central Bank) Malaysia is an important first stopgap measure to prevent any instability in the country's financial and economy system, the Lower House of Parliament sitting was informed on Wednesday. Deputy Finance Minister, Dr Awang Adek Hussin said the guidelines were introduced to ensure that the household sector and credit market remained sustainable and the level of cumulative household debts retained. "The level of cumulative household debts in Malaysia has been rising at an annual average of 12.5 per cent the last 10 years. "This accounted for 76.6 per cent of the gross domestic product (GDP) in 2011 and 55 per cent of total financing by the banking system," he said when replying to a question from MP Khairy Jamaluddin. Khairy wanted to know if the government had plans to review the guidelines with the intent of loosening up the conditions for approving loans. Awang Adek said the guidelines were also important to ensure that financing products offered by financial institutions to individuals were suited to their financing needs and ability to repay the loans taken. "When assessing an individual's ability to repay loans, the financial institutions need to obtain the individual's income after taking into account statutory deductions (such as EPF) and their existing credit payment obligations. "This is important to ensure that the ability of individuals to repay loans commensurate with their existing cumulative debts and their ability to absorb any adjustments in their loan costs or changes in their income." -- BERNAMA