This document discusses trends in household debt in Malaysia. It notes that since the 1997 Asian financial crisis, Malaysian banks have shifted their lending focus from businesses to households. Household debt has grown significantly, with the household sector accounting for over half of total bank loans by 2007, up from one third before the crisis. The growth has been driven by factors like economic growth, low inflation and interest rates, financial sector liberalization, and government policies promoting home ownership. Most household debt is held in the form of mortgages, which make up 55% of total household debt.
The Bank of Thailand held its policy rate unchanged at 3.50% due to the impacts of flooding in Thailand and global economic uncertainties. While inflation remains a concern, reconstruction efforts are expected to boost domestic demand and the flooding will negatively impact production capabilities and consumer spending. One MPC member voted for a rate cut but the committee decided to keep the rate on hold until at least the end of 2012 given weak global economic growth prospects.
The Indian hotels industry is expected to finish the 2011-12 fiscal year weakly due to low consumer confidence and muted pricing power eroding margins. While some recovery was seen in late 2010-11, the industry still lacks pricing power to drive out of stagnation. Globally weak economic conditions and high costs have led to one of the weakest nine month periods for the industry in over five years. With continued uncertainty, wavering confidence and a sluggish economy, significant improvement is not expected for the next 2-3 quarters. Most major hotel brands remain committed to expanding in India over the long term due to significant growth opportunities, despite current challenges.
The document discusses Latvia's experience during the 2008 financial crisis and recovery. It explains that Latvia chose an internal devaluation through austerity and structural reforms rather than devaluing its currency. This led to a rapid but difficult adjustment period and a "V-shaped" economic recovery. Key factors in Latvia's success included speed of implementation, ownership of reforms, commitment to change, and national solidarity. The internal adjustment approach stabilized public finances, restored competitiveness and exports, attracted foreign investment, and put Latvia in a strong position to adopt the Euro in 2014.
- KeyCorp reported a net loss of $1.09 per share for the first quarter of 2009, driven by a large provision for loan losses, impairment charges, and losses from principal investments.
- The company maintained a strong capital position but reduced its quarterly dividend to $0.01 per share. It originated $7.8 billion in new loans while focusing on asset quality and reducing expenses.
- Net interest margin declined to 2.41% from disruptions in the financial markets and high liquidity levels, while nonperforming assets rose to 2.70% of total loans and bank-owned properties.
The document forecasts key UK economic indicators from 2007 to 2015. It predicts that UK GDP growth will be around 1% in 2011-2012 before slowly recovering to a long-term trend of 2.4% by 2015. Inflation is expected to fall to around 2.5% in 2012 as past increases drop out, but remain above the 2% target. Unemployment is projected to rise to 2.7 million in 2012 before gradually declining, while the unemployment rate averages 8.5% in 2012. Interest rates are expected to rise above 1.5% by the end of 2012 as growth recovers. Oil prices are forecast to increase to around $130 per barrel by 2015.
This document contains:
1) Forward-looking statements about Sallie Mae's beliefs, expectations, and assumptions that are subject to risks and uncertainties.
2) Information on Sallie Mae's strong business fundamentals, competitive franchise, assured FFELP profitability through 2010, adequate liquidity, expanding funding sources, and performing private loan portfolios.
3) Details on Sallie Mae's FFELP and private loan originations, funding including new government support programs, and liquidity positions.
Turkish construction industry at a glance contents 15 11 2012Eraikune
This document provides an overview of the Turkish construction industry. It discusses the industry's growth rates, employment levels, and contribution to GDP. It also examines supply and demand factors as well as upcoming urban transformation projects that will stimulate growth. Additionally, it outlines the history and global competitiveness of Turkish contracting firms, which have undertaken nearly 6,500 international projects valued at over $206 billion. Turkish contractors are active in 94 countries and 31 ranked among the top international contractors in 2011.
The Bank of Thailand held its policy rate unchanged at 3.50% due to the impacts of flooding in Thailand and global economic uncertainties. While inflation remains a concern, reconstruction efforts are expected to boost domestic demand and the flooding will negatively impact production capabilities and consumer spending. One MPC member voted for a rate cut but the committee decided to keep the rate on hold until at least the end of 2012 given weak global economic growth prospects.
The Indian hotels industry is expected to finish the 2011-12 fiscal year weakly due to low consumer confidence and muted pricing power eroding margins. While some recovery was seen in late 2010-11, the industry still lacks pricing power to drive out of stagnation. Globally weak economic conditions and high costs have led to one of the weakest nine month periods for the industry in over five years. With continued uncertainty, wavering confidence and a sluggish economy, significant improvement is not expected for the next 2-3 quarters. Most major hotel brands remain committed to expanding in India over the long term due to significant growth opportunities, despite current challenges.
The document discusses Latvia's experience during the 2008 financial crisis and recovery. It explains that Latvia chose an internal devaluation through austerity and structural reforms rather than devaluing its currency. This led to a rapid but difficult adjustment period and a "V-shaped" economic recovery. Key factors in Latvia's success included speed of implementation, ownership of reforms, commitment to change, and national solidarity. The internal adjustment approach stabilized public finances, restored competitiveness and exports, attracted foreign investment, and put Latvia in a strong position to adopt the Euro in 2014.
- KeyCorp reported a net loss of $1.09 per share for the first quarter of 2009, driven by a large provision for loan losses, impairment charges, and losses from principal investments.
- The company maintained a strong capital position but reduced its quarterly dividend to $0.01 per share. It originated $7.8 billion in new loans while focusing on asset quality and reducing expenses.
- Net interest margin declined to 2.41% from disruptions in the financial markets and high liquidity levels, while nonperforming assets rose to 2.70% of total loans and bank-owned properties.
The document forecasts key UK economic indicators from 2007 to 2015. It predicts that UK GDP growth will be around 1% in 2011-2012 before slowly recovering to a long-term trend of 2.4% by 2015. Inflation is expected to fall to around 2.5% in 2012 as past increases drop out, but remain above the 2% target. Unemployment is projected to rise to 2.7 million in 2012 before gradually declining, while the unemployment rate averages 8.5% in 2012. Interest rates are expected to rise above 1.5% by the end of 2012 as growth recovers. Oil prices are forecast to increase to around $130 per barrel by 2015.
This document contains:
1) Forward-looking statements about Sallie Mae's beliefs, expectations, and assumptions that are subject to risks and uncertainties.
2) Information on Sallie Mae's strong business fundamentals, competitive franchise, assured FFELP profitability through 2010, adequate liquidity, expanding funding sources, and performing private loan portfolios.
3) Details on Sallie Mae's FFELP and private loan originations, funding including new government support programs, and liquidity positions.
Turkish construction industry at a glance contents 15 11 2012Eraikune
This document provides an overview of the Turkish construction industry. It discusses the industry's growth rates, employment levels, and contribution to GDP. It also examines supply and demand factors as well as upcoming urban transformation projects that will stimulate growth. Additionally, it outlines the history and global competitiveness of Turkish contracting firms, which have undertaken nearly 6,500 international projects valued at over $206 billion. Turkish contractors are active in 94 countries and 31 ranked among the top international contractors in 2011.
The document examines how Asia remains important for global economic growth and wealth creation despite challenges from the eurozone crisis. It revisits conclusions from a previous report that Asia's high net worth population will grow substantially through 2015, driven primarily by China, India, and Indonesia. While Asia has remained relatively insulated from the eurozone crisis, continued weakness in Europe could potentially impact Asian growth through financial markets, exports, and credit exposure over the medium term. The report aims to stress test previous assumptions about Asia's wealth creation in a more difficult global environment.
The credit market is extremely tight according to this document:
1) Lending rates have increased substantially, with cash flow loans over 15% and ABL loans at LIBOR + 500 to 600 basis points.
2) There is little to no mezzanine lending, DIP financing, or exit financing available as major lenders withdraw from the market.
3) Bank lending standards have tightened more than at any other time in the last 20 years according to the Federal Reserve, and lenders are de-leveraging their balance sheets by selling loan participations.
4) An estimated $46.6 billion of debt securities may need to be liquidated in the near future, further competing for
This document summarizes a forum on Ukrainian SMEs held in Lviv, Ukraine in October 2009. It notes that SMEs make up 10-15% of Ukraine's GDP, compared to 30-40% in other CEE countries. The downturn has negatively impacted Ukrainian and CEE SMEs, forcing some into the shadow economy, while others are restructuring. Banks in Ukraine have tightened lending due to losses, adopting a more risk-averse approach. To receive financing, Ukrainian SMEs must improve transparency, management, and financial structures. The document advocates adopting European standards and attracting foreign investment to allow businesses to grow beyond small pockets. Erste Bank was highlighted as continuing to support SMEs
E-Updates_Apr12—Indian & Global Economic IndicatorsEcofin Surge
Monthly statistical e-bulletin comprising about 30 tables and some charts with the latest available economic/financial market indicators, both Indian and Global.
Moody's downgraded SBI's ratings due to low capital ratios, spoiling stock market sentiment. Cement sales were mixed in September. The infrastructure sector underperformed indices last week. RPower was the top gainer while JP Infra lost the most. Suzlon bagged wind sector orders of Rs. 200Cr. Tata Power plans to sell non-core assets to fund projects. IL&FS won a Rs. 161Cr stadium project. JSPL will build a $3B power plant in Mozambique. BHEL secured a Rs. 3800Cr order from Dainik Bhaskar Power.
Presented by Dennis R. Chrisbaum
Director, International Trade Finance
Office of International Trade
U.S. Small Business Administration
409 – 3rd Street, S.W.
Washington, D.C. 20416
Tel: 202.205.6885
E-mail: dennis.chrisbaum@sba.gov
Web: www.sba.gov/international
This document summarizes the semiconductor and photovoltaic markets in China. It discusses trends in China's GDP growth and the drivers of demand for semiconductors. It provides an overview of wafer fabrication facilities and capacity in China by wafer size. The document also examines China's semiconductor materials market, equipment spending trends, and domestic equipment suppliers. Finally, it briefly touches on China's polysilicon production and solar cell manufacturing landscape.
World Economic Situation And Prospects 2009 2010icgfmconference
The document discusses the state of the global economy in 2009-2010. It finds that the world is experiencing the worst financial crisis since WWII, with a synchronized global recession, rising unemployment, and setbacks to progress on poverty reduction. There are downside risks of a prolonged recession. Key policy challenges include taking further decisive action to restore bank health, better coordinating fiscal stimulus, and urgently reforming the international financial system and frameworks for global economic governance.
SEB Debt Investor Presentation Paris March 2009SEBgroup
1. The document is a presentation by Anders Kvist, Head of Group Treasury at Skandinaviska Enskilda Banken AB (SEB), to debt investors in March 2009.
2. SEB announced capital measures totaling SEK 19.5 billion to strengthen its capital ratios in response to higher market expectations and the changing economic environment. This includes a SEK 15 billion rights issue.
3. The capital measures position SEB with top quartile capital ratios among European peers and provide a substantial capital buffer to withstand significant economic deterioration. With a diversified Nordic and German portfolio, SEB is well positioned.
- Total revenue for the company increased 47% in the first half of the fiscal year compared to the same period last year, driven by growth in the customer services and Indonet business units.
- Profit before tax was up 36% for the half year despite pressure on margins in tough market conditions.
- The company focused on improving productivity and manpower utilization, increasing net value added per employee by 5% and profit per employee by 28%.
This document summarizes the state of the Indian economy in 2012. It notes that global growth estimates have been revised downward. While the US and European economies have not fully recovered from recession, India's growth is projected to slow as well, impacted by weakness abroad. Exports from India are declining, particularly to Europe, ASEAN and Northeast Asia. Capital inflows to India have also been volatile, with FDI steadier than portfolio flows. The rupee has begun depreciating against the dollar after gaining strength earlier in 2012.
Community Bank Mergers: Creating the Potential for Shared Upside | Mercer Cap...Mercer Capital
In this whitepaper we review financial issues arising when community banks merge or sell to a larger, public institution. It is not intended to answer every question and, in some instances, our intention is to raise questions for directors and managers to evaluate. In a series of follow-up papers and webinars we will address specific topics that merit further scrutiny.
Economic update – Keith Wade’s presentation at the LBS Investing Strategy event London Business School
Keith Wade is Chief Economist and strategist at Schroders. He is responsible for the economics team and the house view of the world economy. Prior to joining Schroders he was a researcher at London Business School's Centre for Economic Forecasting. In the presentation he discusses the current economic cycle, the likely trajectory and investment options for pension schemes having long term outlooks but short term pressure to manage volatility.
The “Investment Strategy 2013: Peering into the Crystal Ball” event was organised by The Pensions Management Institute and London Business School’s Alumni Club. It took place on 8 October 2012.
The document discusses non-performing loans (NPLs) in Europe. It finds that NPLs increased over 25% in most countries between 2008-2009, though transaction volumes remained low due to pricing issues. While investors claim to have funds, banks may be underestimating loan losses by using outdated collateral valuations. Overall asset quality is expected to improve in 2010 as new defaults decrease, but number of accounts in arrears may remain high for UK banks.
The Saturday Economist : UK recoveries compared 1930 2012 John Ashcroft
The document compares the UK recessions and recoveries of 1930, 1980, 1990 to the current recession from 2008. It finds that the 2008 recession was steeper than previous recessions. The recovery was in line with previous recessions until 2011, but has since faltered, with the economy now flatlining and output still below pre-recession levels. In contrast to previous strong recoveries, the current recovery lacks stimulus, with constrained government spending, household spending, and weak investment awaiting growth in domestic demand.
The document discusses trends in India's financial sector, including banking, insurance, and capital markets. It notes that banking is dominated by public sector banks, holding 65% of credit. The insurance sector is growing rapidly at 30-35% annually and has potential for further expansion in rural areas. Overall, the financial sector is critical to India's economy but still has opportunities to deepen penetration in rural and underserved areas to further support growth.
The Bank of Thailand held its policy rate unchanged at 3.50% due to the impacts of flooding in Thailand and global economic uncertainties. While inflation remains a concern, reconstruction efforts are expected to boost domestic demand and the flooding will negatively impact production capabilities and consumer spending. One MPC member voted for a rate cut but the committee decided to keep the rate on hold until at least the end of 2012 given weak global economic growth prospects.
The document summarizes ICICI Bank's strategy and performance in FY2009 amid market volatility. Key points include:
ICICI Bank focused on maintaining high capital levels, increasing low-cost deposits, moderating credit growth, and stringent cost control in response to liquidity issues and rising risks. For FY2009, the bank reported a 12% rise in operating profit despite slower revenue growth. Going forward, ICICI Bank aims to further increase its CASA deposit ratio and capital adequacy ratios to prepare for future uncertainties.
The document provides an overview of Sallie Mae's business fundamentals and financial outlook. It discusses that Sallie Mae has:
1) Strong fundamentals in student lending, competitive scale, and assured FFELP profits through 2010.
2) Adequate liquidity to meet debt obligations and unlimited funding for new FFELP loans through 2009/2010.
3) Expanding deposit funding and $20 billion in expected FFELP originations for 2008/2009.
4) Private loan originations increased despite economic challenges, with improving credit quality in recent vintages.
Pakistan's economy faces challenges from recent floods and inflation. Growth was only 2.4% in FY2011 due to energy shortages and security issues. The services sector contributed most to growth while manufacturing declined. Investment has fallen significantly as a percentage of GDP in recent years. The fiscal deficit widened to 6.3% of GDP in FY2010 due to higher spending and weaker revenues. Inflation averaged 14.1% in FY2011 while the current account deficit improved due to higher exports and remittances. Foreign direct investment continues to decline.
The document examines how Asia remains important for global economic growth and wealth creation despite challenges from the eurozone crisis. It revisits conclusions from a previous report that Asia's high net worth population will grow substantially through 2015, driven primarily by China, India, and Indonesia. While Asia has remained relatively insulated from the eurozone crisis, continued weakness in Europe could potentially impact Asian growth through financial markets, exports, and credit exposure over the medium term. The report aims to stress test previous assumptions about Asia's wealth creation in a more difficult global environment.
The credit market is extremely tight according to this document:
1) Lending rates have increased substantially, with cash flow loans over 15% and ABL loans at LIBOR + 500 to 600 basis points.
2) There is little to no mezzanine lending, DIP financing, or exit financing available as major lenders withdraw from the market.
3) Bank lending standards have tightened more than at any other time in the last 20 years according to the Federal Reserve, and lenders are de-leveraging their balance sheets by selling loan participations.
4) An estimated $46.6 billion of debt securities may need to be liquidated in the near future, further competing for
This document summarizes a forum on Ukrainian SMEs held in Lviv, Ukraine in October 2009. It notes that SMEs make up 10-15% of Ukraine's GDP, compared to 30-40% in other CEE countries. The downturn has negatively impacted Ukrainian and CEE SMEs, forcing some into the shadow economy, while others are restructuring. Banks in Ukraine have tightened lending due to losses, adopting a more risk-averse approach. To receive financing, Ukrainian SMEs must improve transparency, management, and financial structures. The document advocates adopting European standards and attracting foreign investment to allow businesses to grow beyond small pockets. Erste Bank was highlighted as continuing to support SMEs
E-Updates_Apr12—Indian & Global Economic IndicatorsEcofin Surge
Monthly statistical e-bulletin comprising about 30 tables and some charts with the latest available economic/financial market indicators, both Indian and Global.
Moody's downgraded SBI's ratings due to low capital ratios, spoiling stock market sentiment. Cement sales were mixed in September. The infrastructure sector underperformed indices last week. RPower was the top gainer while JP Infra lost the most. Suzlon bagged wind sector orders of Rs. 200Cr. Tata Power plans to sell non-core assets to fund projects. IL&FS won a Rs. 161Cr stadium project. JSPL will build a $3B power plant in Mozambique. BHEL secured a Rs. 3800Cr order from Dainik Bhaskar Power.
Presented by Dennis R. Chrisbaum
Director, International Trade Finance
Office of International Trade
U.S. Small Business Administration
409 – 3rd Street, S.W.
Washington, D.C. 20416
Tel: 202.205.6885
E-mail: dennis.chrisbaum@sba.gov
Web: www.sba.gov/international
This document summarizes the semiconductor and photovoltaic markets in China. It discusses trends in China's GDP growth and the drivers of demand for semiconductors. It provides an overview of wafer fabrication facilities and capacity in China by wafer size. The document also examines China's semiconductor materials market, equipment spending trends, and domestic equipment suppliers. Finally, it briefly touches on China's polysilicon production and solar cell manufacturing landscape.
World Economic Situation And Prospects 2009 2010icgfmconference
The document discusses the state of the global economy in 2009-2010. It finds that the world is experiencing the worst financial crisis since WWII, with a synchronized global recession, rising unemployment, and setbacks to progress on poverty reduction. There are downside risks of a prolonged recession. Key policy challenges include taking further decisive action to restore bank health, better coordinating fiscal stimulus, and urgently reforming the international financial system and frameworks for global economic governance.
SEB Debt Investor Presentation Paris March 2009SEBgroup
1. The document is a presentation by Anders Kvist, Head of Group Treasury at Skandinaviska Enskilda Banken AB (SEB), to debt investors in March 2009.
2. SEB announced capital measures totaling SEK 19.5 billion to strengthen its capital ratios in response to higher market expectations and the changing economic environment. This includes a SEK 15 billion rights issue.
3. The capital measures position SEB with top quartile capital ratios among European peers and provide a substantial capital buffer to withstand significant economic deterioration. With a diversified Nordic and German portfolio, SEB is well positioned.
- Total revenue for the company increased 47% in the first half of the fiscal year compared to the same period last year, driven by growth in the customer services and Indonet business units.
- Profit before tax was up 36% for the half year despite pressure on margins in tough market conditions.
- The company focused on improving productivity and manpower utilization, increasing net value added per employee by 5% and profit per employee by 28%.
This document summarizes the state of the Indian economy in 2012. It notes that global growth estimates have been revised downward. While the US and European economies have not fully recovered from recession, India's growth is projected to slow as well, impacted by weakness abroad. Exports from India are declining, particularly to Europe, ASEAN and Northeast Asia. Capital inflows to India have also been volatile, with FDI steadier than portfolio flows. The rupee has begun depreciating against the dollar after gaining strength earlier in 2012.
Community Bank Mergers: Creating the Potential for Shared Upside | Mercer Cap...Mercer Capital
In this whitepaper we review financial issues arising when community banks merge or sell to a larger, public institution. It is not intended to answer every question and, in some instances, our intention is to raise questions for directors and managers to evaluate. In a series of follow-up papers and webinars we will address specific topics that merit further scrutiny.
Economic update – Keith Wade’s presentation at the LBS Investing Strategy event London Business School
Keith Wade is Chief Economist and strategist at Schroders. He is responsible for the economics team and the house view of the world economy. Prior to joining Schroders he was a researcher at London Business School's Centre for Economic Forecasting. In the presentation he discusses the current economic cycle, the likely trajectory and investment options for pension schemes having long term outlooks but short term pressure to manage volatility.
The “Investment Strategy 2013: Peering into the Crystal Ball” event was organised by The Pensions Management Institute and London Business School’s Alumni Club. It took place on 8 October 2012.
The document discusses non-performing loans (NPLs) in Europe. It finds that NPLs increased over 25% in most countries between 2008-2009, though transaction volumes remained low due to pricing issues. While investors claim to have funds, banks may be underestimating loan losses by using outdated collateral valuations. Overall asset quality is expected to improve in 2010 as new defaults decrease, but number of accounts in arrears may remain high for UK banks.
The Saturday Economist : UK recoveries compared 1930 2012 John Ashcroft
The document compares the UK recessions and recoveries of 1930, 1980, 1990 to the current recession from 2008. It finds that the 2008 recession was steeper than previous recessions. The recovery was in line with previous recessions until 2011, but has since faltered, with the economy now flatlining and output still below pre-recession levels. In contrast to previous strong recoveries, the current recovery lacks stimulus, with constrained government spending, household spending, and weak investment awaiting growth in domestic demand.
The document discusses trends in India's financial sector, including banking, insurance, and capital markets. It notes that banking is dominated by public sector banks, holding 65% of credit. The insurance sector is growing rapidly at 30-35% annually and has potential for further expansion in rural areas. Overall, the financial sector is critical to India's economy but still has opportunities to deepen penetration in rural and underserved areas to further support growth.
The Bank of Thailand held its policy rate unchanged at 3.50% due to the impacts of flooding in Thailand and global economic uncertainties. While inflation remains a concern, reconstruction efforts are expected to boost domestic demand and the flooding will negatively impact production capabilities and consumer spending. One MPC member voted for a rate cut but the committee decided to keep the rate on hold until at least the end of 2012 given weak global economic growth prospects.
The document summarizes ICICI Bank's strategy and performance in FY2009 amid market volatility. Key points include:
ICICI Bank focused on maintaining high capital levels, increasing low-cost deposits, moderating credit growth, and stringent cost control in response to liquidity issues and rising risks. For FY2009, the bank reported a 12% rise in operating profit despite slower revenue growth. Going forward, ICICI Bank aims to further increase its CASA deposit ratio and capital adequacy ratios to prepare for future uncertainties.
The document provides an overview of Sallie Mae's business fundamentals and financial outlook. It discusses that Sallie Mae has:
1) Strong fundamentals in student lending, competitive scale, and assured FFELP profits through 2010.
2) Adequate liquidity to meet debt obligations and unlimited funding for new FFELP loans through 2009/2010.
3) Expanding deposit funding and $20 billion in expected FFELP originations for 2008/2009.
4) Private loan originations increased despite economic challenges, with improving credit quality in recent vintages.
Pakistan's economy faces challenges from recent floods and inflation. Growth was only 2.4% in FY2011 due to energy shortages and security issues. The services sector contributed most to growth while manufacturing declined. Investment has fallen significantly as a percentage of GDP in recent years. The fiscal deficit widened to 6.3% of GDP in FY2010 due to higher spending and weaker revenues. Inflation averaged 14.1% in FY2011 while the current account deficit improved due to higher exports and remittances. Foreign direct investment continues to decline.
Member Business Lending as a Source of Growth (Credit Union Conference Sessio...NAFCU Services Corporation
In this 2012 Strategic Growth Conference session, investigate ways that credit unions can take advantage of the current business environment and look to member business lending as a source of robust and ongoing growth. We’ll talk about filling the void in small business lending, advantages credit unions offer small business borrowers searching for capital, leveraging technology in the lending process to minimize costs and maximize productivity, ways technology can enable credit unions that have never done small business lending to quickly build a program and strategies and tactics for deal sourcing. We will also look at the need for tracking analytics and ratios for both underwriting and monitoring. More info at: www.nafcu.org/biz2credit
1) The document discusses trends in financing for a real estate company. It provides details on negotiated new and follow-on financings from 2009 to 2011, including loan amounts, interest rates, and maturities.
2) The majority of loan renewals occurred in 2011 when interest rates were low. No further follow-on financings are planned until 2013.
3) Current market conditions show strong competition for mortgage-backed loans but signs of difficulty in inter-bank lending. Margins vary significantly between banks.
The RBI cut its repo rate by 25 basis points to 7.75% and lowered the reverse repo and MSF rates as well. It revised India's GDP growth forecast down to 5.5% for FY2013 due to weak external demand and investment. Headline inflation is projected at 6.8%. Treasury bond yields were volatile after the announcement while equity markets closed lower. The RBI aims to support growth while managing inflation expectations in an uncertain global environment.
Chile is known for its political and economic stability. It has a properly functioning government, is highly integrated internationally through many trade agreements, and relies on commodity exports like copper. Chile joined the OECD in 2009 and has the most stable economy in Latin America with the lowest risk. Its GDP has grown steadily in recent years at over 9% annually, inflation has been low and stable around 3%, and the stock market and currency have strengthened significantly against the dollar. Mining contributes nearly 20% of GDP and over $100 billion in new investments are expected in mining through 2020, presenting opportunities for suppliers.
The document discusses the state of the US economy and the role of monetary policy. It provides an analysis of key economic indicators and headwinds facing recovery. GDP growth in 2012 was supported by consumption, investment and government spending. Housing prices and production are improving but wages remain low. The document evaluates current monetary policy tools and makes recommendations, suggesting policy should remain accommodative given unemployment and deflation risks outweigh inflation concerns. It recommends the Federal Reserve continue its current policy path.
This document summarizes a presentation given by Marco Boa, the Asia Regional Manager for MicroFinanza Rating, at the 59th Annual National Convention of Rural Banks in the Philippines on May 25, 2012. The presentation discusses three factors important for microfinance institutions - governance, reputation, and financial strength. It then provides an overview of the microfinance industry in the Philippines and challenges facing rural banks. The presentation concludes by discussing the relationship between client protection and financial performance for microfinance institutions.
The document summarizes the performance of Global Banking and Markets in the first half of 2008. Key points include:
- Global Banking and Markets contributed 26% of the group's pre-tax profits despite challenging market conditions.
- Strength in emerging markets like Asia Pacific and Latin America helped offset losses elsewhere.
- Writedowns were taken on subprime, credit, and leveraged loan exposures totaling $3.9 billion.
- Two of the group's structured investment vehicles, Cullinan and Asscher, had their assets transferred or sold into three securities investment conduits to provide more stable funding.
The document discusses how auto lenders should adapt their underwriting processes to evaluate non-prime borrowers effectively as more borrowers enter the non-prime segment due to economic hardship. It recommends that lenders supplement traditional credit scoring with subjective analysis, such as applicant interviews, to obtain additional contextual information and identify creditworthy non-prime applicants. Conducting interviews allows lenders to clarify inconsistencies in credit reports, understand the causes of credit blemishes, and assess an applicant's willingness and ability to repay a loan. Integrating subjective analysis into underwriting can help lenders navigate the complexities of evaluating non-prime borrowers and capture this growing market segment in a responsible way.
Mutual funds and term deposits are discussed. A mutual fund pools money from investors and invests in securities like stocks and bonds. A term deposit is a fixed deposit held at a bank for a set period of time, ranging from 15 days to a few years. Benefits of mutual funds include affordability, professional management, risk reduction through diversification, and liquidity. Types of mutual funds and term deposits are also outlined. Returns of mutual funds are then compared to term deposit returns over 10 years, showing mutual funds providing higher returns on average. Factors for identifying the best performing mutual funds in a category are also listed.
- US economic growth is expected to remain sub-trend at around 1.2-2.2% in Q3 2012 due to ongoing household deleveraging and fiscal drag. Unemployment is expected to remain elevated.
- Risks include a slowdown in the Eurozone and potential policy mistakes around fiscal tightening.
- Global manufacturing is slowing due to weak demand in Europe, the US, and a growth moderation in China.
The Korea Fund underperformed the MSCI Korea benchmark in the second quarter of 2012, with the MSCI Korea dropping sharply by 8.6% in USD terms. Foreign investors sold a net $5 trillion worth of Korean equities, though the Korean won depreciated only moderately against the USD. During the quarter, the Fund outperformed its benchmark by 42 basis points due to strong stock picks in consumer discretionary, while IT and materials detracted. Quality stocks outperformed in the volatile market conditions, with low debt, low volatility stocks performing well.
The budget focuses on fiscal consolidation and boosting growth. It marginally increases tax deductions but also raises some taxes. Funding is enhanced for infrastructure through tax-free bonds and ECB changes. The power sector may benefit from coal duty exemptions and FSA commitments. However, the auto sector faces higher excise duties that could impact large carmakers. Key assumptions around GDP and oil prices make deficit targets optimistic. Overall policy measures only partially address issues around land, environment and state electricity boards.
While Philippine GDP grew at a modest 3.7% last year, lower than neighboring ASEAN countries, strong consumer spending and the resilient services sector helped compensate. Office space options in Metro Manila are currently limited due to high demand from business process outsourcing firms. In the residential property market, over 33,000 new condominium units were completed last year with vacancy rates remaining below 6%. Major mall operators are improving shopping experiences through new technologies and attractions to increase foot traffic.
The Philippine economy grew at 3.7% last year, slower than other ASEAN countries but still managing growth despite global economic challenges. Strong consumer spending and growth in the services sector compensated for sluggish government infrastructure spending and declines in fishing. Inflation contracted to 2.7% while lending rates are at their lowest. Most institutions forecast 3.5-4.0% growth for the Philippines this year, supported by rising OFW remittances which exceeded $20 billion in 2011.
Every business, big or small, deals with outgoing payments. Whether it’s to suppliers for inventory, to employees for salaries, or to vendors for services rendered, keeping track of these expenses is crucial. This is where payment vouchers come in – the unsung heroes of the accounting world.
Madhya Pradesh, the "Heart of India," boasts a rich tapestry of culture and heritage, from ancient dynasties to modern developments. Explore its land records, historical landmarks, and vibrant traditions. From agricultural expanses to urban growth, Madhya Pradesh offers a unique blend of the ancient and modern.
What Lessons Can New Investors Learn from Newman Leech’s Success?Newman Leech
Newman Leech's success in the real estate industry is based on key lessons and principles, offering practical advice for new investors and serving as a blueprint for building a successful career.
A toxic combination of 15 years of low growth, and four decades of high inequality, has left Britain poorer and falling behind its peers. Productivity growth is weak and public investment is low, while wages today are no higher than they were before the financial crisis. Britain needs a new economic strategy to lift itself out of stagnation.
Scotland is in many ways a microcosm of this challenge. It has become a hub for creative industries, is home to several world-class universities and a thriving community of businesses – strengths that need to be harness and leveraged. But it also has high levels of deprivation, with homelessness reaching a record high and nearly half a million people living in very deep poverty last year. Scotland won’t be truly thriving unless it finds ways to ensure that all its inhabitants benefit from growth and investment. This is the central challenge facing policy makers both in Holyrood and Westminster.
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1. Household debt in Malaysia
1
Norhana Endut and Toh Geok Hua
Introduction
An important development in the Malaysian financial sector since the 1997 Asian financial
crisis has been the reduction in the banking institutions’ credit exposure to businesses and
the greater focus on household financing. In recent years, there has been a growing trend
among corporations of securing longer-term financing, in larger amounts, from the capital
markets. As the corporate sector turns to the capital markets to meet its financing needs,
banking institutions are shifting their focus to the household sector as part of their business
diversification strategy. The household segment accounted for one third of the banking
sector’s total loan exposure before the crisis; it now accounts for more than half.
With the shift towards high-volume, low-value loans, the banking sector has diversified credit
risks and minimised the potential for large losses stemming from the failure of a few large
borrowers. At the same time, as lending to households becomes a larger segment of the
financial system, it is crucial for policymakers to be aware of the implications for monetary
policy and financial stability. This paper briefly discusses the current development of
household finance in Malaysia, its implications for monetary policy, financial stability and
some of the policy issues it raises.
Key factors driving household credit
Macroeconomic stability, financial sector development and government policies have all
played an important role in influencing the supply of and demand for mortgages and other
household credit. Sustained economic growth in Malaysia, averaging 5.9% a year over the
past six years, has raised household incomes and boosted consumer confidence, which, in
turn, has induced optimistic expectations of future income. Furthermore, the low inflation
rate, which averaged 2.2% a year during 2002–07, and low interest rate environment that
has reduced the cost of borrowing have increased the incentive for households to borrow in
order to smooth their desired path of consumption over the life cycle.
Progressive financial liberalisation, deregulation, financial sector consolidation and
technological advances have also contributed to the growth in household credit. The
emergence of a more diversified and competitive banking system has resulted in downward
pressure on interest rates, expanded credit coverage and increased loan amounts, while the
strengthened risk management of household credit portfolios has enabled financial
institutions to lend more to households.
Government policies also have facilitated greater allocation of credit to households. In line
with the government’s efforts to promote home ownership, banks, based on their capacity
and business strategy, are encouraged or required to offer housing loans, especially to low-
income borrowers, and the government has announced a series of liberalisation measures
1
The views expressed here are solely those of the authors and do not necessarily reflect the views of the
Central Bank of Malaysia. The authors are from the Monetary Assessment and Strategy Department of the
Central Bank of Malaysia.
BIS Papers No 46 107
2. and fiscal incentives for the property market. In terms of funding, a government-sponsored
lending institution, Cagamas Berhad, plays a pivotal role in the housing market. Cagamas, a
specialised secondary market institution, purchases or refinances mortgage loans from
originators (mainly banks) to provide them with long-term funding. Besides these
developments in the housing market, the streamlining and reduction of duties on cars have
also boosted the demand for household credit.
Trends of household debt
Level and growth rate of household debt
Prior to the 1997 Asian financial crisis, the share of household credit in total outstanding
bank loans was relatively small compared to the share of loans extended to businesses. At
end-1997, lending to the corporate sector accounted for 67% of total loans outstanding. But
consumer financing has expanded considerably from 2000 onwards; the average annual
growth rate for the period 2001–07 was 14.8% (Graphs 1 and 2). After six years of rapid
growth, household debt grew at the more moderate pace of 7.9% in 2007, in line with the
more subdued housing and automotive markets. As at end-2007, household credit
accounted for 56% of total outstanding bank loans.
Graph 1
Breakdown of banking system loans
As a percentage of total loans
100
90
34.4%
80 41.3% 45.3% 48.8% 51.4% 54.5%
70 56.5% 55.9%
60
50
40
30 65.6%
58.7% 54.7% 51.2% 48.6% 45.5%
20 43.5% 44.1%
10
0
2000 2001 2002 2003 2004 2005 2006 2007
Business Household
Source: Central Bank of Malaysia.
108 BIS Papers No 46
3. Graph 2
Household indebtedness
1
RM billion % growth
450 30
27.1
400 25
350 17.6 20
13.7 15.0
300 13.1 15
10.2
250 7.9 10
200 5
150 0
2001 2002 2003 2004 2005 2006 2007
Household debt % growth (rhs)
1
Year-on-year change, in per cent.
Sources: Central Bank of Malaysia, Treasury Housing Loans Division.
Composition of household debt
The composition of household debt changed little over the period 2000–07. The bulk was for
house financing, which accounted for 55% of total household debt as at end-2007 (Graph 3).
Total loans for housing purchases grew at an average annual rate of 15% during the period,
in line with government efforts to promote home ownership. In addition, financial institutions
have been willing to finance residential mortgages because such loans are typically viewed
as low risk.
Graph 3
Composition of household debt by purpose
In per cent
100
80
60
40
20
0
2000 2001 2002 2003 2004 2005 2006 2007
1
Purchase of properties Purchase of transport vehicles
Personal use Credit card
Other purpose
1
Includes residential and non-residential properties.
Sources: Central Bank of Malaysia, Treasury Housing Loans Division.
Loans for the purchase of passenger cars account for the second largest proportion of
household debt. As at end-2007, car loans accounted for 23% of total household loans.
Strong consumer demand for motor vehicles is attributed mainly to the revision of the tax
BIS Papers No 46 109
4. structure for passenger cars, new launches of mid-range passenger cars and the
promotional activities undertaken by car companies to expand their sales.
Financing via non-secured credit cards has been growing faster than mortgage lending,
although the amounts are less significant. Reflecting the strong demand for consumer loans,
coupled with aggressive marketing and advertising strategies by banks to attract customers,
outstanding credit card loans grew by 17.8% a year, on average, over 2001–07. As at end-
2007, credit card loans accounted for slightly more than 5% of total household debt.
Providers of household credit
The banking system, with its extensive branch network and increasingly flexible financing
packages, is the largest provider of household credit in Malaysia, accounting for 84% of total
household debt as at end-2007 (Graph 4). As the main mobiliser of funds in the Malaysian
economy, the banking sector has been able to meet the increasing demand for financing
arising from the growth in household consumption. It also reflected banking system
increased dominance in lending to household sector due to the significant rebalancing of
banking institutions’ loan portfolios into the retail segment.
Graph 4
Composition of credit providers to household sector
In per cent
100
95
90
85
80
75
2000 2001 2002 2003 2004 2005 2006 2007
Banking system Treasury Housing Loans Division
Development financial institutions Insurance companies
Sources: Central Bank of Malaysia, Treasury Housing Loans Division.
The role of the development financial institutions (DFIs) is also growing. They overtook the
Treasury Housing Loans Division as the second largest provider of household credit in 2007.
DFIs’ share of the market rose from a mere 1% in 2000 to 7.2% in 2007, mainly on account
of increased lending for consumption and real estate purchases.
Types of loans and contracts
In general, banking institutions in Malaysia offer two types of mortgage loans, namely,
conventional and Islamic. Conventional loans account for 90% of mortgages. Banks typically
offer plain-vanilla mortgages at fixed or variable interest rates or a combination of the two.
Approximately 83% of residential mortgages are variable rate mortgages, with adjustable
rates pegged to the base lending rate (BLR) of individual institutions. In an increasingly
competitive environment, banks also offer mortgage packages with repayment flexibility,
such as graduated repayment schemes (lower initial instalment payments that increase
gradually over time) and loans with longer maturities. Typically, housing loans have a
repayment period ranging from 20 to 35 years or mature when the borrowers turn 60 or 65. It
110 BIS Papers No 46
5. is common for mortgages to carry fixed interest rates during the first three to five years and
BLR-based rates subsequently, until maturity. This reflects the “sell-then-build” 2 concept of
residential property development.
The products offered under Shariah-based Islamic house financing generally have the same
characteristics as conventional mortgages but are based on the concept of Bai’ Bithaman Ajil
(BBA). 3 Islamic mortgages carry mainly fixed interest rates. However, banking institutions
have begun to offer variable rate Islamic mortgages following a review of the BBA’s variable
rate financing mechanism conducted in November 2004 to promote efficiency in the pricing
of this mode of financing. Accordingly, Islamic banking institutions are now allowed to
determine a reasonable ceiling profit rate, taking into account their risk management,
capabilities, business strategies and market outlook.
Housing finance agency
Cagamas Berhad, the National Mortgage Corporation, was established in 1986 to promote
the secondary mortgage market in Malaysia. Its corporate mission is to provide financial
products and services that improve the availability and affordability of home mortgages,
particularly for lower-income households. Cagamas issues debt securities and uses the
funds to finance the purchase of housing loans from banking institutions, selected
corporations and the government. The provision of liquidity at a reasonable cost to the
primary suppliers of housing loans encourages them to offer additional financing on
affordable terms.
However, hedging instruments are relatively less attractive as risk management tools in
Malaysia, where the financial sector has enjoyed ample liquidity since 1998. The opportunity
cost of securitising or reallocating mortgage loans into bond market instruments may not be
potentially higher vis-à-vis the potential returns from retaining the mortgages. Thus, although
Cagamas provides an avenue for banking institutions to hedge against liquidity risk (with
recourse) and credit risk (without recourse), the volume of mortgages that are sold to the
agency and securitised remains relatively low. At end-2007, only 0.7% of the outstanding
mortgages of the banking system were securitised, compared with 33.4% at end-1996.
Through its single-purpose and wholly owned subsidiary, Cagamas MBS Berhad (CMBS), in
October 2004 Cagamas successfully issued Malaysia’s first residential mortgage-backed
securities (RMBS), which were backed by the government’s staff housing loans. 4 This issue
augured well for the development of a securitisation market in Malaysia. It is expected to
create a yield curve for mortgage-backed securities and serve as a benchmark for other
asset-backed securities. As at end-2007, CMBS securitisation activities involved a total of
five issues of RMBS backed by the government’s staff housing loans, of which two were
based on the musyarakah principle. 5
2
A potential homebuyer enters into a contract and makes an initial payment (10% of the sales price) when the
sale and purchase agreement are signed. Subsequently, the buyer makes progress payments on the balance
at different stages of construction.
3
BBA refers to the sale of goods on a deferred-payment basis at a price that includes a profit margin agreed
upon by both the buyer and the seller.
4
The lender is the Treasury Housing Loans Division.
5
The musyarakah principle refers to a partnership or joint venture for a specific business with a profit motive,
whereby the profits are apportioned according to an agreed ratio. Both parties share any losses on the basis
of their equity participation.
BIS Papers No 46 111
6. Financial vulnerabilities and household debt
As a result of heavy borrowing by Malaysian households, the ratio of household debt to GDP
grew to 67% in 2007, from 47% in 2000 (Graph 5). As with most forms of credit, the rapid
development of household debt can create vulnerabilities, in particular if the debt reaches an
unsustainable level. However, the level of household indebtedness in Malaysia, which is
comparable to that of other countries in the region, remains manageable. The risk to the
financial system is limited, mainly because of the household sector’s strong financial position
and a resilient banking system. These have been enhanced by the Central Bank of
Malaysia’s adoption of a comprehensive approach to the preservation of financial stability.
The approach encompasses surveillance at both the institutional and the systemic levels, the
adoption of regulations to ensure prudent bank practices and supervisory activities.
Graph 5
Household debt to GDP ratio (2007)
% of GDP
90.0 82
71
75.0 67
60.0 51
45.0
30.0
15.0 7
0.0
Korea Singapore Malaysia Hong Kong SAR Indonesia
Sources: Central Bank of Malaysia, Financial Stability Reports of
respective countries.
Strong financial position of households
Malaysia’s household sector has demonstrated a great capacity to withstand shocks. In
particular, net worth and income have grown broadly in tandem, supported by stable
employment levels and a favourable economic environment. While their debt has grown
rapidly, households have also accumulated sizeable financial assets. Since 2002, financial
assets, which remain relatively stable at more than double household debt, have provided
households with the flexibility to adjust to changes in the economic environment (Graph 6).
112 BIS Papers No 46
7. Graph 6
Household financial assets to debt ratio
RM billion Times
1,000 3.0
800 2.5
2.0
600
1.5
400
1.0
200 0.5
0 0.0
2000 2001 2002 2003 2004 2005 2006 2007
Household debt
Household financial assets
Household financial assets to debt ratio (rhs)
Sources: Central Bank of Malaysia, Treasury Housing Loans Division, Employees
Provident Fund, Securities Commission.
The very high level of the household sector’s liquid assets underscores the sector’s capacity
to service its debt even in the short run. Indeed, during the first half of 2006, despite higher
interest rates amid greater inflationary pressures, the debt servicing capacity of borrowers
not only did not deteriorate but actually improved. The ratio of repayments to disposable
income dropped to 39.8% in 2006, from 41.3% in 2005 and a high of 46% in 2002.
Equally important, the bulk of the increase in credit card balances did not involve cash
advances. Credit card cash advances have been on a downward trend, accounting for 5.8%
of total credit card transactions in 2007 (6.6% in 2004). Moreover, the repayment ratio 6 for
credit cards –the average amount of debt is paid in full – rose slightly in 2007, to 58.4%, from
57.8% on average during 2000–06, indicating that credit cards continue to be used as a
means of payment rather than as a mode of financing.
Overall, aggregate household non-performing loan ratios continued to trend downwards, to
5.3% in 2007 from a high of 12.1% in 2000 (Graph 7). Collectively, these indicators suggest
that the vulnerability of household finances to adverse shocks continues to remain low.
6
Repayment ratio = [(Total spending + cash advance) – outstanding balance]/(Total spending + cash advance).
BIS Papers No 46 113
8. Graph 7
Non-performing loan (NPL) ratio of household sector
In per cent
20
18
16
14
12
10
8
6
4
2
0
2000 2001 2002 2003 2004 2005 2006 2007
Total
Purchase of transport vehicles
Purchase of residential property
Purchase of non-residential property
Personal use
Credit card
Source: Central Bank of Malaysia.
A more resilient banking sector
Banking institutions in Malaysia have made considerable progress since the 1997 Asian
financial crisis. The strong capitalisation of the banking system was reflected in the risk-
weighted capital ratio of 13% as at end-2007. In addition, banks have made great
improvements in pricing borrowing risks, in particular, implementing substantial and
comprehensive measures allowing them to gain a better understanding of household asset
and debt portfolios. These measures include progressively strengthening risk management
infrastructure and practices, such as retail credit scoring; improving information and portfolio
management systems; and enhancing loan administration, monitoring, management and
recovery processes.
Implications and policy issues
The developments in Malaysia’s household finance markets have thus far supported the
growth in private consumption and made positive contributions to other sectors in the
economy. In addition, house prices have been relatively stable, with moderate increases
driven by fundamental factors such as demographics and income growth. Nonetheless,
policymakers will need to be vigilant as increased household indebtedness has important
macroeconomic implications.
Increased indebtedness means that the household sector has more exposure to interest rate
risks and shocks to household income and house prices. Households whose debt carries
mostly floating interest rates are vulnerable to rising interest rates. Higher interest rates and
the corresponding increases in debt servicing costs, in turn, result in a reduction in
disposable income and, hence, consumption. The risks are more significant if households
have taken advantage of low borrowing rates to increase the size of their mortgage
excessively.
Monetary policy and the increased sensitivity of the household sector to interest rate
changes
In principle, changes in monetary policy affect consumer behaviour through both interest rate
and income channels. Higher indebtedness would, therefore, increase the sensitivity of
households’ behaviour to changes in interest rates, amplifying both effects. This argues for
114 BIS Papers No 46
9. incremental changes in the policy interest rate, particularly when structural changes in the
economy and financial system create uncertainty about the monetary transmission
mechanism. Smooth, steady changes in the policy rate, in turn, reinforce the importance of
forward-looking monetary policy. Ultimately, concern over the impact of household debt from
the perspective of monetary policy would be entirely in terms of the implications for growth
and inflation.
The need for enhanced information on the household sector
The ability to detect and assess emerging vulnerabilities in the financial system arising from
developments in household debt is critical, so as to allow appropriate policy measures to be
implemented in a timely manner to contain such risks. Therefore, it is essential for
policymakers to have timely and frequent data on the household sector. While aggregate
information on household indebtedness and delinquency patterns is well established in
Malaysia, micro level information such as household incomes, expenditures and wealth – in
particular the distribution of wealth across various asset classes and income groups – are not
readily available, are less comprehensive and of lower frequency and cover only a small
sample of the population. Given the variations in the debt burden across income and
occupational groups, actions such as changing the policy interest rate are likely to have
different impacts on different households. Efforts are being made to enhance the collection of
data on the financial assets and liabilities of a wider spectrum of households as well as to
collect micro level data on the financial position of households.
The need to enhance the financial capability of consumers
The Central Bank of Malaysia’s initiatives on consumer protection and education are aimed
at empowering households to take responsibility for their own financial position. The
strategies are two-pronged: strengthening the consumer protection regulatory infrastructure
and enhancing consumer education. The Central Bank of Malaysia has undertaken efforts to
educate consumers on financial management to enable them to make informed decisions
and to manage financial risks in a proactive and constructive manner. In April 2006, the
Central Bank of Malaysia established the Credit Counseling and Debt Management Agency
to assist individuals seeking advice on credit, financial management and education and debt
restructuring.
Prudential regulations and supervisory oversight
On the supervisory front, the Central Bank of Malaysia has conducted an industry-wide
assessment of the adequacy, robustness and effectiveness of the banking sector’s risk
management infrastructure, standards and practices with respect to its exposure to
households. The assessment covered governance, market conduct, product development,
loan origination and underwriting processes, collateral valuation and management, portfolio
management, loan maintenance and recovery and information management and reporting
systems.
The Central Bank of Malaysia also established the Centralised Credit Reference Information
System (CCRIS), which has provided banking institutions with valuable information, thereby
enabling them to screen out non-viable borrowers. The CCRIS contains extensive
information on the leverage position and quality of all borrowers in the banking system,
regardless of the value and performance of the exposures. Efforts are being made to
enhance the information content of the CCRIS to improve further the quality of financial
institutions’ credit assessment and risk modelling. From a financial stability perspective, the
CCRIS provides important information for the conduct of surveillance – for example, the
exposure of the banking sector to a particular borrower or industry and its quality.
BIS Papers No 46 115
10. Meanwhile, to enhance the existing capital adequacy framework, there is a need for
differentiated treatment of different risk classes to take into account the risk profile of loan
exposures. This would ensure that banking institutions maintain sufficient capital to support
the expansion of financing for the household sector.
The financial surveillance framework is also continuously being enhanced, including through
stress-testing the impact of a possible weakening of the household sector’s financial position
on both the banking system and individual institutions. Going forward, the challenges facing
the Central Bank of Malaysia include ensuring that the scenarios in the stress tests are
realistic and that the linkages among financial institutions are understood, and achieving a
better understanding of the secondary impact of a potential weakening of the household
sector’s financial position on the economy and the feedback effect on the financial system.
Conclusion
From the financial stability perspective, as household lending continues to play an important
role in the banking system, a more comprehensive and responsive risk management system
is critical in preserving the soundness of each banking institution and the resilience of the
banking sector as a whole. This is to ensure that banking institutions are able to effectively
manage the risks at all times and under all economic conditions. In terms of monetary policy,
when setting the policy rate it is imperative to take into account the increased potency of
monetary policy as a result of the increased sensitivity of household consumption and debt
servicing capability to interest rate changes.
116 BIS Papers No 46