Key Supervisory and Regulatory Initiatives INSPECTIONS AND SUPERVISORY REVIEWS Inspections on Consumer Car Loan Business In January 2003, MAS had lifted guidelines that restricted the maximum financing quantum for the purchase of a car to 70% of the purchase price, and the maximum financing tenor to seven years. Notwithstanding the lifting of these restrictions, MAS expects financial institutions to continue to exercise prudence when extending car loans to consumers. In this context, MAS conducted thematic inspections on the credit underwriting standards, risk management practices and procedures of six financial institutions that accounted for more than three-quarters of total consumer car loans in the financial system. Although these institutions generally had policies and procedures in place for their car loan business, MAS noted several areas of common weaknesses. Among them were the lack of documentary proof of income for some applications and omission of the hirer’s other liabilities in assessing repayment ability. As the value of collateral is essential in determining the loan amount, financial institutions should also take reasonable steps to ascertain the veracity of the purchase price of both new and used cars. MAS has issued an advisory to the banking industry to share the inspection findings and best practices that may be adopted by the industry. The advisory emphasized the need for robust procedures on assessing the credit worthiness and debt servicing ability of the hirer, and on valuation of the collateral.