SERVING THE PUBLIC,
- PROTECTING CONSUMERS
- Financial Advisory Industry Review
- Encouraging Prudent Borrowing and Lending Behaviour
- Enhancing Prospectus Disclosure Rules for Securities Offers
ENCOURAGING PRUDENT BORROWING AND LENDING BEHAVIOUR
Implementation of Unsecured Credit Measures
To encourage prudent borrowing, MAS announced in 2013 that financial institutions would be disallowed from granting further unsecured credit to a borrower if the borrower's total interest bearing unsecured debt exceeds an industry-wide borrowing limit for three consecutive months. The borrowing limit was to be set at the borrower's annual income, and was to take effect on 1 June 2015. To allow borrowers more time to adjust to the borrowing limit, MAS announced in April 2015 that it would be phased-in over four years. The limit was set at an initial level of 24 times a borrower's monthly income from June 2015. This will be lowered progressively to 18 times from June 2017 and 12 times from June 2019.
To help borrowers affected by MAS' unsecured credit measures, we worked closely with ABS, credit card issuers and Credit Counselling Singapore to develop coordinated repayment solutions for these borrowers. MAS accompanied the introduction of the new measures with an educational campaign to help borrowers understand the phasing in of the borrowing limit and repayment solutions, and to educate the public on the consequences of overspending.
Enhancement of Credit Information in the
MAS has been working closely with the consumer credit bureaus to enhance information residing with them. With effect from April 2015, a borrower's unsecured debt balances are broken down into interest bearing and non-interest bearing components. The enhanced information empowers borrowers and financial institutions to make more prudent borrowing and lending decisions respectively.
Resetting of Motor Vehicle Financing
In 2013, MAS had re-introduced motor vehicle financing restrictions as a cyclical response to the strong demand for cars and the consequent pressures on inflation. In addition, they serve as a structural measure to foster financial prudence among borrowers.
As at Q1 2016, premiums on COEs have fallen significantly and inflationary pressures have receded. The contribution of private road transport (excluding petrol) to CPI-All Items inflation eased from +1.3% points in 2011-2012 to -0.5% point in Q1 2016. Outstanding motor vehicle loans have moderated alongside the fall in demand, declining by 32% from S$14.13 billion in Q1 2013 to S$9.55 billion in Q1 2016. In view of these developments, MAS reset the financing restrictions in May 2016 by raising the maximum loan-to-value limit and tenure to 70% and seven years respectively. The recalibrated rules will continue to limit excessive borrowing and support the move towards a car-lite society over the long term.