Date: For Parliamentary Sitting on 25 Apr 2000
Questions:
Q2. To ask the Deputy Prime Minister whether there are signs, anecdotal or actual, of excessive consumer credit, given the recovery in confidence and the advent of online services, and how the Government will act to curb such excess, if necessary.
Q3. To ask the Deputy Prime Minister, given the changing nature of the provision of financial services, especially where a more timely extension of online credit may mean that credit risk assessment lags approvals, how overall credit risk will be managed.
Answer:
1. Consumer credit, overall, has not increased significantly. Total bank loans to individuals declined by 0.8% in 1999 to $21.6 billion, and picked up by only 2% in Feb 2000, compared to a year ago. Credit card spending has gone up by 16% in 1999 and 19% in Feb 2000, after declining in 1998 due to the downturn in the economy. After a slowdown in 1998, the amounts rolled-over on credit card balances have also grown by 23% in 1999 and 25% in Feb 2000, compared to a year ago. But bad debts on credit card spending remained low, at 0.6% of spending.
2. There has been a rapid emergence of online services allowing purchases by credit card. This will no doubt grow, as e-commerce becomes prevalent and more consumers become familiar with the internet. While this may alter the means of payment and spending patterns, credit spending in Singapore is still governed by the minimum income requirement and 2 times monthly salary limit that MAS imposes.
3. The traditional methods by which banks assess and manage their credit risks still apply in the electronic age. Offering online credit facilities should not change the criteria that banks use to evaluate credit applications. Banks will have to carefully balance the need to grant quick approval of on-line applications with the need to verify the income and credit history of the applicants.
4. However, technology exists for banks to perform credit assessment more efficiently and quickly and thus become more responsive to consumers, particularly for those with whom they have an existing banking relationship. Within the industry, the Association of Banks (ABS) is looking into the formation of a Consumer Credit Rating Bureau (CCRB) which will help the banking community identify risky candidates for credit. All these enable the banks to manage their overall credit risks better, while raising the quality of service to their customers.
5. While the pickup in credit so far has not been excessive, the Government will continue to monitor the trends in consumer credit to see if further measures are necessary.