Singapore announces lending curbs amid rising debt


I supposed to write down my thoughts on Tanda Putera after I watched it, but due to lack of time, I am still writing it.

However, this one should go first as this caught my attention today, and I think worth of sharing:

SINGAPORE: Singapore has announced new rules to cap credit card and other forms of unsecured lending by banks, amid growing concerns about rising household debt in Asia by consumers once known for their thrift.

Asia has seen consumer debt levels rise sharply in recent years due to low interest rates and aggressive lending by banks.

For Singapore, the ratio of household debt to gross domestic product now stands at around 75%, up from 55% in 2010 and 45% in 2005, according to data compiled by Standard Chartered.

“The rise in household debt is a fairly generic trend across Asia,” said Selena Ling, head of treasury research at OverseaChinese Banking Corp.

“From a macro prudential point of view, you’d want to mitigate the increase in household debt, particularly with respect to unsecured loans.”

In Asia, household debt levels are highest in South Korea and Malaysia, followed by Thailand, while Singapore is somewhere in the middle of the pack, she added.

Bank of America Merrill Lynch estimated in a recent report that household debt in South Korea stood at around 88% of GDP at the end of March this year.

The ratio for Malaysia was 80.5%, while Thailand’s is 77.5%.

Singapore has already taken steps to cap borrowings for property purchases, while Thailand’s central bank has warned about rising household debt and a possible credit bubble, although it backtracked slightly on Aug 21 by saying it was less concerned about the high level of borrowings by households. Credit Suisse said in a recent report the household debt situation in Malaysia, Korea and Thailand are more worrying than in Singapore and Hong Kong, where the level of financial wealth is also high.

“For these two countries, the ratio of household debt to financial assets is 13% on average, compared to an average of 48% for Korea, Malaysia and Thailand,” the Swiss bank said in its recent report.

In Singapore, the changes to the rules on unsecured lending will to be implemented in stages from Dec 1, and they include limiting the total amount of unsecured loans an individual can take to 12 times that person’s monthly income.

The changes are “aimed at improving lending practices by financial institutions and enabling individuals to make better borrowing decisions”, the Monetary Authority of Singapore said in a statement. Singapore, which has a population of 5.3 million, had 9.3 million credit cards in circulation at the end of 2012, up from 8.3 million at the end of the previous year.

Banks wrote off S$226.6mil in bad debt last year, an increase of 21% from S$186.7mil at end-2011.

But people in Singapore, which has more millionaires per capita than any other country, also own lots of assets, so the debt to asset ratio in the city-state is low relative to other Asian countries. — Reuters

Hmm.. the actual line that really, really caught my attention is:

For Singapore, the ratio of household debt to gross domestic product now stands at around 75%, up from 55% in 2010 and 45% in 2005, according to data compiled by Standard Chartered.

I can’t stop from thinking and wondering that some of us, here in Malaysia, are so damn proud to bash our own country, saying like as if we are really among the worst and how our debt and even some of our own household debt is high due to government’s doings.

Frankly, yes, I am amazed.

It is not that I am living debt free. I also do have loans -car loans, housing loans and the favourite one -credit cards.. but never once I put the blame on government.

I don’t blame government not because I blindly support them, but I think, the debt that I owe is in my control. In other words, if I don’t want my debt ratio is high – I need to control my spending.

For example, for the kind of salary I am earning, I could see my friends who are within my salary range, using cars more luxury than mine. If possible, they do not opt for Proton or any local cars. For some, with that kind of salary, they “SHOULD” using better standard cars. So, in a way, though they earn as much as the same with me, they drive bigger car and bigger installments per month.

So do the choice of house. I know we want the best for the family, but we also need to see whether we can sustain it. Some are willing to loan more just to get the type of house (not necessarily home) they wanted… with some even tried to push it, even if the credit rating is not that good.

Therefore, if one want to do a survey, of course, their household debt can be higher than mine because they loaned more than I do.

However, I do acknowledge that some may need to borrow. Yes, at times, there’s a need (not want). There are times we actually need more cash because we need to, not want to.

So, my dear friends, do check yourself.. is your “choice of debt” is based on things you need or want? Yes, a house and a car has become a necessity, but the type of house and car  that distinguish is the choice made a want or a need.

Question on the street: Why are you to be in debt? Is it by choice or force?

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