Monday, September 16, 2013

Balance sheets of S'pore households "generally in good shape": MAS  |  POSTED: 12 Sep 2013 11:12 PM

The balance sheets of Singapore households are "generally in good shape", according to the Monetary Authority of Singapore.

SINGAPORE: The balance sheets of Singapore households are "generally in good shape", according to the Monetary Authority of Singapore (MAS).

In an exclusive interview with Channel NewsAsia on Thursday, MAS said the latest measures announced on Wednesday aim to prevent individuals with credit card problems from getting further into debt.

Meanwhile, analysts have said the various debt reducing moves by the central bank are a prudent move to curb borrowings in a low interest rate environment.

A slew of measures has been implemented to curb the burgeoning household debt in Singapore.

Restrictions on the loan tenure for residential properties were introduced in October 2012.

Then came financing restrictions on motor vehicle loans in February 2013.

Property loans got hit again when the Total Debt Servicing Framework was introduced in June 2013.

The latest measures involve new rules to curb credit card and unsecured debt.

Wong Nai Seng, assistant managing director at Monetary Authority of Singapore, said: "MAS has taken a series of measures to restrain borrowings for various types of household debt, including car loans and mortgages, and the objective really is to avoid households getting into too much debt and borrowing beyond their means."

He added: "The MoneySENSE financial education programme is working with the industry and consumer groups to encourage responsible borrowing. MAS will continue to encourage prudence both in lending and borrowing."

Compared to other economies' debt in the region, analysts said Singapore fits somewhere in the middle.

Vishnu Varathan, a senior economist at Mizuho Bank, said: "You have Malaysia and Thailand who are well ahead, 80 per cent for Thailand's case as a percentage of GDP. Korea is leading the way, about 90 per cent. And Singapore is - depending on how you take the measure - either in the 60 plus per cent or going to hit 75 per cent of GDP. All of this we want to keep in context... net household assets are also very high in Singapore."

He added: "The collateral that is pledged against this debt for example, mortgages, you have house prices. With higher interest rates, there could be the issues of prices coming down and rentals coming down, so these things are inter-related. (This) is why there needs to be a pre-emptive move.

"And to frame things, while nominal GDP has grown just below 25 per cent since the end of 2009, you actually have mortgages growing about 75 per cent, so three times as fast. Which means we have accumulated debt exposed to the property sector a lot faster. Credit cards debts are also similar, though at a slower rate, at 40 per cent. So these are the reasons why the government has to step in."

MAS said Singapore's household debt is not that dire and analysts said the latest measures are meant to rein in rollover and credit card debts. So when interest rates start rising and financing burdens for cars and homes start to rise as well, these households will be in better shape to pay back those loans.

As for banks in Singapore, experts said these measures will have little impact.

Karen Loon, banking leader at PwC Singapore, said: "The credit card and unsecured business is reasonably small for the banks, so we do not expect a big impact. There could be a small impact on interest income.

"The other things we have noted as well is that... these similar rules in other countries have not had a big impact on banks in those markets."

These markets include the US, Australia and the UK where there have been a big push towards responsible lending and consumer protection.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C

Senior Sales Director
DTZ Property Network Pte Ltd (L3007960A)

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