ASEAN KEY DESTINATIONS
Malaysian banks warned against risks
The latest figures released by Bank Negara showed that total household debt reached an all-time high of RM561.5bil or 78.1 percent of gross domestic product (GDP) as at end-August, the second highest debt level in Asia outside Japan.
As at end-2009, household debt stood at RM516.6bil or 76.6 percent of GDP, compared with 63.9 percent in 2008 while from 2005 to 2008, total household debt averaged at 67 percent. "As competition intensifies in a low interest rate and liquidity-flushed environment, banks should continue to maintain prudent risk appetite and guard against being blind-sided by build-ups in risk concentrations," Yeah said.
"Since hitting a peak of 166 percent of GDP prior to the Asian financial crisis in 1998, the country's total private sector credit has reversed its declining trend from a low of 111 percent in 2008 to reach an estimated 123% of GDP this year. With the rise in overall debt level, it is appropriate to alert banks against risky lending that usually accompanies a surge in debt level." Given the close supervision of the central bank and the continuous strengthening of banks' risk management since the Asian financial crisis, he said there was less room for reckless lending although banks may stretch lending to the limits for selected individuals and firms.
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