MAA says new rules already impact sales of new vehicles

NEW rules means new consequences and the first industry to raise its displeasure over new funding guidelines was the auto industry. Their concerns were stoked by a steep drop in sales in January, and was echoed by Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad.

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/3/24/business/10924637&sec=business
Published: March 26, 2012

Aishah: ‘We feel banks must not be too cautious and stringent in providing loans.’

 

“The sales of motor vehicles, whether new or used, are very dependent on availability of financing. Most people require financing to buy a car. In fact the purchase of a motor vehicle is the second biggest capital expenditure item for most people after property.

“Therefore, MAA is naturally very concerned with any move by financial institutions to impose more stringent financing conditions for hire purchase loans for the purchase of new vehicles,” she tells StarBizWeek.

According to reports, loan applications for the purchase of passenger cars contracted by 15.5% year-on-year in January from 7.8% year-on-year growth in December 2011.

Aishah says while the MAA commends Bank Negara's action in promoting prudent and responsible financing practices among local financial institutions, she however feels that imposing more stringent financing conditions for hire purchase loans under the present economic environment will not help to stimulate the market and instead make it worse.

“MAA recognises that banks will naturally be more apprehensive about lending in the current uncertain economic outlook. However, we feel banks must not be too cautious and stringent in providing loans as this will inadvertently have a negative impact on the overall economy and the automotive sector would be one of the sectors earliest to be affected.”
Aishah says the new lending rules had already had an impact on the sales of new vehicles.

 
Ang: ‘The whole vehicale sales process may take longer to complete with request for more documentation.’

 

“This will in turn reduce the revenue for the Government as the automotive sector contributes a lot of money in terms of taxes and duties.

“Instead of implementing the stricter guidelines straight away in January 2012, we feel the guidelines should have been implemented in stages so as to allow all stakeholders to familiarise with them and to soften the impact on the auto industry and consumers,” she says.

According to OSK Investment Research, under the new lending guidelines, credit approval will now be determined by calculating the “debt service ratio” based on a purchaser's net income (which is a smaller denominator) instead of gross income previously.

Proper documentation is also needed and any additional income must be backed by supporting documents, while lending to civil servants will be capped at a debt service ratio of 60% versus 70%-75% previously.

Last month, Proton Edar Dealers Association Malaysia (PEDA) president Armin Baniaz Pahamin was reported as saying that dealership sales had been “severely damaged” with only 30% of applicants able to secure financing for new Proton cars in January.

Armin also claimed that the income of more than 4,500 sales advisers employed by the Proton dealers' network had been badly impacted since the implementation of the new lending rules.

Impact on lower segment vehicles
Industry observers and players believe that the central bank's new guidelines will have the biggest impact on lower segment vehicles.

“As forecast in our annual outlook for 2012, the A segment and the used car financing will see the most adverse impact, followed by the B-segment. The impact on higher income buyers will be minimal,” says Frost & Sullivan partner and head for automotive and transportation practice, Asia-Pacific, Kavan Mukhtyar.

Kavan: ‘This has had a significant adverse impact on the automotive industry in the first two months.’

 

Kavan adds that the new lending guidelines need to be looked at in the context of the global economic uncertainty since 2008.

“Globally the core issue has been unmanageable and poor quality of consumer debt. Bank Negara's guidelines are with the intent of managing household debt in Malaysia to reasonable levels.

“However, this has had a significant adverse impact on the automotive industry in the first two months of 2012. The approval rates have gone down dramatically. We believe this could be due to an initial reaction to the guidelines. Over the next few months the approval rate would go up. However, we expect lending institutions to remain conservative in 2012.”

Aishah concurs that the segment most affected will be the lower capacity passenger car segment.
“Customers for this segment are usually from the lower income group and self-employed. Many may have the income including supplementary income derived from part time jobs. But they do not have the proper documentation to substantiate their ability to service hire-purchase loans.

“Going forward, we feel sales of motor vehicles would show some improvement in the coming months,” she says, adding that MAA, together with other auto key players, had met Bank Negara last month to voice their concerns over the new ruling.

“Bank Negara has agreed that all the concerns and issues raised by auto players would be smoothened out with the financial institutions,” she says.

OSK Investment Research analyst Ahmad Maghfur Usman similarly feels that “things should recover,” adding that the dealer to banker lending chain will “adjust eventually” and that everything should be “back to normal.”

In his recent research report, Ahmad said that banks, in complying with the new guidelines, have become stricter on documentation and more stringent in the initial screening stage putting put a dent on vehicle sales.

“On the other hand, this may get more manageable as banks and car dealers adapt to and familiarise themselves with the new submission procedure, which has led to the overall loan application period stretching to a week versus the usual one to two days.

“We understand that the applicants most hit by the new guidelines are civil servants, who are unable to produce supporting documents on their side income,” he says.

Ahmad, however, feels that demand for vehicle sales will be spurred by new model launches, such as Proton's upcoming P3-21A, which is expected to be launched soon.

Aminar Rashid: ‘While our bookings continue to be healthy, registration or the conversion is still relatively low.’

Drop in vehicle sales
Total vehicle sales fell 25% to 40,948 units in January 2012 from 54,781 units in the same month last year. This was attributed to attributable to tighter hire purchase loan approvals, but also to the shorter working month as a result of the Chinese New Year holidays and impact from Thailand's flood disaster, which had yet to recover fully.

Sales of vehicles, however, rebounded in February to rise 9% to 44,013 units from 40,387 units a year earlier, boosted by a return of consumers' buying interest, a longer working month and improved performance by the commercial vehicles segment.

According to the MAA, sales volume for March is expected to improve further as the local market adjusts to the stricter requirements of hire purchase application process.

Perusahaan Otomobil Kedua Sdn Bhd (Perodua) managing director Datuk Aminar Rashid Salleh says a meeting was recently held between the central bank and Perodua.

“From this meeting we were made to understand that one of the reasons for the decline in sales in January this year was due to various interpretations by the financial institutions, hence the differing stances taken by banks when implementing the new guidelines.

“This has led to the delay in registration for our vehicles especially Viva model, which is our level entry vehicle specifically for first time buyers.”

Aminar admits that the delay did have an impact in sales for Perodua Viva vehicles, especially in the northern, East Coast and east Malaysian regions by as much as 20% in January.

“While our bookings continue to be healthy, registration or the conversion is still relatively low. Our current strategy is to continue our dialogue with the respective stakeholders, namely the financial institutions as well as other automotive players on how best to overcome this issue.

“We are also looking at other viable options and studying its effects. Adjustments will be made accordingly,” he says.

Edaran Tan Chong Motor Sdn Bhd (ETCM) executive director Datuk Dr Ang Bon Beng says the stringent loan conditions for hire purchase of vehicles affects mainly the lower income group. The company distributes Nissan cars.

Market positioning
“Nissan booking and sales are not badly affected attributable to the market positioning of our model line-up.

Oda: ‘There will be a J-curve effect where we will see a dip in sales in the initial stages.’

 

“However, as financial institutions request for more supporting documents, take a longer loan processing time and impose additional conditions for loan approvals, the whole vehicle sales process may take longer to complete.”

Ang adds that while ETCM understands and supports the objective of Bank Negara's new guideline, he urges that any changes should be done in stages to minimise the impact to the automotive industry's eco-system.

Mitsubishi Motors Malaysia chief executive officer Tetsuya Oda believes the new guidelines will have an impact on all vehicle sales initially.

“There will be a J-curve effect where we will see a dip in sales in the initial stages but it will eventually rise. Consumers and the market will respond accordingly and will eventually adapt to the guidelines.”

Tighter screening of loans

THE local property sector is expected to see some “cooling down” in the number of transactions this year following the implementation of the responsible lending guidelines by Bank Negara on Jan 1.

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/3/24/business/10961643&sec=business
Published: March 26, 2012

According to Real Estate and Housing Developers Association (Rehda) president Datuk Seri Michael Yam, transactions are now taking a longer time to crystallise as banks are grappling with more data required for processing loan applications.

Yam says transactions are taking a longer time to crystallise.
 

“Buyers are also not committing to purchases until they get clearance from banks that they will be offered the loan applied for, which may or may not be sufficient for them to purchase the property they desire.

“The first segment to be affected is obviously the residential component. For the non-residential, especially commercial properties which may be bought by companies or partnerships, we understand the new formula is not applicable,” he tells StarBizWeek.

Yam feels that the new ruling will have a huge impact on the middle-income segment.
“However, it is common for this group to actually have double (or even) triple incomes from their second and third jobs, but may not have documents to support higher loan eligibility. While prudent risk management is good, financial institutions must also play a facilitative role in the home ownership agenda by assessing each application on its own merit and not blanket applications across the board.”

He adds that the affordable housing segment will probably be the most affected segment as borrowers are likely to be less affluent, with lower income and disproportionately higher expenditure.
“We predict headwinds for sales in this critical segment, which is contradictory to the wish of the Government to encourage home ownership,” Yam says.

Chang says the entry level market will be the most affected.
 

In light of this situation, Federation of Malaysian Consumers Association (Fomca) chief executive officer Datuk Paul Selvaraj is urging the central bank to perhaps ease the loan application process, such as making it easier for consumers to switch banks if necessary.

“Consumers, if they feel that they can get a better deal with another bank for their housing or car loan, should be able to do so with ease and at minimum costs. Consumers often feel overwhelmed at the procedures for changing banks. The process should be simplified. The ease of bank switching would promote better quality of services from the banks through competition.

“There should be greater emphasis not only on policy measures but on financial education. Not enough is being done to provide appropriate financial knowledge and skills to consumers,” he says.
One industry observer concurred that the responsible lending guidelines will have the biggest impact on the lower income group.

“This group of people are already earning a low salary and with stricter lending rules, getting loans could be made more difficult.”

National Housebuyers Association (HBA) secretary-general Chang Kim Loong says the responsible lending guidelines will have an impact on the local property sector, especially in the entry level market where aspiring job seekers purchase their first home and for married couples hoping to be able to purchase or upgrade their homes.

Selvaraj urges the central bank to ease the loan application process.
 

“Depending on location and from state to state, the price ranges from RM150,000 to RM500,000. This is the price range that speculators have been targeting in the past and have artificially inflated such property prices, but it's still too early to gauge the effectiveness or effects of the responsible lending guidelines.

“It is hoped that as property speculators are denied financing to purchase such homes and with only real demand in the picture, the prices of such properties will gradually decline to more realistic prices.”

According to reports, applications for loans for the purpose of purchasing residential properties contracted 6.3% in January from a growth of 11.3% in December 2011.

Yam says Rehda understands that the implementation of the rationale for responsible lending guidelines was due to the large household debts and the 40% increase in transaction value (from RM100bil to RM140bil) between 2010 and 2011.

“On the short to medium term, this restriction would ultimately cause a slowdown in borrowing which is the intended effect, and it will cause a negative effect on home ownership.

“The mixed signal arising from this new lending rule is that while on the one hand the Government is encouraging the building of more affordable medium-cost housing by introducing “My First Home Scheme” and “PR1MA” homes to stimulate demand, on the other we have this Bank Negara announcement,” he says.

Yam feels that the central bank's new lending criteria seems to be in contradiction to the earlier Budget announcement in October last year.

“This does not sit well with developers who are taking the cue and feel positive about home-buyers being offered greater opportunity and various incentives to own homes only to be somewhat dampened by this new requirement,” he says.

Positive measure?
Khong & Jaafar Sdn Bhd managing director Elvin Fernandez says he is supportive of Bank Negara's responsible lending guidelines.

“The new rulings are good because they are pre-emptive measures to prevent a housing bubble. The measures are making themselves felt as price increases in some hot spots that were a cause for concern have now stalled and also the trend from it spreading down the line or to other areas have also been curtailed.

Fernandez supports the guidelines as they prevent a housing bubble.
 

“House prices rising are not good. Prices rising with fundamentals such as household income and rental returns are good,” he says.

Chang also applauds Bank Negara's responsible lending guidelines.
“The guideline requires the financial services providers (FSPs) to provide assessment of individual affordability and provide suitable and responsible advice to customers on their capacity to take on additional financing,” he says.

According to Chang, the FSPs or banks will be required to undertake a comprehensive assessment on borrowers' sources of income and verify against independent sources to ensure that they have the ability to repay the loans throughout the tenure of the loan.

Income assessment shall be based on the borrowers' net income, which is the gross salary minus the statutory deductions such as Employees Provident Fund contributions and tax deductions.

“HBA has been advocating for a very long time for FSPs to exercise prudence and good judgment when disbursing loans. Due to stiff competition and key performance indicators set by the board and senior management, (FSPs) have been too lenient and aggressive in providing financing, resulting in artificially inflated property prices and many young adults being declared bankrupt due to their inability to repay their debt obligations,” says Chang.

Chang says that as part of the responsible lending guidelines, Bank Negara has repealed its requirement of a maximum debt service ratio (DSR). For the uninitiated, the DSR means that the debt repayments are divided by the borrower's income.

According to him, prior to the responsible lending guidelines, the maximum DSR was set at one-third (or 33%) of gross income for single loan repayments and half (or 50%) of gross income for all loan repayments combined.

The exception was given to civil servants who could borrow from the cooperatives with a DSR of up to 60% of their gross income.

“Hence, if the borrower's gross income is RM3,000, the maximum single loan repayment is RM990 and maximum aggregate of all loan repayments cannot exceed RM1,500 per month,” Chang says.

Under the responsible lending guidelines, the DSR based on gross income has been repealed and FSPs are now free to set their own DSR based on the net income of the borrower.

Chang says the issue now will be that prospective borrowers do not know if they would qualify for a loan as different FSPs have different DSR guidelines.

“There is a shock-effect with FSPs being told to totally disregard all forms of variable income such as discretionary bonuses, commissions and overtime and prospective borrowers that are dependent on these types of income are adversely affected.

“Based on our market sources, some FSPs are willing to consider these types of income but at a discounted rate and this causes great confusion to prospective borrowers as they attempt to shop around for loans,” he says.

 
Rehda feels the affordable housing segment will probably be the most affected.
 

Chang says HBA is urging the central bank to retain its “maximum DSR” requirement “to set a cap” as guidance for FSPs to follow.

“As it is, even with the previous guidelines on one-third and half, many FSPs have openly flouted the guidelines with reckless financing, resulting in artificially-inflated property prices and many young adults being declared bankrupt due to unmanageable debt levels.

“With the caps removed and FSPs being free to set their own lending policies, the situation of reckless financing may get even worse. Although HBA agrees that market forces are the best form of regulation, it has been shown that we operate in an imperfect market and hence the need to retain DSR limits for FSPs to follow,” he says.

As a means to improve lending, the HBA is also calling on the central bank to issue additional guidelines on the recognition of variable income, where the borrower can show a good track record for such income.

“This is because certain industries such as in the sales and manufacturing sectors, the basic income is often very low and the discretionary income serves as an incentive for employees to perform.
“If such discretionary income is to be totally disregarded, it is feared that such employees may never qualify for any sort of loan from legal channels and end up resorting to loan sharks.”

Principles and targets of lending guidelines

Many factors affect loan growth such as economic fundamentals, labour market conditions and income growth. Overall, loan growth is expected to continue in tandem with economic growth. The implementation of the guidelines will not curtail access to financing for borrowers who have the means to take on additional debt.

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/3/24/business/10927506&sec=business
Published: March 26, 2012


StarBizWeek posed some questions to Bank Negara via email 
on the lending guidelines and below are the answers:

SBW: With the responsible lending guidelines in place, do you expect loan growth for the banking industry to slow down this year?
Bank Negara: Many factors affect loan growth such as economic fundamentals, labour market conditions and income growth. Overall, loan growth is expected to continue in tandem with economic growth. The implementation of the guidelines will not curtail access to financing for borrowers who have the means to take on additional debt.

To ensure that individuals and households borrow within their means, financial institutions are required to ensure that appropriate consideration is given to a borrower's needs and circumstances when assessing loan application.

Are the guidelines effective in containing rising household debt and, on the flip side, to strengthen the banking system in the long run?
The guidelines complement a comprehensive range of pre-emptive measures introduced by Bank Negara to prevent the household sector from becoming a source of vulnerability to the financial system and economy. The aim is to prevent individuals from becoming overly-indebted and to discourage the build-up of any unhealthy trends in household indebtedness.

With consumers and lenders focusing on the borrowers' financial capability to afford a loan and the implications of not being able to meet the contracted debt obligations, we expect the guidelines to contribute towards avoiding the excessive accumulation of household debt, particularly among households that are more vulnerable to income shocks.

The guidelines are expected to create awareness and promote financial discipline and responsible practices for both lenders and borrowers. Its implementation will ensure the continued resilience of the household sector and promote a sustainable credit market that contributes to the stability of the financial system and economy as a whole.

Other measures implemented by the bank includes: stricter credit card guidelines for individuals earning a monthly gross income of RM3,000 and below; introducing a financial education programme, POWER!, targeted at young and new borrowers; providing an avenue for individuals to seek advice and assistance from Credit Counselling and Debt Management Agency in managing credit, finances as well as in restructuring existing debts with banks; and introducing maximum loan-to value of 70% on third and subsequent housing loan facility taken out by borrowers.

Do you foresee household debt to rise this year despite the guidelines?
As at end-2011, household debt stood at RM653.1bil or 76.6% of GDP (2010: 75.8%). Moving forward, the level of debt is expected to increase in tandem with income growth and favourable labour market conditions. The guidelines will serve to ensure that the pace of increase of household debt commensurate with the household's capacity to repay.

Do you think there is a need to review the guidelines? Do other jurisdictions also practise this (lending based on net income, among others)?
There are no plans to review it as its principles are sound. However, implementation issues related to the operationalisation of the guidelines have been identified and resolved. These include issues relating to documentation requirements to support loan applications and the need for effective engagement by financial institutions with their customers. Financial institutions have been reminded to ensure consumers who have the ability and capacity to repay will continue to have access to financing.

They are also required to provide more information at branches and in their websites on the documents required as proof of income and other supporting documents required for loan applications.

Reference to net income in the guidelines means income net of statutory deductions such as income tax, Socso and EPF. This provides a more accurate reflection of a borrower's capacity to take on more debt as statutory deductions do not form part of a borrower's disposable income. Apart from this, financial institutions are given the flexibility to determine a prudent debt service ratio level based on their respective lending policies and the circumstances of respective borrowers.

Countries such as Australia, Britain and the United States have also recognised the importance of ensuring a prudent, responsible and transparent financing practice for both consumers and financial institutions and have adopted relevant measures to this effect. -

Banks’ estimates on loan growth differ from consensus

PETALING JAYA: There is a gap between management guidance and consensus for loan growth the challenge for banks is to ensure that their loan growth targets for this year are met.

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/3/26/business/10978255&sec=business
Published: March 26, 2012

“Many investment professionals continue to retain their cautious stance on the banking sector with expectations of intensified competition, single-digit loan growth and continued pressure on net interest margin (NIM),'' said analyst Cheah King Yoong of Alliance Research.

However, in a recent sector update on banking, Cheah had put the average industry loan growth this year at 11% with competition in the sector expected to subside and NIM to bottom out this year.
Looking at just retail loans, Standard Chartered Bank Malaysia projects retail loan growth at single digit; however, there are other growth triggers for corporate loan growth.

Bank Negara’s new guidelines have some impact as we are seeing a general slowdown in retail loans. However, the ETP continues to be a positive trigger to the sector. — Tiew Siew Chien

 

“Bank Negara's new guidelines have some impact as we are seeing a general slowdown in retail loans,'' said Tiew Siew Chuen, country head of consumer banking, Standard Chartered Bank Malaysia. “However, the Economic Transformation Programme (ETP) continues to be a positive trigger to the sector.''

Standard Chartered registered loan growth of 13.5% year-on-year between June 2010 and June 2011.
“We expect the small and medium enterprises (SME) sector to capitalise on the ETP and sustain domestic demand. If economic indicators remain favourable, we forecast double-digit growth for our SME sector,'' she told StarBiz.

The Public Bank group expects its loan growth rate to sustain at a double-digit low teens, with accomodative interest rates and implementation of projects under the ETP supporting the demand for loans.

“The group is confident it can achieve its loan growth target based on its competitive pricing, fast turnaround time for loan approvals and disbursement, loyal customer base and wide branch network,'' said chairman Tan Sri Teh Hong Piow in an email reply.

Last year, the Public Bank group grew its total gross loans by 13.5% to RM177.7bil with domestic loan growth stronger at 14.1% compared with industry growth rate of 13.6%.
Loans to the SME sector grew by 13.8%.

The Public Bank group has the largest market share of residential properties and passenger vehicle hire-purchase financing in Malaysia at 18.1% (previous: 17.4%) and 25.9% (25.5%) respectively as at end of last year.

In residential properties, the group sees continued demand for affordable mid-range homes which form the bulk of its profile; it expects to maintain its leading position in the passenger vehicle hire-purchase sector with competitive financing packages and fast turnaround time.

“The group is also confident that demand for financing by SMEs will continue to expand, supported by healthy domestic demand,'' said Teh, adding that business loans would get a boost from ETP projects.

“However, weak global growth prospects, exacerbated by the sovereign debt problems in Europe and lingering concerns in the US economy are likely to impact economc growth in Malaysia, which could weigh on demand for loans this year.

“Despite the expected moderation in eocnomic growth this year, the group is confident of maintaining its track record for superior asset quality by having in place a rigorous credit risk management infrastructure and prudent lending policies,'' Teh said, adding that gross impaired loan ratio was expected to remain stable at below 1%.

RHB Bank Bhd expects loan growth at about 12%, with bridge financing for corporates under ETP projects taking the lead.

“The bank will continue to build on the momentum set last year on retail segments such as Amanah Saham Bhd financing, albeit at a slower pace,” said RHB Bank managing director Johari Abdul Muid.

The RHB Bank group achieved 16% loan growth last year compared with the industry rate of 13%.
This year, the mortgage loan segment is likely to experience a moderate slowdown, given slowing property sales particularly for high-end properties, said Johari.

“For motor vehicles, we expect demand for hire-purchase loans in the first half to stay soft although we see prospects for stronger volumes in the second half due to increase in car sales volumes with new car models hitting the market.

“For business and trade financing, it will be affected by a slower growth in global trade as well as the local economy. However, loans to the corporate/business sector, particularly for construction companies, will likely pick up in the second half as the implementation of ETP projects gain traction,'' said Johari.

Auto players adopt a ‘wait-and-see’ approach about impact of new lending guidelines

PETALING JAYA: Automotive industry players and observers are still maintaining a “wait-and-see” approach about the impact of Bank Negara's responsible lending guidelines on total industry volume (TIV) for this year.

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/3/26/business/10978551&sec=business
Published: March 26, 2012

“At this juncture, we feel it is still early to do a review on the TIV forecast for 2012. We will relook at it when we hold our half-year review sometime during the third week of July,” said Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad.

The MAA had forecast TIV to grow 2.5% to 615,000 units this year from 600,123 units in 2011.


                  Local car assembly plant
 
Total vehicle sales fell 25% to 40,948 units in January 2012 from 54,781 units in the same month last year. This was attributable to tighter hire-purchase loan approvals, shorter working month as a result of the Chinese New Year holidays and the impact from Thailand's flood disaster, which had yet to recover fully.

Sales of vehicles, however, rebounded in February to rise 9% to 44,013 units from 40,387 a year earlier, boosted by a return of consumers' buying interest, longer working month and improved performance by the commercial vehicles segment.

Frost & Sullivan partner and head for automotive and transportation practice, Asia-Pacific, Kavan Mukhtyar also said he was maintaining his TIV forecast at 612,000 units.

“We are holding our forecasts for now. In fact, we had already factored in the tightening of lending rules as one of the market restraints for 2012,” he said.

At a presentation earlier this year, Frost & Sullivan had forecast the approval rate for passenger vehicle loans to decline to 50.3% in 2011 from 59% in 2009.

Perusahaan Otomobil Kedua Sdn Bhd (Perodua) managing director Datuk Aminar Rashid Salleh said it was still too early to determine if the central bank's responsible lending guidelines would have an impact on TIV.

“It is too premature to assume that overall TIV will be adversely impacted due to this new ruling, especially when the central bank and other stakeholders are willing to continue to have open dialogue.

“We will closely monitor the situation, especially in March and April, and we will present our case again with the relevant data and information to the central bank as well as financial institutions if the need arises.”

Aminar added that a contraction or reduction to the total sales and production would have a far reaching affect to all stakeholders, including the Government, which might have a lesser revenue collection from related taxes and duties.

Mitsubishi Motors Malaysia (MMM) chief executive officer Tetsuya Oda said the company's plans and strategies were still on track despite the new lending rules by the central bank.

“For MMM, we remain positive on achieving our sales target for this year and MAA's forecast of 2.5% growth in vehicle sales and we expect the industry to remain robust,” he said, adding that the company's network expansion plan would be carried out extensively in 2012.

Allahyarham Mohd Razif dianugerah Tokoh Takaful 2012

BEKAS Timbalan Gabenor Bank Negara Malaysia, Allahyarham Datuk Mohd Razif Abd Kadir dianugerahkan sebagai Tokoh Takaful 2012.  Penganugerahan itu yang dibuat pada majlis Malam Anugerah Takaful 2012 anjuran Persatuan Takaful Malaysia semalam adalah bagi mengiktiraf usaha dan jasa Allahyarham terhadap industri kewangan negara. 

Source from (Berita Harian): http://www.bharian.com.my/bharian/articles/AllahyarhamMohdRazifdianugerahTokohTakaful2012/Article
Published: March 23, 2012


Mohd Razif Abd Kadir 

Allahyarham yang meninggal dunia Ogos tahun lalu menyertai Bank Negara pada 1976 dan memegang beberapa jawatan kanan sepanjang kerjayanya, antaranya Ketua Perwakilan di Pejabat Perwakilan di London, Pengarah Jabatan Pengawalan Bank dan Ketua Pengarah Lembaga Perkhidmatan Kewangan Luar Pesisir Labuan (LOFSA) dari 1999.

Allahyarham juga pernah memegang jawatan Pengerusi pertama Jawatankuasa Teknikal Lembaga Perkhidmatan Kewangan Islam (IFSB) serta menjadi ahli lembaga Pusat Pendidikan Kewangan Islam Antarabangsa (INCEIF) dan Lembaga Pengarah BNM.

Pengerusi MTA, Datuk Syed Moheeb Syed Kamarulzaman dalam ucapannya pada majlis itu berkata, industri takaful negara kekal kukuh dalam menghadapi cabaran persekitaran pasaran semasa yang tidak menentu tanpa menjejaskan teras syariah yang membentuk dasar asas takaful.

Katanya, komitmen yang jitu penggiat industri takaful di negara ini dengan memperkenalkan produk baru dan usaha yang tidak putus meneroka pasaran baru menyumbang kepada pengukuhan dan ketahanan industri takaful negara dalam berdepan cabaran pasaran yang tidak menentu.

“Sebagai salah satu komponen industri kewangan Islam, industri takaful telah mampu menyumbang ke arah meletakkan Malaysia dan Kuala Lumpur sebagai pusat kewangan Islam global seperti yang dirancang dalam Pelan Tranformasi Ekonomi Negara,” katanya.
Hadir pada majlis itu Raja Muda Perak, Raja Dr. Nazrin Shah dan Raja Puan Besar Perak, Tuanku Zara Salim.

Pada majlis berkenaan turut diadakan sambutan ulang tahun ke-10 MTA yang diraikan secara simbolik menerusi pelancaran logo baru persatuan berkenaan.

Bank Negara reserves at RM427bil March 2012

KUALA LUMPUR: Bank Negara international reserves totalled RM427bil (US$134.8bil) as at March 15, the central bank said. The reserves were sufficient to finance 9.7 months of retained imports and was 4.1 times the short-term external debt, it said.

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/3/23/business/10972902&sec=business
Published: March 23, 2012

It said the international reserves main components were foreign currency (US$121.1bil); International Monetary Fund reserves (US$800mil); Special Drawing Rights or SDRs (US$2bil); gold (US$1.8bil) and other reserves (US$9.1bil). Its total assets, including international reserves, amounted to RM479.75bil.

The central bank’s other assets include the Malaysian government papers (RM2.19bil); deposits with financial institutions (RM31.88bil); loans and advances (RM10.51bil); and other reserves (RM8.16bil). — Bernama

Minimum Wage Policy To Have Relatively Marginal Effect On Economy: BNM Assistant Governor

KUALA LUMPUR, March 22 (Bernama) -- The minimum wage policy will have a relatively marginal effect on the economy in the long term, says Bank Negara Malaysia (BNM) assistant governor Dr Sukhdave Singh.

Source from (Bernama): http://www.bernama.com/bernama/v6/newsbusiness.php?id=654272
Published: March 23, 2012

Sukhdave said it would not only be good for the economy and ensure Malaysia achieve its high-income nation goal but would also increase labour productivity.

"If your competitiveness is based on providing wages that are very low thenthat’s the wrong economic structure.

"If our agenda is determined by the low value-added industries paying low wages, we will not achieve the objective of high-income nation goal," he said at the question-and-answer session at the Seminar on BNM Governor''s Address on The Malaysian Economy & Panel Discussion here today.

He said workers who get paid more would be able to enjoy a higher standard of living and thus would be more prouctive.

"Some people said it (minimum wage) might create unemployment but I believe the other side of picture. If you have the minimum wage, it may create more employment opportunities," he said.

Sukhdave said industries that essentially relied on cheap labour now had to move up to higher value chain and would create jobs which contribute directly to higher value-added economic activities. -- BERNAMA

Malaysian banks continue to record improvement in profits

MALAYSIAN banks, including Islamic banks, continued to show improvement in profitability last year, Bank Negara Malaysia's (BNM) latest annual report shows. Pre-tax profits increased by 14.2 per cent to RM26.2 billion. The growth rate was, however, slower than the previous year's 35.1 per cent.

Source from (Business Times): http://www.btimes.com.my/Current_News/BTIMES/articles/bnr3/Article/
Published: March 23, 2012



Return on equity - a measure of how well banks use shareholders' money to generate more money - rose by 17.4 per cent compared with 16.6 per cent in the previous year.

The Islamic banking system recorded pre-tax profits of RM3.1 billion, with average returns on assets and equity of 1.0 and 13.7 per cent, respectively.

This took into account the impact from a large one-off provision by one Islamic bank that undertook a balance sheet strengthening exercise during the year, BNM said.

The strong overall performance was partly attributed to higher interest/financing income (12.2 per cent growth), which more than offset higher funding costs on the expanded deposit base.

The net interest/financing margin, nonetheless, narrowed slightly to 0.57 per cent during the year, compared with 0.62 per cent in 2010, due to strong competition in the house financing and retail lending segments.

Impairment charges (net of recoveries) declined for a second consecutive year, reducing by 35.9 per cent in 2011 due to lower newly-impaired financing and improved bad debt recoveries.

Also contributing to profits were higher fee-based activities (including fees associated with credit facilities, bancassurance and wealth management offerings), net trading and net investment income, which grew by 4.5, 30.1 and 44.3 per cent, respectively.

Profits have also come under some pressure from higher staff costs, which grew by 12 per cent in 2011, higher than the average annual growth of 10.2 per cent in the previous three years.

This came against a backdrop of an intensely competitive talent market in the financial sector, driven by vacancies in specialist, technical and management positions.

As at end-2011, six out of eight Malaysian banking groups had overseas operations in 19 countries, mostly in Asia.

Their total overseas assets increased to RM264.7 billion, accounting for 19 per cent of total assets, while operating income derived from overseas accounted for 30 per cent of total operating income.

Banks continued to report stable and sound funding positions, with more than sufficient ringgit liquidity to meet demand for credit from households and businesses, as well as to weather any unexpected large deposit withdrawals.

Banks' liquidity buffers in excess of the minimum regulatory requirement under BNM's liquidity framework increased to 18.3 per cent and 18.1 per cent of deposits for liquidity needs maturing in less than one week and one month respectively.

As in previous years, the banking system remained a net lender in the domestic interbank market, with excess liquidity of RM153.3 billion placed with BNM as at end-2011.

In December last year, BNM came out with the Financial Sector Blueprint, which is a strategic plan to chart the direction of the country's financial system over the the next 10 years.

Stress tests carried out on the banking and insurance sectors at the system-wide and institutional levels affirmed the resilience of the domestic system to extreme macroeconomic and financial shocks.

GDP forecast in line with market consensus

PETALING JAYA: Economists contacted agree with Bank Negara's gross domestic product (GDP) growth forecast of between 4% and 5%, with the domestic economy providing the impetus, while global growth will continue to be challenged by the eurozone debt crisis.

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/3/23/business/10969972&sec=business
Published: March 23, 2012

Although some encouraging signs are emerging from the advanced economies, Bank Negara trimmed growth estimate for 2012 from the 5% to 6% projected by the Treasury during Budget 2012 in October 2011.

“This is higher than our estimate of 3.8% but in line with market consensus of 4%. Given the loss of momentum for the export engine, the policymakers are pinning their hopes on domestic demand to sustain economic growth.

“Private sector spending is projected to deliver 6.6% growth, contributing 4.4% points to 2012 GDP growth,” said CIMB head of economics Lee Heng Guie.


A mono-rail approaches its station as traffic passes by in Kuala Lumpur. 
Malaysia forecasts economic growth of between 4% and 5% this year.— AFP

MIDF Research head of economics Anthony Dass said the growth outlook projected by Bank Negara appeared achievable.

“While the external uncertainties will be the major drag to the domestic economic expansion, growth impetus in 2012 would come from domestic demand, backed by private expenditure and public expenditure. We are projecting a growth of 4.8% for 2012,” said Dass.

Lee concurs with the central bank's assessment of the risks to domestic growth in 2012, including downside risks to global growth due to fiscal drags from the eurozone's debt-impaired countries; volatility in capital flows which could misalign asset prices and distort resource allocation; higher-than-expected inflation coming from food and fuel prices, which could dampen household consumption; and much slower growth for Malaysia's major trading partners.

Meanwhile, after growing by 13.7% to RM580.6bil at end-2010, Malaysia's household debt rose at a slower rate of 12.5% to RM653.1bil at end-2011.

“We view the rising household debt-to-GDP ratio of 76.6% in 2011 as a worrying trend, which prompted Bank Negara to tighten lending rules to ensure that households live within their means,” said Lee.

While the central bank acknowledged that the level of household debt was concerning and might have some negative implications on consumer spending, it was optimistic that households would remain financially sound, with strong financial buffers to service debt obligations and cushion against income shocks.

“In terms of percentage contribution to real GDP, personal consumption will contribute about 3.4 percentage points in 2012, from 3.7 in 2011, supported by continued access to financing and accommodative monetary conditions,” said Affin Securities economist Alan Tan.

As downside risks to the economy has ease, Lee believes that the central bank will keep the policy rate at 3% until the year is out. He said that accommodative interest rates were still needed to support domestic demand as there were still tail risks on the external front.

On the monetary management, Bank Negara is expected to maintain its accommodative monetary policy.

“With inflationary pressure easing, projected to hover between 2.5% and 3.%, it provides more breathing space with respect to their interest rate policy.

“Our inflation outlook for 2012 is 2.8%-3.%. We are of the view that Bank Negara would leave its policy rate unchanged at 3% in 2012,” said Dass.

New guidelines ensure borrowers do not abuse credit

KUALA LUMPUR: The responsible financing practices, which came into effect on Jan 1 and have caused some disquiet among housing developers and car distributors, were tenaciously upheld by the central bank as it came under criticism for using a one-size-fits-all approach in tackling rising household debt.

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/3/23/business/10971357&sec=business
Published: March 23, 2012

Bank Negara’s stance on the issue was reiterated at a forum jointly organised by the Malaysian Economic Association and Universiti Malaya’s Faculty of Economics and Administration to discuss the central bank’s annual report as well as the financial stability and payment systems report.

Household debt to gross domestic product (GDP) rose to an all-time high of 76.6% in 2011 after growing 75.8% in 2010 with an upward quarterly trend observed in central bank statistics since 2009 and only started stabilising from the second half of last year.

Borrowing, according to the data, continued to be concentrated in residential properties, and motor vehicles together accounted for 64% of total debt.

Assistant governor Dr Sukdhave Singh said in reply to a question from the floor that the lending guidelines and the limit to the amount of loans given for residential property purchases were put in place to ensure that borrowers did not abuse credit.

“We’ve seen rapid growth in household loans with banks giving credit to single borrowers of multiple properties, giving the impression that the purchases were for speculative purposes,” he said.

The guidelines on responsible financing, applicable to home and vehicle financing, credit and charge cards, personal financing including overdraft facility as well as financing for the purchase of securities, save for those which come under stock exchange rules, essentially make the vetting of potential borrowers more thorough with ability to borrow based on net income.

“How are the guidelines bad when they ensure that borrowers do not default at a later stage?” Sukdhave asked, adding that defaults in a large scale would not only impact certain industries but the entire economy.

He drew a comparison with the subprime crisis in the United States where borrowers defaulted in large numbers on their housing loans as they were not able to service them, especially when the interest rates rose.

“There’ll be a price to pay in the longer term should we allow this to happen,” Sukdhave pointed out.

Meanwhile, he said what uses the Government had put for the debt it had incurred were more important than the level of the debt. The Government has projected the deficit at 4.7% of GDP this year while national debt stood at 54.8% of GDP.

“It’s not the debt level we should be concerned about. It’s more about what the debt has been used for. In Malaysia’s case, as with any emerging economy, there is a need for infrastructure but there’s certainly room for improvement in how the Government spends money,” Sukdhave said.

Pilot project to allow HK-Malaysia investment and settlement

PETALING JAYA: The Hong Kong Monetary Authority (HKMA), Bank Negara and Euroclear Bank has launched a pilot platform for cross-border investment and settlement of debt securities in a move to enhance efficiency and strenghten capacity for transactions in Asia.

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/3/14/business/10910279&sec=business
Published: March 14, 2012

The parties said in a joint press release that the platform, which would be operational from March 30, would strengthen foreign investment and cross-border issuance of local bonds in Hong Kong and Malaysia.

“Through the pilot platform, investors in Hong Kong and Malaysia can buy and hold foreign debt securities and settle cross-border transactions on a delivery-versus-payment (DvP) basis while local and international bond issuers can issue a wide range of debt securities,” they said, adding that the platform would include a comprehensive database of Asian debt securities maintained by Euroclear Bank.

HKMA chief executive Peter Pang said the alliance went beyond commercial cooperation and would bring about more significant benefits in fostering global and regional bond market development as well as promoting financial stability in the region.

“The HKMA will continue to collaborate with Bank Negara and Euroclear Bank to promote the pilot platform to other central banks and securities settlement systems in the region and implement additional services to meet market needs,” he said.

Bank Negara deputy governor Datuk Muhammad Ibrahim said the implementation of the platform would be an important step towards sustaining growth and development in a region of ongoing growth.

“The rollout of the pilot platform provides investors and market intermediaries an efficient and cost-effective cross-border access to the bond markets in Malaysia and Hong Kong,” he said.

Meanwhile, Euroclear managing director and head of business development Anso Thir said the bank had strong ties with the Asia-Pacific region and looked forward to working with other Asian markets on their settlement, collateral management and corporate action processing challenges.

Kerjasama sekuriti hutang BNM, Hong Kong

KUALA LUMPUR 13 Mac - Bank Negara Malaysia (BNM), Penguasa Kewangan Hong Kong (HKMA) dan Euroclear Bank mengumumkan pelancaran platform bagi pelaburan rentas sempadan dan penyelesaian sekuriti hutang sekuriti secara bersama.

Source from (Utusan Malaysia): http://www.utusan.com.my/utusan/info.asp?y=2012&dt=0314&pub=Utusan_Malaysia&sec=Ekonomi&pg=ek_02.htm
Published: March 14, 2012

Platform itu akan mula beroperasi pada 30 Mac ini bagi meningkatkan kecekapan aktiviti penyelesaian sekuriti hutang serta penerbitannya di rantau Asia.

BNM dalam satu kenyataan bersama menjelaskan, platform itu akan membolehkan pelabur di Hong Kong dan Malaysia membeli dan memegang sekuriti hutang asing dan menyelesaikan transaksi merentas sempadan berdasarkan konsep serahan berbanding pembayaran (DvP).

Selain itu, penerbit bon tempatan dan asing boleh menawarkan pelbagai bentuk sekuriti hutang.

Jelas kenyataan itu, platform itu akan mengukuhkan pelaburan asing di dalam bon tempatan di Hong Kong dan Malaysia.

Ia juga menyediakan data sekuriti hutang Asia yang dikendalikan oleh Euroclear Bank.

Pengenalan platform itu merupakan langkah penting kepada pasaran bon Asia yang disokong oleh pendeposit sekuriti pusat antarabangsa yang mahu mengukuhkan infrastruktur selepas perdagangan dilakukan.

"Ia akan mengharmonikan amalan di dalam pasaran dan menyelaraskan penerbitan dan penyelesaian hutang sekuriti bagi meningkatkan kecairan pasaran bon Asia dan menarik pelaburan," menurut kenyataan itu.

Platform itu juga akan mengoptimumkan sistem yang sedia terjalin di antara HKMA, BNM dan Euroclear Bank serta perhubungan dengan Pendeposit Sekuriti Pusat Setempat (CSDs) dan sistem matawang asing RTGS di Asia.

Sukuk negara bernilai RM535 bilion March 2012

KUALA LUMPUR 8 Mac - Pasaran sukuk telah merekodkan purata pertumbuhan tahunan sebanyak 40 peratus walaupun saiz pasaran adalah sederhana mengikut standard global.

Source from (Utusan Malaysia): http://www.utusan.com.my/utusan/info.asp?y=2012&dt=0309&pub=Utusan_Malaysia&sec=Ekonomi&pg=ek_02.htm
Published: March 09, 2012

Pasaran sukuk global kini telah mencecah AS$180 bilion (RM540 bilion) sehingga akhir tahun 2011 dan bagi saiz sukuk berdaulat dan korporat Malaysia pula adalah sekitar RM353 bilion.

Gabenor Bank Negara Malaysia (BNM), Tan Sri Zeti Akhtar Aziz berkata, permintaan terhadap sukuk pada masa ini melebihi tawaran, ekoran paras lebihan simpanan tinggi di Asia dan rantau teluk merangsang permintaan.

''Pertumbuhan pasaran bon Islam dalam keadaan ekonomi semasa menggambarkan kos efektif yang diberikannya. Peningkatan dapat dilihat apabila lebih banyak syarikat multinasional (MNC), agensi kerajaan dan sektor korporat memilih sukuk sebagai sumber menjana pembiayaan.

''Pasaran sukuk menawarkan nilai menarik kepada penerbit dan pelabur kerana strukturnya berdasarkan aset yang mempunyai aliran pendapatan,'' katanya ketika menyampaikan ucaptama Perbincangan Panel Kewangan Dewan Perniagaan dan Industri Kesatuan Eropah - Malaysia (EU-MCCI) di sini hari.

Tambah Zeti, dengan keperluan pembiayaan perlu dibuat kepada perkara-perkara produktif, pendedahan risiko sukuk adalah kepada setiap projek dan bukan terhadap ketidaktentuan serta aktiviti yang tidak mempunyai manfaat ekonomi.

''Elemen tersebut tidak hanya menyumbang kepada kestabilan kewangan tetapi juga menawarkan pelabur kelas aset lain sebagai pelaburan," jelasnya.

Dengan pasaran kewangan Islam yang maju, sukuk dan pasaran kewangan Islam telah menjadi instrumen dalam perantaraan dana sistem kewangan Islam.

Ia telah menjadi platform penting untuk aktiviti penjanaan modal antarabangsa dan aktiviti pelaburan serta menggalakkan aliran melepasi sempadan.

Sementara itu, BNM juga membayangkan untuk mengekalkan kadar dasar semalaman (OPR) pada 3.00 peratus dalam Mesyuarat Jawatankuasa Monetari, esok.

Zeti Akhtar berkata, mengikut penilaian bank pusat itu, kadar OPR semasa adalah sangat akomodatif dan kekal menyokong pertumbuhan ekonomi.

OPR at 3% very ‘accommodative,’ says Zeti

KUALA LUMPUR: The overnight policy rate (OPR) at 3% currently is accommodative but will keep tab of inflationary risks, Bank Negara said.

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/3/9/business/10881016&sec=business
Published: March 09, 2012

Speaking on the sidelines at the EU-Malaysia Chambers of Commerce and Industry's Quarterly Financial Panel Discussion, Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said: “The benchmark interest rate at 3% is very accommodative.

“This is our assessment that we want to be supportive of the economy but at the same time will look out for developments taking place as well as the risk of inflation.”

Many economists expect the central bank to uphold the current rate in its monetary policy committee meeting today in view of the rising inflationary pressure due higher crude oil prices. The OPR has remained unchanged at 3% since last May after rates were raised four times from 2% in March 2010.

Zeti said the country's economy was essentially driven by domestic demand and for the last three years it had grown by more than 6%, adding that private sector investments had also grown significantly and was expected to continue this year.

Besides domestic demand, she added that Government spending in major projects would also drive growth.

Meanwhile, in her keynote address entitled Islamic Finance: New Frontiers in Financing the Economy, she said despite the challenging global environment and the increased uncertainties, the Islamic finance industry had continued to enjoy the double-digit growth of 21%, and total syariah-compliant assets had surpassed the US$1 trillion mark.

There were now more than 600 Islamic financial institutions operating in more than 75 countries in both Muslim and non-Muslim jurisdictions, she added.

Zeti said the emergence of new financial centres in Asia and the Middle East and their increased connectivity had strengthened the foundations for intra- and inter-regional linkages in trade and investments.

The Islamic financial markets, including the sukuk and Islamic money markets, she said had been particularly instrumental in intermediating funds in the Islamic financial system.

It was fast becoming an important platform for international fund raising and investment activities that were generating increased cross-border flows, Zeti said, noting that from an outstanding amount of US$33bil in 2006, the sukuk market had expanded to US$180bil as at end-2011.

“The demand for sukuk currently exceeds the supply, as the high level of surplus savings in Asia and the Gulf region spurs the strong demand. Although the size of the market may seem modest by global standards, the sukuk market has been registering an average annual growth of 40%. The growth of the Islamic bond market in particular, in the current environment also reflects its cost effectiveness.

“An increasing number of multilateral agencies, government agencies and the corporate sector including multinational corporations have relied on the sukuk market as a source for raising financing,'' she said.

AIBIM sokong garis panduan BNM

PERSATUAN Institusi Perbankan Islam Malaysia (AIBIM) menyokong Garis Panduan Amalan Pembiayaan Bertanggungjawab (Garis Panduan) yang diperkenalkan Bank Negara Malaysia (BNM) bagi memperketatkan pemberian pinjaman kepada orang ramai dan ia adalah satu langkah membolehkan pihak bank lebih beretika dalam urusan pembiayaan berkuat kuasa 1 Januari lalu.

Source from (Harian Metro): http://www.hmetro.com.my/myMetro/articles/AIBIMsokonggarispanduanBNM/Article/index_html
Published: March 09, 2012

Presidennya, Datuk Mohd Redza Shah Abdul Wahid berkata, walaupun kadar pinjaman diunjurkan menurun antara 10 dan 15 peratus ke atas bank Islam selepas garis panduan itu dilaksanakan, namun ia memberi faedah kepada ramai pihak bagi mengelakkan perbelanjaan di luar kemampuan peminjam.

Katanya, pelaksanaan itu turut membolehkan pihak bank menjalankan urusan pembiayaan lebih bertanggungjawab kepada orang ramai dan tidak hanya mementingkan keuntungan dalam perniagaan.

Bank Negara reserves at RM426.7b Feb 2012

KUALA LUMPUR: The international reserves of Bank Negara amounted to RM426.7bil (equivalent to US$134.7bil) as at Feb 29. This is sufficient to finance 9.4 months of retained imports and 4.1 times the short-term external debt, the central bank said in a statement.

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/3/8/business/10877318&sec=business
Published: March 08, 2012

It said the main components of the international reserves were foreign currency (US$121.0bil); International Monetary Fund reserves (US$800mil); Special Drawing Rights (SDRs) (US$2bil); gold (US$1.8bil) and other reserves (US$9.1bil).

Its total assets, including international reserves, totalled RM478.59bil. - Bernama

Key interest rate to stay unchanged?

PETALING JAYA: Bank Negara is expected to hold the benchmark interest rate steady when policymakers meet tomorrow as the surge in oil prices again raises concerns over inflationary pressure.

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/3/8/business/10872820&sec=business
Published: March 08, 2012

CIMB Investment Bank Bhd economic research head Lee Heng Guie said the central bank would keep the overnight policy rate (OPR) on hold as they again weigh price increases with growth concerns after crude oil prices jumped in the past six months.

The OPR has remained unchanged at 3% since last May after rates were raised four times from 2% in March 2010.

The median estimate in a Bloomberg survey of economists showed no change in the OPR regime.

“Policymakers are now caught in a dilemma as they've to weigh upside risks to inflation and downside risks to growth after easing rates earlier on,” Lee told StarBiz.

He said although inflation had come off in most of the Asean region, policymakers would have to assess growth momentum and then make decisions on whether “to rewind what they unwound earlier on or to keep rates steady”.

For Malaysia, Lee said policymakers would have to keep in mind the subsidy policy on fuel. “While subsidy rationalisation will not be in the picture as the general election draws closer, inflation expectations will go up when the subsidies are cut,” he added.

Meanwhile Citigroup Inc senior economist Kit Wei Zheng said in a report dated Feb 24 that unless there were signs of a much deeper recession which would lead to large-scale loss of jobs, “we think Bank Negara is inclined to stand pat in 2012”.

Societe Generale SA forex strategist Chong Wee Khoon said in another report that as Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz had expressed strong confidence in domestic demand supporting the economy, the monetary policy committee meeting tomorrow should be “a non-event”.

He said that despite the central bank's non-dovish tone, “global growth risks remain skewed to the downside and we think it is too early to write off possible easing measures in the coming 12 months”.

A Bloomberg report noted that South Korea, New Zealand and Indonesia were among countries expected to hold rates steady in the Asia-Pacific region.

PERODUA kurangkan pengeluaran

PERUSAHAAN Otomobil Kedua Sdn Bhd (PERODUA) mungkin mengurangkan kapasiti pengeluarannya sebagai langkah terakhir jika jualan terus merosot yang disebabkan syarat ketat dalam pinjaman sewa beli bagi kereta. 

Source from (Berita Harian): http://www.bharian.com.my/bharian/articles/PERODUAkurangkanpengeluaran/Article
Published: March 07, 2012


AMINAR Rashid (empat dari kanan) dan Ketua Pengarah Pengajian Tinggi, Prof 
Datuk Dr Rujhan Mustafa (empat dari kiri) bersama penerima dana di Kuala Lumpur, semalam.

Langkah atasi jualan merosot kerana syarat ketat sewa beli kereta

Pengarah Urusannya, Datuk Aminar Rashid Salleh, berkata Perodua juga sedang meneliti langkah lain untuk menangani isu berkenaan.

“Jika keadaan tidak bertambah baik, jelas sekali kami perlu melihat kepada langkah tindak balas. Mengurangkan pengeluaran akan menjadi yang terakhir,” katanya kepada media selepas majlis Penyerahan Dana Pembangunan dan Pengubahsuaian Perodua Eco-Challenge kepada institusi pengajian tinggi di Kuala Lumpur, semalam.

Pengeluar kereta nasional kedua itu berkata, jika masalah berkenaan berterusan, ia bukan saja menjejaskan jualannya tetapi juga pihak berkaitan lain seperti pengedar dan vendor.

Berkuat kuasa 1 Januari lalu, Bank Negara Malaysia melaksanakan Garis Panduan mengenai Pembiayaan Bertanggungjawab bagi menggalakkan amalan pembiayaan runcit yang berhemat, bertanggungjawab dan telus serta memastikan sektor isi rumah dan pasaran kredit kekal berdaya tahan.

Aminar Rashid berkata, PERODUA sentiasa menyokong objektif kerajaan dalam membendung hutang isi rumah, tetapi berharap rundingan awal dengan peserta industri perlu dilakukan sebelum sebarang langkah diambil. “Kami merayu dalam kes kenderaan kategori seperti PERODUA, mungkin pendekatan sedikit berbeza perlu diambil.

“Perundingan awal dengan peserta industri adalah penting. Kami merayu kepada pihak berkuasa apabila mereka mahu memperkenalkan sebarang langkah baru, tolong libatkan kami lebih awal supaya kami boleh memberikan pandangan,” katanya.

Mengenai Perodua Eco-Challenge 2012, Aminar Rashid berkata, semua 13 institusi pengajian tinggi yang mengambil bahagian pada 2011 akan bertanding sekali lagi.

Perodua dalam kenyataannya berkata, pasukan yang menyertai program itu perlu menambah baik kenderaan lumba mereka pada tahun lalu berasaskan kepada konsep buggy menggunakan enjin ViVA 660cc yang diberikan, dengan PERODUA memberikan pembiayaan awal RM10,000 kepada setiap pasukan.

“Untuk menambahkan lagi keseronokan, PERODUA juga memanjangkan jemputan kepada fakulti perniagaan, perdagangan atau pengurusan di institusi yang menyertai untuk bersaing dengan menyerahkan pelan pemasaran, promosi dan perniagaan mereka bagi kenderaan lumba pasukan mereka,” kata syarikat itu.

PERODUA berkata, ia akan menyediakan kepada setiap kumpulan RM5,000 bagi aktiviti pemasaran dan promosi dan satu panel juri daripada industri akan memilih pemenang. – BERNAMA

Stricter car loan rules stay despite protests

Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz told BFM prudence underlines all measures taken and policies implemented by the central bank. Below are extracts from the BFM interview 

Source from (The Malay Mail): http://www.mmail.com.my/story/stricter-car-loan-rules-stay-despite-protests
Published: March 06, 2012


CAUTION: 'We don't borrowers entering into a loan 
agreement and then find they cannot service their loan'

Q: Car dealers have come out to say that only one in three loans applications get approved and apparently new car sales have fallen by 25%. What's Bank Negara's response going to be? Are you going to backtrack on your measures?

A: No. You have to understand that Malaysia as a country has one of the highest car ownerships in the world. Per population, the number of cars owned is the highest in the world. So, our car market is already quite saturated.

Now, we have no objection if a borrower has the affordability to do so. What we don't want to happen is borrowers entering into a loan agreement and then find they cannot service their loan. The car is repossessed and it leads to a lot of problems for the borrower as well as for the financial institutions.

It is very important for the carmakers to recognise this – that there are limitations for the domestic market and it's very important for them to intensify their competitiveness and explore other markets in other parts of the world. There are a lot of noise that we continue to hear and we respond to. We engage with them, we tell them what we are doing and an important mandate of the central bank is safeguarding financial stability.

And what that essentially means is in the corporate sector, it is protection of shareholders' interests and so on. In the case of financial institutions, it is not just shareholder's interests but importantly, it is depositor's interests.

Our household debt to GDP (gross domestic product) is at a record high, almost 78% in 2011 and this is among the highest ratios in the region. How did our household debt become so bloated?

Household debt increases with rising incomes and what we have seen so far is that these loans have contributed to the growth of our economy and the important aspect of it is that the risk of loans turning bad is very, very low and is on a declining trend.

So, despite increases in the volume of lending to the household, the number of debts going bad have declined to now at 1.9% and that is low, less than 2%. In fact, the previous year, 2010, it was at 2.5%. So this is a positve trend.

The central bank has taken some measures to tighten credit, credit card loans and also for home mortgages and also now car loans. So are you worried that 78% may be just too high now?

No. At this point in time, we are not concerned but we don't want to wait until it becomes a problem and then implement (corrective) policies. Our policies are implemented across the board, a wide-ranging set of policies, the first starting with the normalisation of our interest rates. We raised it gradually from 2% to 3% in 2010. This is important and we said it was not a tightening but a normalisation of interest rates. This was to prevent the build-up of financial imbalances.

When interest rates are too low for too long, it results in mispricing of risk and formation of asset bubbles. People take an outlook that interest rates are going to be low for a long time and they may go into businesses that are less viable. At the moment, risk of recession was not there. And so, we took the opportunity to normalise interest rates. We also raised the statutory reserve requirement, which was at 1% to 4% to manage excess liquidity.

We also did sterilisation of operations, which means that we mopped up the excess liquidity largely as a result of inflows. We also implemented macro-prudential measures, which are like the loan-to-value ratio and other prudential regulations.

The government reinforced these with a capital gains tax. Why do we introduce all these? We don't want the formation of an asset bubble because it's a risk not only to the financial system but the economy. But also it prevents affordability to the public at large to purchase houses. We don't want to see speculative activity where easy access to loans at low cost encourages lending, encourages purchase for speculative activity in the property sector for example.

So these measures are essentially pre-emptive. We're not worried because it hasn't happened yet. But it could happen and therefore these are (preventive) measures. On the other side, we not only have these lending guidelines to have responsible lending practices by the financial institutions.

We have significant education programmes which have been introduced throughout the country and the latest one is called "Power". We believe it is important to teach especially first-time borrowers, who could be young members of our population from ages 20 to 30.

Economists are saying that perhaps there's a shift from credit card balances to personal loans, because of the credit card-tightening measures. Is Bank Negara going to home in on unsecured lending now?

We don't approach it by looking at these various segments. Equally important is the supervisory oversight because there may be one or two banks that engage in this kind of excessive business. They will be told, not only their management but their board, on the practices being adopted by the bank. If it is excessive and imprudent behaviour, we then take action on the bank and they may be required to come up with a plan, letter of undertaking on how they are going to address this issue.

Every other week, I probably get a call from a bank to ask whether I want a personal loan. It is very easy now, they just send to you a cheque and you can then just bank it and borrow the money. It becomes so easy, so accessible. Will Bank Negara take more active measures to stop these kinds of practices?

We don't micro-manage and we have general rules. It's based on principles rather than being very prescriptive.

What about lending to government servants? We're just looked at earnings reports of some banks that have excess lending to civil servants and they've been reporting like 50% growth. From an outsider's point of view, it seems quite worrying. It would seem to suggest that civil servants are borrowing indiscriminately. Is Bank Negara monitoring this closely?

Civil servants also may be borrowing but less through the banking system. Some of them, especially the middle-to-lower income groups, may be borrowing through cooperatives. We have highlighted and engaged with the Cooperative Commission that people should be allowed to borrow if they have the means. That means based on affordability.

While we put that in place in the financial system, with financial institutions under the purview of the central bank, it could case of migration and gravitation to the less regulated parts of the financial system. This has been observed in Europe and even in the US. They call it shadow-banking and so on.

That hasn't happened yet in our country. But once again, we don't want to wait until it has happened and then rush to put in more stringent rules than what was required. Now, it is a gradual process. When we recognise a trend, we highlight these to the various regulators, the government and so on. We wish to heighten their surveillance on these borrowings before it becomes excess.

The subsequent parts of this BFM interview transcript will be run over the next few days

Syarat baru BNM tidak beri kesan (MBSB)

MALAYSIA Building Society Bhd (MBSB) mengunjurkan prestasi positif dalam jualan produk kewangan persendiriannya sehingga RM9 bilion dan jumlah pinjaman dijangka bertambah kepada 20 peratus bersandarkan kemampuannya menawarkan pelbagai portfolio pinjaman kewangan menjelang akhir tahun ini.

Source from (Harian Metro): http://www.hmetro.com.my/myMetro/articles/SyaratbaruBNMtidakberikesan/Article/index_html
Published: March 02, 2012

Tahun lalu, MBSB mencatatkan jualan RM7 juta pelbagai portfolio produk kewangan dan optimis mencapai angka berkenaan walaupun Bank Negara Malaysia (BNM) memperketatkan syarat pinjaman kepada orang ramai.

Ketua Pegawai Eksekutifnya, Datuk Zaini Othman berkata, pihaknya sudah meneliti syarat baru diperkenalkan BNM dan ia dijangka tidak memberi kesan untuk terus menawarkan produk kewangan kepada pelanggannya.

“MBSB sentiasa memperkenalkan segmen perniagaan baru dan terkini kami menunggu keputusan BNM untuk menilai kertas cadangan mengenai pembiayaan sewa beli.

“Pembiayaan ini tertumpu kepada segmen kenderaan mewah dan sepatutnya keputusan berkenaan dimuktamadkan pada Februari lalu, namun kami menjangkakan ia diputuskan dalam pertengahan tahun ini,” katanya pada majlis menandatangani kemudahan pembiayaan RM124.6 juta dengan LBS Bina Group Bhd (LBS) di Kuala Lumpur, semalam.

Ia adalah kemudahan pinjaman kepada LBS sebanyak RM124.6 juta yang merangkumi pembiayaan titian dan bertempoh.

“Pembiayaan ini digunakan untuk membiayai dua fasa projek D’Island Residence LBS iaitu Balvia dan Nautilus di Puchong. Ini termasuk kerja membersihkan tapak, kerja tanah, penanaman cerucuk dan pembinaan infrastruktur serta unit pameran,” katanya.