ABM: In response to letter-to-editor on "All to protect the bottom line" published in The Star on 1 August 2017

August 4, 2017
We refer to the abovementioned subject matter.

We would like to thank ‘A Concerned Ex-banker and Ordinary Citizen’ for sharing his concerns on this matter. On behalf of our member banks, The Association of Banks in Malaysia (ABM) would like to reiterate that the commercial banks in Malaysia have and will continue to offer financing to eligible home buyers.

Banks are generally guided by the various regulations that govern responsible financing as well as the Risk Framework on assessment of affordability and credit prudency. In addition, each bank would have its own internal policies in relation to its risk appetite when evaluating loan applications.

As responsible lenders, the banks need to ensure that potential borrowers are not overly burdened by their debt repayment such that it would cause them to go into financial distress. This is especially true for the vulnerable income segment, i.e. the bottom 40% of households.

Please allow us to address the issues highlighted in the article.
  1. “Auto-deducting a flat rate of RM1,000 for each housing loan applicant”
    • Based on feedback received from our member banks, it is not true that banks adopt the practice of “auto-deducting a flat rate of RM1,000 for each housing loan applicant under their so-called living expenses, regardless of the reported income of the applicants”. In fact, during the evaluation process, banks take into consideration the applicant’s debt service ratio (DSR), i.e. the level of borrowings as a percentage of income. Some banks have differentiated DSRs depending on income level to ensure sufficient buffers for expenditures and contingencies.
  2. ‘Deliberately’ approving loans at a lower margin
    • ABM member banks would generally approve housing loans based on the eligibility and capacity of the applicant. Banks are in the business of lending and financing will be extended to viable applicants. It would not be prudent for banks to approve higher margins if the income level of the applicant is not able to support the same.
  3. Imposition of fixed deposit pledge as additional security
    • Based on feedback from member banks, we are not aware of any banks that currently require a fixed deposit pledge as security for housing loans.
  4. Exclusion of overtime and other side income evidence not being taken into consideration for the sum of the loan being applied.
    • Banks do not exclude overtime and other side income declaration in lieu of roping in a strong guarantor. Banks are expected to assess and verify all information provided by the customer to ensure that the loans approved are sustainable and that the applicants can viably service their loans.
For further enquires, members of the public are welcomed to contact us at our ABMConnect hotline by dialing 1-300-88-9980, or through eABMConnect by logging on to our website, www.abm.org.my.
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ABMConnect provides an avenue for consumers to clarify any doubts and verify information on conventional banking issues.