SINGAPORE - Singapore's central bank has proposed changes to rules regarding the issue of credit cards and unsecured loans to individuals, in a bid to prevent those with credit problems from taking on more debt.
The Monetary Authority of Singapore (MAS) had warned, during its annual financial stability review in November, that low interest rates in recent years had prompted corporates and households to borrow more than usual, putting them at risk should rates rise sharply.
The changes MAS is looking to implement include requiring banks to review the outstanding debt and credit limits for all loans taken by a borrower, including those with other banks, before granting a new credit card or unsecured facility. The same conditions apply when granting customers a higher credit limit.
Financial institutions will not be allowed to make unsolicited offers to raise a customer's credit limits. Instead, they will have to expressly obtain the borrower's consent for the amount of each credit limit increase, MAS said.
Banks in Singapore have been aggressively promoting unsecured loans to individuals in a bid to raise margins in the current low interest rate environment where mortgage loans can be obtained for as little as 1 per cent per annum.