Singapore’s financial regulator is proposing new rules for unsecured consumer loans to stem credit card delinquencies and protect clients from borrowing more than they can afford.
Under the Monetary Authority of Singapore’s proposals, credit card and other unsecured debt holders with loans 60 days past due or carrying a balance exceeding two months of income for half a year would be barred from borrowing without collateral, the banking and capital markets regulator said in a consultation paper today.
Singapore, home to Southeast Asia’s three largest banks including DBS Group Holding., saw lenders’ charge-off rates jump in the third quarter as the economy slows. Banks are seeking to boost fee income from services such as credit cards to help offset the region’s lowest loan profitability and a slowdown in borrowing.
“Lenders and borrowers both have a role to play in ensuring that credit cards and unsecured credit are used responsibly and within the borrower’s means to repay,” the central bank said in a statement.
Singapore’s charge-off rates, or the ratio of bad-debt write offs to average outstanding credit card debt, jumped to 5.1% in the third quarter from 4% in the fourth quarter last year, according to MAS data.
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