KUALA LUMPUR, March 30 – Bank Negara Malaysia (BNM) has expressed concerns about the financial resilience of certain segments of borrowing households who are highly indebted and have a lower financial buffer, a situation that can only be addressed through reforms labor market and social protection.
He indicated that household financial assets grew at a more moderate pace (2.4%; June 2021: 5.3%) due to declining stock market performance and large drawdowns on retirement savings. under various special withdrawal facilities put in place due to the pandemic.
“Concerns remain about the financial resilience of certain segments of borrowing households that are highly indebted and have low financial reserves,” the central bank said in its second-half Financial Stability Review (FSR) published here today.
According to the BNM, a stress test conducted by the central bank showed that under adverse scenarios of income and employment shocks, between 3.8% and 4% of banking system loans could be at risk of default. by the end of 2024 due to insufficient borrowers. financial buffers.
He said the bulk (63.5%) of these subprime borrowers earn monthly incomes below RM5,000.
The central bank said public support measures and repayment assistance offered by banks continued to help financially-struggling households cope with declines in income and employment.
In 2021, he said 23,711 new borrowers signed up for the debt management program of the Credit Counseling and Debt Management Agency (AKPK) to clean up their finances.
Meanwhile, he said that under AKPK’s Financial Management and Resilience (Urus) program, borrowers can benefit from free financial counseling and education programs aimed at promoting financial resilience to more long term.
As of March 4, 2022, he said that 5,657 people with total loan exposures of RM2.7 billion have signed up for Urus, of which about half of the borrowers with total loan exposures of RM1.4 billion are those who have lost their jobs.
Beyond Urus, he said banks continued to offer borrowers a range of repayment packages to suit their financial situation and that financial institutions had also expanded assistance programs for borrowers affected by the floods of December.
Further decline in retirement savings would increase financial vulnerabilities
Going forward, he said improving economic prospects and job prospects should support overall household debt servicing capacity.
BNM said the latest information from the Employees Provident Fund (EPF), however, points to significant long-term risks to household resilience.
The central bank said according to the EPF, about 6.1 million EPF members currently have retirement savings of less than RM10,000 in their accounts, of which 3.6 million have less than RM1,000.
“A further decline in retirement savings would increase the financial vulnerabilities of these households over the longer term, given the already insufficient savings for retirement.”
He said the risks would be higher for borrowing households whose loan terms extend into retirement and those who are already retired.
“As the economy recovers, it will therefore be important to ensure that affected households are able to gradually rebuild their financial reserves.
“Government efforts to pursue necessary labor market and social protection reforms will be key to increasing income levels and household resilience in the long term,” he added. — Bernama