Owning a car or a home can be relatively expensive in Singapore, but
money is cheap and the central bank here aims to make sure consumers don’t get
caught up in the temptations of easy cash.
Singaporeans aren’t known as
profligate spenders, and their household debt-to-GDP ratio remains well below
levels in developed nations. In 2010, that ratio was 0.7% in Singapore,
compared with about 1% for the U.S. and U.K., according to Singapore’s
Department of Statistics.
Nevertheless, consumer credit is
on the rise, with new credit-card loans reaching 8.4 billion Singapore dollars
(US$6.9 billion) in October, up from S$4.4 billion the same month in 2007. Part
of what is fueling that rise is the near-zero interest rates that have
prevailed since global central banks implemented loose monetary policy in the
wake of the financial crisis.
Interest rates in Singapore are
among the lowest in Asia. Its central bank uses the exchange rate to control
monetary settings, rather than setting a benchmark interest rate. As a result,
lending is more closely linked to the rates set by the U.S. Federal Reserve.
“The ultra-low interest rate
environment has been a big driver of rising consumer credit,” said DBS
economist Irvin Seah. “When real interest rates are already negative, there is
every incentive to get yourself over-leveraged.”
Mr. Seah said at this point,
mortgage loans pose a bigger danger in Singapore than credit cards because
amounts are larger, and because of the potential for asset-price deflation. But
the MAS is moving on both fronts to rein in what the central bank calls
“over-borrowing.”
New rules, still in the proposal
stage, would require banks before lending to more deeply scrutinize a
would-be-borrower’s outstanding debts, across all financial institutions.
Consumers who are more than 60
days past due on debt to a certain bank won’t be able to charge more on credit
cards issued by that bank, and those who carry for more than six months an
outstanding balance greater than two months of their income will also be barred
from running up more debt.
Martin Vaughan
Business & Investment Opportunities
Saigon Business Corporation Pte Ltd (SBC) is incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Health care and Life Science with expertise in ASEAN 's area. We are currently changing the platform of www.yourvietnamexpert.com, if any request, please, contact directly Dr Christian SIODMAK, business strategist, owner and CEO of SBC at christian.siodmak@gmail.com. Many thanks.
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