BNM Financial Stability and Payment Systems Report Household debt-to-GDP elevated at 89.1%

by **Cals** Thu 24 Mar 2016, 06:25

BNM Financial Stability and Payment Systems Report

[size=28]Household debt-to-GDP elevated at 89.1%

By Gho Chee Yuan / theedgemarkets.com | March 23, 2016 : 6:01 PM MYT

KUALA LUMPUR (March 23): The level of household debt-to-gross domestic product (GDP) ratio continued to be elevated at 89.1% amid the more moderate growth in nominal GDP in 2015, according to Bank Negara Malaysia.

"The capacity of households to service debt has however generally remained firm. This continues to be supported by a broadly stable domestic employment and income outlook," according to the central bank’s Financial Stability and Payment Systems Report 2015 published today.

According to the central bank, the share of borrowings by highly leveraged lower income households that earn RM3,000 or less a month declined further to account for 23.6%, as compared to last year's 24.3% of total household debt or 20.4% of total banking system financing to the household sector, reflecting improvements in affordability assessment.

"A moderation in the level of indebtedness for this group is likely to be gradual, given the relatively long average remaining maturity of household borrowings," it explained.

However, it said the continued income growth and a deceleration in new financing growth will contribute towards reducing leverage over time.

According to BNM, the household borrowings from banks and non-banks expanded by 7.3% as at end of 2015, extending the slower pace of growth since 2010.

"This was due mainly to a sustained slower expansion in financing for personal use (grew 4.6%), while financing for house purchases has remained robust at 11%," the central bank said, noting that the expansion in loans for the purchase of securities and non-residential property also moderated.

Central Bank said the aggregate household balance sheet remained healthy, as households continue to accumulate more financial assets than debt.

"In 2015, aggregate household financial assets grew by RM97.9 billion, compared with an increase of RM70.4 billion in household debt.

"Deposits and deposit-like instruments continue to form the major component (43%) of household financial assets," it said.

"A further reason for the moderate increase in household financial assets was the sustained demand for housing, including first-time house buyers, against a backdrop of elevated house price," it added.

Nevertheless, the central bank said the aggregate household financial asset-to-debt ratio has remained above two times, indicating continued resilience.

"Encouragingly, aggregate household liquid financial asset-to-debt ratio has remained in excess of 1.4 times, preserving ready access to funds for households to meet debt obligations," it added.
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