by D KANYAKUMARI / pic by TMR filepic

The Malaysian Investment Banking Association (MIBA) backs Bank Negara Malaysia’s (BNM) prudential measures to contain risks and does not agree with calls for the property lending guidelines now in-place to be scrapped.

In a statement yesterday, the association noted that it was aware of the ramifications resulting from the over-concentration of credit exposures to the property sector and the need to maintain prudential measures to keep systemic risks in check.

“The guideline on lending to the broad property sector (BPS), which was introduced in 1997, has encouraged prudential lending and ensured there is no property overhang.

“The current property environment calls for the continued practice of prudent measures and necessary safeguards to be put in place,” the association said.

The guideline on lending to the BPS cannot be read in isolation as it complements other banking regulations within the financial system.

MIBA stressed that it was not agreeable with calls by industry players for the property lending rule be scrapped as reported in an English weekly newspaper.

Unnamed sources from the industry wanted the property lending guidelines to be scrapped as it was deemed no longer practical and constrained underwriting businesses.

The BPS guideline was introduced by the central bank on April 1, 1997, for all commercial, Islamic and investment banks as a form of macroprudential policy to avoid over-concentration of lending to the cyclical property sector.

The guideline requires a bank’s credit facilities — which means all forms of lending, including the issue of guarantees, private debt securities and commercial papers — to the BPS should not exceed 20% of its total outstanding loan base.

Compliance with this requirement is calculated on a quarterly basis.