Don’t take short-term view on property lending rule, Bank Negara tells investment banks

PETALING JAYA: Bank Negara Malaysia (BNM) said investment banks calling for the termination of the property lending rule are short-sighted, and should not narrowly focus on their own commercial gains.

The central bank was responding to a news report on investment banks’ calls for the abolition of the property lending rule, which states that a bank’s credit facility exposure in the broad property sector should not exceed 20% of its total outstanding loan base.

BNM said the industry players should consider the long term systemic implications of over-exposure to the property sector and should not be oblivious to the many lessons learnt from the Asian and Global Financial Crisis.

BNM explained that the Broad Property Sector guideline was introduced in 1997 to avoid over-concentration of credit exposures to the property sector, and it is still relevant in curbing excessive systemic exposures to the sector, complementing other existing regulations.

It stressed that banking institutions should always be mindful of current property market conditions and not contribute to a situation where there is a mismatch between supply and demand.

“There is currently an insufficient supply of affordable homes. This situation could worsen if these supply-demand conditions persist. Banks and property developers should focus on supporting the affordable housing segment and development projects that generate multiplier effects to the economy.”