purchaser mostly hardcore taikor... financial strong strong...

Base rate derived from cost of fund + statutory reserve requirement --> Bank with lower cost of fund + strong reserve normally will have lower base rate.

Spread derived from the operating cost, profit margin, customer's risk margin etc ---> Bank with higher spread means higher profit margin.

If all other charges, terms and conditions are same for both banks, I will opt for bank B, coz still maybe have chance and room for me to negotiate with the bank for better rate (lower spread).

Chris gor, if the cost of fund is increased, the KLIBOR rate will definately increase as well.. If KLIBOR is increased, I presume Bank B will increase its Base rate also, no?

Klibor increase definately will give more severe impact to those banks with smaller deposit bases, higher current BR rate in this context, no?

Jason gor, if KLIBOR is used as benchmark COF, isn't it supposed to be same across all the banks, as it is an average value? Then how come every bank has its own BR

I thought Base Rate is the "benchmark cost of fund of the bank itself" in reference to KLIBOR, no? That's why different bank has different actual COF and hence different BR, no?

If BR = 3M KLIBOR + SRR, then the variation of BR will only rely on the SRR.

This post has been edited by samkps: Apr 18 2015, 12:20 AM

Jason gor, thanks for the information...

Have done some reading and there is clearer picture now..

BR = Benchmark cost of fund + SRR
Spread = profit margin + operating cost + credit risk + liquidity risk

There are 3 types of reference rate - base rate, benchmark cost of fund, actual cost of fund index. All three have strong correlations with COF. Apparently, the approach adopted by Bank Negara is Reference rate = Benchmark cost of fund + SRR.

Bank Negara gives flexibility to the bank to adopt their choice / methodology of Benchmark Cost of Fund. 90% bank choose to use 3M KLIBOR as Benchmark COF, but there is still 10% banks choose to use "Internal Funding Cost" as the Benchmark COF instead. I think the obvious case here would be Maybank, due to their super low BR (3.2%), I suspect they are not using the 3M KLIBOR as the Benchmark COF. Public bank maybe another case as well.

Therefore, the divergence in base rate methodologies could lead to uneven adjustment to base rate when there is changes in OPR or KLIBOR. Bank Negara expects that Internal funding Cost-based BR shall be adjusted less than the KLIBOR-based BR.

Majority banks propose that when there is a change of 5-10 base points in the benchmark of COF, it will trigger the change of the BR.

Notes:

1.) I presume the formula that is being used by the banks for calculating the BR all are same. The variation only rely on which type of benchmark cost of funding the bank is using - either internal fund or KLIBOR.

2.) I presume Bank Negara also provide a time frame for the banks to capture the KLIBOR data. They cannot varies too much between different banks within the same time frame. Therefore, I believe the variation in BR for different banks that adopt the KLIBOR-based COF mostly is due to the SRR components. SRR is the fund deposited to the Central Bank according to the bank liability. Therefore, I believe the variation in bank liability is much higher compare to the KLIBOR and hence carry more weightage in terms of BR variation.

This post has been edited by samkps: Apr 18 2015, 09:20 AM


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Not quite....

Take your example:

Before OPR change:

Bank A 3.99 + 0.41 = 4.4
Bank B 3.15 + 1.25 = 4.4


After OPR raise up 25 base points:

Bank A (3.99 + 0.25) + 0.41 = 4.65
Bank B (3.15 + 0.25) + 1.25 = 4.65

BR movement depends on the benchmark COF, nothing related to the spread portion. Bank Negara projected that those bank using the internal funding-based benchmark COF shall be more resilient to BR changes in case there is any OPR rate change, compared to those adopt KLIBOR-based.

Nevertheless, I still believe the banks can offer a better Spread rate for their premier customer. BR depends on the benchmark COF and can't change if there is nothing change in OPR/KLIBOR. Bank can alter or change the Spread rate instead, depending on the credit risk profile of the borrower...

This post has been edited by samkps: Apr 18 2015, 09:29 AM

Excellent piece of info... Gain some new knowledge today...

Based on this, it is hard to preclude me assuming Jason gor profession is in finance/actuarial science...

Which part looks complicated?

Lol... full credit to Prof Jason for his kind sharing...

Nice...

Jason gor fill up the online version or hardcopy version?

I filled up online, but EM tarak give me yet....

Perhaps my comment is abit harsh, that's why they don't want give me free gift liao...

Lol... me ikan bilis only lah... Jason gor is the true taikor here...

Seems like the owner is selling the land between EcoMajestic and Ecohill.. It's at a higher ground compare to Ecomajestic, any impact?


https://www.youtube.com/watch?v=MGCdl4Iemq4

Being told so as well... Perhaps Malay sell back to Malay?

Should be real, just the land isn't big, will limit its usage for property development.. Highrise maybe..

Lol... No need to be so worry.. That plot of land is before the North gate, not that so near to Tenderfield..

hehehe..


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Most likely due to some issues... Otherwise neither SPS nor EW would just leave this piece of land in such a way... very awkward indeed...

Nice shot bro !! Thanks for sharing...

EM Lekas Interchange already in shape....


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Yeah... If want park, can go to THE PARC of SEH, if want lake can go to THE Swan Lake of EM, both just different by about 1km using the Red Carpet bridge...

Residents from both township can enjoy these facilities interchangeably...


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