Bank Negara issues updated exposure draft on licensing for digital banks
(theedgemarkets.com / theedgemarkets.com March 03, 2020 11:26 am +08)

KUALA LUMPUR (March 3): Bank Negara Malaysia (BNM) has today issued an updated exposure draft on the licensing framework for digital banks that incorporates a simplified framework applicable during the foundational phase.

In a statement today, BNM said the simplifications aim to reduce regulatory burden for new entrants that have strong value propositions for the development of the Malaysian economy, while safeguarding the integrity and stability of the financial system.

"Digital banks will be required to comply with all equivalent regulatory requirements applicable to incumbent banks after the foundational phase."

Key features of the simplified regulatory framework include:

~ Capital adequacy requirement: The risk categories to calculate the credit and market risk components for risk-weighted assets under Basel II capital framework have been rationalised into simpler categories; and

~ Liquidity requirement: 25% of the digital bank's on-balance sheet liabilities must be held in high quality liquid assets.

BNM is extending the consultation period for the exposure draft until April 30.

It said all feedback on the exposure draft are to be submitted to the central bank by then. "Applications for new licence(s) will be open upon issuance of the policy document."


https://www.theedgemarkets.com/article/bank...g-digital-banks

A lot of borrowers not really understand the interest mechanism how to impact lending policy

A lot of borrowers misleading & miscalculating the lending cost

I will give you direct example :-


Scenario 1 :-

Mr.A has borrowed the loan from Bank during Dec'19, the bank offering him by BR + 0.50% = 4.25% (during Dec'19 period, BR only 3.75%)

So now Bank Negara Malaysia (BNM) suddenly had announced 2 time interest rate cut (OPR cut), 1st cut at 23/01/20 by 0.25% and 2nd cut at 03/02/20 by 0.25%

Simultaneously Mr.A will enjoy lower interest rate charged by 0.50%, which mean now Mr.A can enjoy 3.75% home loan interest rate



Scenario 2 :-

Mr.Y now intend to apply home loan but unfortunately bank can offer BR + 1.00% = 4.25% (new BR is 3.25% after OPR cut 2 times)

So Mr.Y has asked the bank, why your bank still maintain offering 4.25% since BNM had already announced 2 times OPR cut??

The Bank officer told Mr.Y that, despite BNM had already cut 2 time OPR, it does not mean new home loan application can lower down the interest rate because now bank profit margin getting lower & lower

If, the Mr.Y taking the home loan right now, ie BR + 1.00% = 4.25%, in future Mr.Y need to absorb higher interest cost

The reason behind is because BR can adjust anytime but spread rate (ie +1.00%) is fixed for entire home loan, in other word, if next few years later BNM gradually increase back OPR at the same time BR also adjust back, let say gradually increase by 0.75%, so Mr.Y home loan interest rate cost become 5.00%


Now you know why NOT BENEFIT for those new home loan application

One more important things

A lot of borrowers also wrong perception about the refinancing scenario

Most of the time, refinancing need to bear some cost, such as :-

1) Legal fees

2) Valuation report fee

3) MRTA or MLTA or MLTT insurance

^^ insurance cost will adjust or revise by respective insurance company every year subject to market conditions (like inflation, bank interest policy, economic factor)

If Mr.Y maybe wanted to refinance later, Mr.Y will need to bear the above costs (don't forget age factor also impact on the cost of MRTA insurance coverage)

At the end Mr.Y still bear higher cost in order to secure the home loan




** You think is it wisely to take up any new home loan right now ?????






This post has been edited by DisneyHome: Mar 4 2020, 07:25 AM

but also bank might decrease the BR for the new application tho

Yesterday many dupes were happy after receiving the news. Some even think it’s time to flip properties. Poor soul.

It might be 1 more round of OPR cut but not hurry

BNM also need to protect banks cost

If you look at past 20 years OPR in Malaysia, of course you will know how far can BNM further reduce interest rate

In fact not much room for further reduce

I am not blaming to any property agents or sale staffs

Most of the time they are sweet talk, not even understand the bank interest rate cost mechanism, so of course will approach buyers to buy now in order to enjoy lower cost

In fact, right now 2 BIG issue already put on the table

1st - interest rate cost for future

2nd - how much global economic impact on property market, most of the time when recession or turmoil come, property sector is the 1st sector heavily affected


** I am not advising you not to buy property, if buy for own occupation, it might wisely calculate the cost & right property

If your flip or investment wise, you need bear your own huge risk

Let me further elaborate the instalment for you

Assuming my property purchased is RM 500,000

Loan amount : RM 450,000 (assuming only property loan without other fees)

Loan tenure : 35 years

Interest rate offer : BR + 1.00% = 4.25% (after 2 times reduced by BNM) (current BR 3.25%)

Instalment amount : RM 2061 per month


Assuming BNM gradually increase back OPR (simultaneously BR also gradually increase back) by 0.75% later 3 years

new interest rate charged : BR + 1.00% = 5.00% (BR become 4.00% after gradually increase back to 0.75%)

New instalment amount adjusted : RM 2271 per month

** Assuming the new project need 3 years completion & vacant possession


You know how much need to bear extra cost each month if gradually increase OPR later !!


RM 450,000 x (5.00% - 4.25%) = RM 3375 per year

equivalent to RM 281 per month extra

it's good that disney boss clearly states the impact of the up and down of BR/BLR from OPR.
personally i always advocate when considering loan for housing, to add 2% to it and standby the funds accordingly.

Agree with TS...


I just bought one condo..

My rate is 4.05%

Interest 1.30 %+ IBR 2.75%

Im so scared later after OPR increase

Relax.

That is a very good interest rate.

And IBR not adjusted yet. Once adjust it’ll be 3.8%.

Steady.

Scenario 2 is highly unrealistic as it will be not a 0.5 % diff after 2 cut, a more realistic diff should be around 0.1%

scenario 2 means Bank get extra 0.25% profits margin because cost of borrow already reduced by 0.25% if maintain same rate as before.

Old loan tak kasi potong?

So far any good banks/SA for new loans can recommend ah?

Very scared if we make new loan application and OPR increase back..

Very scared if we make new loan application and OPR increase back..

the bank is offering 4.25% still despite the rate cut?

Too sad to say confirm no interest rate change for new home loan application despite OPR cut whereby announced by BNM yesterday (I have called my some bank officers to reconfirm)

That's mean, if interest rate offered before was BR + 0.75% = 4.25% (before base rate cut was 3.50%), now become BR + 1.00% = 4.25% (after base rate cut to 3.25%)

Bear in mind, during Jan'20 BNM had announced OPR cut simultaneously BR also follow the suit but same practice for majority bank (ie no change of interest rate offer for new home loan by that time)

My personally point of view, I will feel very high risk if I intend to take up home loan right now

Since Jan'20 BNM already cut 0.25% & now OPR cut again 0.25%, which mean less than 2 months already cut 0.50%

So I need to bear the risk for future cost if BNM gradually normalise the OPR

Since majority commercial bank not willing to reduce home loan interest rate offer, after 2 times BNM OPR cut, no point to challenge current market unforeseen circumstances

Better wait, see & monitor approach to save our cost of living

Don't forget, home loan is always carry "BIG CHUNK" of debt for entire life