Managing Household Debt Risks

Ms Tan Su Shan asked the Prime Minister in view of the growing concerns over Singapore's household debt ratio and to better manage the risks, whether he will consider (i) enhancing the central data repository to capture all credit data, including all hire-purchase and vendor credit; and (ii) aligning the various governing bodies for different types of creditors so as to attain more consistency in policy changes.

MAS monitors the level of household leverage in Singapore closely. The focus is on banks as bank lending accounts for more than 98% of household credit granted by commercial entities. The consumer credit bureaus currently collect data primarily on bank credit.

While other sources of private consumer credit, such as moneylenders, pawnbrokers, hire purchase for motor vehicles and vendor credit, are currently not significant in aggregate, MAS monitors their contribution to household leverage by working with relevant Government agencies, such as MinLaw and MTI.

MAS also works closely with these Government agencies to implement policies to encourage financial prudence among Singapore households. For example, the maximum amount of unsecured borrowings by any individual is generally capped at four months' income per lender. This is regardless of whether he borrows from a financial institution regulated by MAS, or a moneylender regulated by MinLaw. Likewise, a single set of rules on loan tenures and loan-to-value ratios for motor vehicle loans applies to borrowers, regardless of whether the loans are granted by financial institutions, hire-purchase companies or moneylenders. For housing loans, MAS' rules require financial institutions to take into account borrowers' total outstanding debt obligations, including housing loans from the HDB, motor vehicle loans under hire-purchase arrangements and loans extended by moneylenders.

Household balance sheets in Singapore are, on the whole, sound. Household assets are in excess of liabilities, with a large buffer between the two. However, some households are at risk because of overborrowing. MAS will continue to work with relevant Government agencies to monitor household leverage and promote responsible borrowing.

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