Financial Institutions' Responsibility in Promoting Prudent Borrowing and Limiting Credit Issuance

Mr Yip Hon Weng asked the Prime Minister and Minister for Finance in view of the escalation in credit card debt, whether the Government plans to (i) impose more responsibility on financial institutions to promote prudent borrowing and (ii) implement stricter guidelines on credit issuance by financial institutions.

While credit card borrowings have increased, as a share of personal disposal income, such borrowings remain in line with their historical average at 2.4%. Based on latest available data, credit card delinquency rates as a share of total cardholders have also remained stable at less than 1%, which is below the historical average. These suggest that most borrowers have been able to service their credit card debt.

Consumers should be prudent when borrowing. The Monetary Authority of Singapore (MAS) has, therefore, implemented safeguards to reduce the risk of consumers borrowing beyond their ability to repay. These safeguards are generally more extensive and stringent than in many countries. For instance, Financial Institutions (FIs) must ensure borrowers meet the minimum annual income requirement of $30,000 to qualify for a credit card. FIs must also check a borrower’s income and credit bureau records when he applies for a credit card or credit limit increase, or when the FI receives information that raises concerns on his creditworthiness.

To limit debt build up, FIs cannot grant further credit to individuals whose aggregate unsecured borrowings across all FIs exceed their annual income for three consecutive months. FIs must also suspend the unsecured accounts of borrowers who are more than 60 days past due.

To complement our regulations, MoneySense, our national financial education programme, regularly educates the public on money management skills, reminds consumers not to spend beyond one's means and to prioritise paying off high interest-bearing borrowings, like credit card debts. Borrowers in distress can also contact their FIs to explore options to restructure and consolidate their debts. They can also approach Credit Counselling Singapore for guidance and assistance to restructure their debts or work out sustainable repayment plans.

These suite of measures is generally adequate to promote prudent borrowing. MAS will keep a close watch on developments and adjust its policies where warranted.