Zeti Akhtar Aziz, Malaysia’s central bank governor, comments on household debt, banking lending and interest rates.
Bank Negara Malaysia announced measures to avoid excessive household indebtedness in July. Zeti made these comments to reporters in Kuala Lumpur today.
On whether she’s still concerned about excessive household debt:
“Household debt in Malaysia has not reached alarming levels. When we look at the non-performing loans it is less than two percent for the household sector. So in other words, all those who have borrowed are creditworthy. In Malaysia we have the Central Credit Reference Information System that monitors the exposure of each individual and businesses all the way to conglomerates. So even if you have a small credit card balance your name will be on this information system.
“Through this we have seen the bad debts or impaired loans from the household sector and from the other sectors, including SMEs, really go on a declining trend. Therefore, no we aren’t concerned. We have taken all the measures necessary -- the macro-prudential measures -- to rein in excessive lending activities to specific sectors in particular. We believe at this point it is contained. We have seen loan growth that is from double digit 12, 13 percent, now it is at a more sustainable rate of 9 percent.”
On whether Malaysia’s current overnight policy rate of 3 percent is the new normal given the central bank appears to have stopped using the word “normalization”:
“Normalization is a process and the environment is highly dynamic. Therefore in a dynamic environment the risks change. We have highlighted in our recent monetary policy statement the direction of the risks and we continue to monitor these risks. Each time we will balance these risks and make a decision as to the direction of monetary policy.
“In our case, there is no forward guidance. For a small and highly open economy like ours, we have to monitor conditions and we make assessments of the future risks relating to inflation and growth so that we can be anticipatory in our policy.”