To keep lenders in check, the Monetary Authority of Singapore (MAS) is currently reviewing home loan lending practices of local and foreign banks, sources have revealed.
Experts feel that the move is a reminder to banks that the authorities are keeping a close eye on them. Hence, they must remain responsible in their lending practices.
Roger Tan, Chief Executive at SIAS Research, said that MAS could be looking for signs of lax lending practices.
“They will want to make sure that rules are being enforced and that proper risk management is tightly in place, especially now that the property market is hot,” said Tan, adding that the audit is in line with the central bank’s supervisory work.
Analysts were quick to add that MAS regularly audits lenders and there is no indication that a bank is being singled out for loose lending practices. The review of mortgage lending practices is likely part of general prudence measures, given the hot property market with prices and sales volumes at record levels.
While general lending guidelines are clear, MAS should focus more on banks’ internal lending policies, said one insider who wished to remain anonymous.
Before a mortgage is granted, a range of criteria are assessed. They typically include acceptability of collateral, the applicant’s income and credit worthiness, the property’s value and the loan-to-value (LTV) ratio.
However, lenders have different standards on some of these criteria. For instance, the definition of income among banks may vary, with some banks either excluding or including bonuses and commissions as part of the borrower’s take home pay.
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