PREPARING FOR MORE TIGHTENING? Maybank sets base rate at 3.2%

PETALING JAYA - Malayan Banking Bhd (Maybank), the country’s biggest bank, has set the base rate (BR) for its consumer loan products at 3.2%.

The new system of pricing floating loans and financing products using the BR, effective yesterday, will replace the bank’s previous base lending rate (BLR), and Maybank Islamic’s base financing rate (BFR).

A check by StarBizweek revealed that Maybank had already notified its customers about the impending adjustment. Some customers said there was a slight increase in monthly payment for mortgages from January onwards.

An economist told StarBizWeek that the ability to price products more efficiently, competitively and flexibly was favourable for banks with lower funding costs such as Maybank and Hong Leong Bank.

“However, as banks’ cost of funds can fluctuate due to market and liquidity factors, the BR can also be reviewed to reflect such movements even if there is no change in the overnight policy rate (OPR), which also influences the banks’ cost of funds,” he said.

Maybank group president and chief executive officer Datuk Abdul Farid Alias said that retail customers with existing loans or financing based on the BLR or BFR would continue to have them pegged to the same until settlement, expiry or upon review.

He added that customers who had applied for loans or financing before Jan 2, 2015, which are approved thereafter would also have their loans or financing pegged to the prevailing BLR and BFR.

Noting that the BR was in accordance with the new Reference Rate Framework introduced by Bank Negara, he said it was determined based on the benchmark cost of funds of Maybank and Maybank Islamic, as well as the statutory reserve requirement (SRR).

“Other components of loan pricing such as borrower credit risk, liquidity risk premium and operating costs will be reflected in a spread above the BR,” he said in a statement yesterday.

A banking analyst said he expected other banks to follow Maybank’s lead in pricing its loans, given the still competitive market condition.

He added that the 3.2% base rate charged by Maybank was expected, considering the average overnight rates currently hovered at 3.23%.

The analyst said the rate was an adjustment to ensure that the pricing of loans would reflect prevailing conditions in the interbank market and the state of monetary policy, which is essentially the cost of funds.

He noted that any changes in the OPR, SRR and market conditions would be reflected in the BR, while other components would be reflected in the spread over the BR.

“Unlike in the previous regime, where lending rates were generally quoted below the BLR or BFR, implying inefficiencies in the pricing of loans and financing,” he said.

Abdul Farid said the BR would be used for all individual customers who applied for new retail loans and financing from yesterday, and included mortgages, unit trust loans, share margin financing and personal financing.

However, loans extended to business entities and for hire-purchase/Al-Ijarah Thumma Al-Bai are excluded from using the BR.

Maybank’s BLR and Maybank Islamic’s BFR remained unchanged at 6.85% and would continue to be displayed alongside the BR at all their branches and websites. - ANN