Bankruptcy trend declining despite OPR hikes - BNM

 

The bankruptcy trend among individuals has been declining since 2016, including the period during which the Overnight Policy Rate (OPR) was raised in 2018, said Bank Negara Malaysia (BNM) governor Nor Shamsiah Mohd Yunus.

Nor Shamsiah (above) said the declining trend was based on the latest trend and information provided by banks and selected non-bank institutions (hire purchase service providers).

“The number of youths (individuals aged below 35) who are bankrupt also showed a similar decreasing trend, constituting 14 percent of bankruptcy cases from January to May 2022 (2017-2019 average: 24.9 percent),” she said in a statement today.

Nor Shamsiah said this in response to claims by the Malaysian Association of Borrowers and Consumers that bankruptcy has gotten worse after recent OPR hikes by BNM.

She said in 2018, a total of 5,283 bankruptcy cases were recorded, 3,948 cases were registered in 2019, 2020 totalled 2,844 cases, and 2021 saw 1,884 cases.

The declining trend was from seven domestic financial institutions which accounted for 71 percent of loans in the banking system, she said.

She added that many procedures needed to be complied with by the financial institutions or other creditors because declaring a person as bankrupt is not an easy task.

“A bankruptcy action is the last resort taken by the financial institutions after all recovery efforts have been exhausted to get back the loans given to borrowers,” she said.

The governor said, according to the Fair Treatment of Financial Consumers and Responsible Financing Practices Principles issued by BNM, financial institutions are required to ensure borrowers who face difficulties in repaying their loans are treated fairly and are given due consideration before any bankruptcy action is taken.

Borrowers who face difficulties in repaying their loans are encouraged to take proactive action by contacting their respective financial institutions before their loans become non-performing to avoid bankruptcy petitions being filed by the financial institutions.

This will enable the financial institutions to offer them suitable loan repayment package assistance to help with their financial condition, she said.

“BNM also found that borrowers have slowly exited the loan repayment package assistance.

“The loan repayment trend in the banking system has recorded an improvement in the first quarter (Q1) of 2022, whereby this trend increased to 92 percent of the loan repayment level before the pandemic, that is, in Q1 2020.” 

Nor Shamsiah said borrowers could also seek advisory services from the Credit Counselling and Debt Management Agency for consideration under the Debt Management Programme.

The programme is able to help borrowers restructure their existing and subsequent loans, enabling the borrowers to continue to repay their loans.

BNM also closely cooperates with its partners and other agencies through the Financial Education Network to intensify efforts to increase financial literacy among individuals.

Meanwhile, the governor stressed that besides financial institutions, bankruptcy action can also be taken by other creditors outside BNM’s jurisdiction such as credit providers, suppliers and others.

“Towards this end, the ministries and agencies involved in this matter are actively working to ensure that borrowers/debtors get fair treatment through the drafting of the Consumer Credit Act and establishment of the Consumer Credit Oversight Board under the Finance Ministry, as well as the uniform standards and guidelines set with regards to the Fair Treatment of Financial Consumers and Responsible Financing Practices Principles,” she added

- Bernama