MAS amended Notices 645, 1115, 831, 128, 632, 115, and 825, along with the guidelines on the application of total debt-servicing ratio (TDSR) for property loans under Notices 645, 1115, 831, and 128 (TDSR Guidelines). MAS Notices 632, 115, and 825 are related to residential property loans and apply to banks, direct insurers, and finance companies, respectively. The amendments to the relevant notices and guideline will take effect on July 06, 2018.
MAS Notices 645, 1115, 831, and 128 require financial institutions to compute TDSR of a borrower applying for any credit facility set out in paragraph 3 of the Notices 645, 1115, 831, and 128. The TDSR will facilitate financial institutions’ assessment of the borrower’s repayment ability. It will also encourage financial prudence, as it will help to ensure that borrowers are not over leveraged in their property purchases. MAS expects financial institutions to have internal policies and procedures in place to implement the Notices. The TDSR Guidelines set out further expectations of MAS regarding a financial institution's application of the TDSR.
Financial institutions should incorporate the TDSR in their credit assessment frameworks for property loans. Financial institutions should set appropriate and prudent TDSR thresholds in credit assessment, to ensure that property loans granted are commensurate with the institutions’ risk appetite. Financial institutions should also set out clearly the rationale behind any differentiated TDSR thresholds applied, taking into consideration factors such as the risk profile of the borrower and purpose of the property loan. TDSR thresholds should be reviewed periodically to ensure their continued relevance.
Effective Date: July 06, 2018
Keywords: Asia Pacific, Singapore, Banking, Insurance, Residential Property Loans, TDSR Guidelines, Notice 632, Notice 115, Notice 825, Debt Service Ratio, MAS
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