Bank Negara sees defaults on bank loans hit 4% by end of 2024 on employment shocks

According to the BNM, a stress test conducted by the central bank showed that under adverse scenarios of income and employment shocks, between 3.8% and 4% of banking system loans could be at risk of default. by the end of 2024 due to insufficient borrowers. financial stamps.

He said the bulk (63.5%) of these subprime borrowers earn monthly incomes below RM5,000.

The central bank said public support measures and repayment assistance offered by banks continued to help financially-struggling households cope with declines in income and employment.

In 2021, he said 23,711 new borrowers signed up for the debt management program of the Credit Counseling and Debt Management Agency (AKPK) to clean up their finances.

Meanwhile, he said that under AKPK’s Financial Management and Resilience (Urus) program, borrowers can benefit from free financial counseling and education programs aimed at promoting financial resilience to more long term.

As of March 4, 2022, he said that 5,657 people with total loan exposures of RM2.7 billion have signed up for Urus, of which about half of the borrowers with total loan exposures of RM1.4 billion are those who have lost their jobs.

Beyond Urus, he said banks continued to offer borrowers a range of repayment packages to suit their financial situation and that financial institutions had also expanded assistance programs for borrowers affected by the floods of december.

Further decline in retirement savings would increase financial vulnerabilities

Going forward, he said improving economic prospects and job prospects should support overall household debt servicing capacity.

BNM said the latest information from the Employees Provident Fund (EPF), however, points to significant long-term risks to household resilience.

The central bank said according to the EPF, about 6.1 million EPF members currently have retirement savings of less than RM10,000 in their accounts, of which 3.6 million have less than RM1,000.

“A further decline in retirement savings would increase the financial vulnerabilities of these households over the longer term, given the already insufficient savings for retirement.”

He said the risks would be higher for borrowing households whose loan terms extend into retirement and those who are already retired.

“As the economy recovers, it will therefore be important to ensure that affected households are able to gradually rebuild their financial reserves.

“Government efforts to pursue necessary labor market and social protection reforms will be key to increasing income levels and household resilience in the long term,” he added. — Bernama

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