KUALA LUMPUR: Malaysia and Singapore are the two countries in ASEAN with well-established credit bureaux which aggregate extensive data from various sources, supported by the high level of banking penetration in their economies, according to Moody’s.
In its Moody’s Ratings note on financial institutions in the region today, the agency said credit bureaux play a key role in providing lenders with a centralised platform to obtain borrower credit information, reducing information asymmetry and supporting lending decisions.
"Nevertheless, the effectiveness of these bureaux largely depends on the comprehensiveness and accuracy of the credit information it collects and shares,” it said.
Meanwhile, Moody’s also pointed out that Malaysia’s household debt as a percentage of gross domestic product reached 84 per cent in 2023, one of the highest in the region.
"Despite the high level of household leverage in Malaysia, the risks to banks are mitigated by the banking system’s high proportion of secured loans and the modest increase in interest rates relative to regional peers,” it said.
The agency noted that high household debt, coupled with elevated interest rates, has increased asset risks for several ASEAN banking systems and weakened their credit profiles.
It said most ASEAN economies saw a sizable increase in household debt over the past decade, supported by strong consumption spending and improving financial inclusion.
"Looking ahead, we expect the debt repayment capacity of retail borrowers to remain under strain over the medium term from the region’s high interest rate environment and modest income growth.
"While declining interest rates and stable economic conditions will alleviate asset quality pressures, the overall risk to each banking system will vary based on risk factors such as the extent of household indebtedness and buffers maintained by banks,” added Moody’s. - Bernama
