The Association of Banks in Malaysia hailed Bank Negara's Guidelines on Responsible Financing.
ABM executive director, Chuah Mei Lin, said envisaged underscored the existing approach taken by ABM members and defines the expectations of banks to act responsibly and transparently when lending.
"The commercial banking industry has worked closely with the oversight regulator and its comments on the concept paper have been considered and in the main, incorporated," she said.
"Banks will continue to engage closely with their customers by providing advice to ensure debt commitments are within their repayment capacities," she added.
The guidelines, which will take effect from Jan 1, 2012, aim at promoting prudent, responsible and transparent retail financing practices.
Under the guidelines, financial institutions are required to make assessments of a borrower's ability to afford financing facilities based on a prudent debt service ratio as inputs to their credit decisions.
Financial institutions must make appropriate enquiries into a prospective borrower's income after statutory deductions for tax and Employees Provident Fund, and consider all debt obligations, in assessing affordability.
The guidelines will thus ensure that the increasingly competitive conditions will not lead financial institutions to compromise prudent and responsible financing practices.
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