Akmal_Zaidi
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Ada otai2 nak komen beza PFR dengan BLR, harap menguntungkan pembeli
KUALA LUMPUR: Bank Negara Malaysia (BNM) has proposed that banks introduce a prime financing rate (PFR) to replace the base lending rate (BLR) as the reference for pricing retail loans, bankers said.
BNM briefed senior bankers last Thursday on its proposal for a new reference rate framework for the industry to price retail loans. The briefing was chaired by governor Tan Sri Zeti Akhtar Aziz.
“It was proposed that a PFR — set by the respective banks — replace the BLR for the pricing of all retail loans,” said a retail banker who spoke to The Edge Financial Daily on condition of anonymity.
This suggests that banks will quote their lending rates as “PFR plus (a spread)”, rather than the current practice of “BLR minus
(a spread)”, he said.
The PFR of each bank would be calculated based on the benchmark cost of funds plus the statutory reserve requirement (SRR), he said. The spread will reflect the bank’s profit margin, operating costs and credit risk, among other things.
It is likely that the PFR that each bank sets, based on the framework that BNM provides, would end up being similar to one another’s, much like the BLR now, said another banker. It is understood that BNM would not be averse to this situation, based on its response to questions by some bankers on the matter.
“What is clear is that BNM is not going to prescribe the rate. I’d expect a situation where one or two of the big banks will be the early movers to set the rate, and the rest would follow suit with a similar rate,” the banker said.
It is understood that the PFR won’t change frequently unless there is a change in BNM’s overnight policy rate (OPR) or SRR.
BNM’s proposal on the new reference rate framework was detailed in an industry consultative paper it issued last week. Financial institutions (FI) have until Feb 14 to provide their feedback to BNM. There is expected to be a six-month transition period from the time a final paper on the matter is issued.
Zeti had pointed out as early as last December that the BLR no longer seemed relevant as a reference rate, given that average lending rates today are well below the BLR. This suggests its lack of sensitivity to funding costs.
BNM, in a press release it issued on the consultative paper last Thursday, however made no mention of the word “PFR”.
“The new reference rate will be determined by the respective FI’s funding costs, which reflect its specific funding structure and strategy and the SRR,” was all it said on the proposed new reference rate.
It said the new reference rate would better enable borrowers to compare lending rates between FIs for more informed decision-making.
It stressed that the proposed changes would not have an impact on effective lending rates charged to retail borrowers. Effective lending rates are determined by a range of factors, including the bank’s assessment of a borrower’s credit standing, it pointed out.
The new reference rate will be used for the pricing of new retail loans and the refinancing of existing loans after the effective date of the new framework. Existing loans will continue to be referenced against the BLR.
Bankers agree that the BLR is no longer relevant. As it stands, all eight local banking groups, from the largest to the smallest, have a BLR of 6.6%.
Banks set their respective BLR based on a formula that takes into consideration the OPR, their cost structure — which includes their cost of funds — and business strategies. Banks have been allowed to announce their own BLR since April 2004.
However, banks have tended to have a similar BLR in order to stay competitive. By right, the BLR should be different for each bank given that the costs they incur are different. This again points to the irrelevance of the BLR. The cost of funds for most banks is between 3% and 4%, said a banker.
The prevailing lending rate by banks today for home loans is between 4.2% and 5%, which is way below the BLR. The lending rate for automotive loans is slightly higher, at between 5% and 6%. But most automotive loans tend to be pegged to a fixed interest rate that banks set rather than the floating rate.
This article first appeared in The Edge Financial Daily, on January 20, 2014.
Sumber artikel
KUALA LUMPUR: Bank Negara Malaysia (BNM) has proposed that banks introduce a prime financing rate (PFR) to replace the base lending rate (BLR) as the reference for pricing retail loans, bankers said.
BNM briefed senior bankers last Thursday on its proposal for a new reference rate framework for the industry to price retail loans. The briefing was chaired by governor Tan Sri Zeti Akhtar Aziz.
“It was proposed that a PFR — set by the respective banks — replace the BLR for the pricing of all retail loans,” said a retail banker who spoke to The Edge Financial Daily on condition of anonymity.
This suggests that banks will quote their lending rates as “PFR plus (a spread)”, rather than the current practice of “BLR minus
(a spread)”, he said.
The PFR of each bank would be calculated based on the benchmark cost of funds plus the statutory reserve requirement (SRR), he said. The spread will reflect the bank’s profit margin, operating costs and credit risk, among other things.
It is likely that the PFR that each bank sets, based on the framework that BNM provides, would end up being similar to one another’s, much like the BLR now, said another banker. It is understood that BNM would not be averse to this situation, based on its response to questions by some bankers on the matter.
“What is clear is that BNM is not going to prescribe the rate. I’d expect a situation where one or two of the big banks will be the early movers to set the rate, and the rest would follow suit with a similar rate,” the banker said.
It is understood that the PFR won’t change frequently unless there is a change in BNM’s overnight policy rate (OPR) or SRR.
BNM’s proposal on the new reference rate framework was detailed in an industry consultative paper it issued last week. Financial institutions (FI) have until Feb 14 to provide their feedback to BNM. There is expected to be a six-month transition period from the time a final paper on the matter is issued.
Zeti had pointed out as early as last December that the BLR no longer seemed relevant as a reference rate, given that average lending rates today are well below the BLR. This suggests its lack of sensitivity to funding costs.
BNM, in a press release it issued on the consultative paper last Thursday, however made no mention of the word “PFR”.
“The new reference rate will be determined by the respective FI’s funding costs, which reflect its specific funding structure and strategy and the SRR,” was all it said on the proposed new reference rate.
It said the new reference rate would better enable borrowers to compare lending rates between FIs for more informed decision-making.
It stressed that the proposed changes would not have an impact on effective lending rates charged to retail borrowers. Effective lending rates are determined by a range of factors, including the bank’s assessment of a borrower’s credit standing, it pointed out.
The new reference rate will be used for the pricing of new retail loans and the refinancing of existing loans after the effective date of the new framework. Existing loans will continue to be referenced against the BLR.
Bankers agree that the BLR is no longer relevant. As it stands, all eight local banking groups, from the largest to the smallest, have a BLR of 6.6%.
Banks set their respective BLR based on a formula that takes into consideration the OPR, their cost structure — which includes their cost of funds — and business strategies. Banks have been allowed to announce their own BLR since April 2004.
However, banks have tended to have a similar BLR in order to stay competitive. By right, the BLR should be different for each bank given that the costs they incur are different. This again points to the irrelevance of the BLR. The cost of funds for most banks is between 3% and 4%, said a banker.
The prevailing lending rate by banks today for home loans is between 4.2% and 5%, which is way below the BLR. The lending rate for automotive loans is slightly higher, at between 5% and 6%. But most automotive loans tend to be pegged to a fixed interest rate that banks set rather than the floating rate.
This article first appeared in The Edge Financial Daily, on January 20, 2014.
Sumber artikel