MAS unveils tighter rules on credit card, unsecured credit

Here's how Singapore banks will be affected.

According to OSK, the MAS yesterday announced changes to credit card and unsecured credit rules aimed at, among others: 1) improving financial institutions’ (FI) lending practices; 2) empowering individuals to make better borrowing decisions; 3) helping individuals who are at risk of credit problems avoid getting into greater debt; and 4) increasing flexibility for financially secure retirees.

These are largely based on the consultation paper MAS issued in Dec 2012.

Here's more:

There are 12 changes in total that will be implemented in stages, the earliest being 1 Dec 2013. Overall, we view the latest measures announced as a good pre-emptive move to address household indebtedness and longer term, should help ensure asset quality stays intact.

We do not expect the latest developments to have a near-term impact, where we already expect loan growth to moderate due to seasonality and property market cooling measures taking effect.

We maintain our Neutral call on the sector. We like DBS given its relatively stronger earnings growth profile, while valuations are still at a discount to peers.

DBS is also less vulnerable to policy changes affecting the property market sector given its relatively smaller exposure to the segment. Elsewhere, we think UOB is well positioned to benefit from Asean’s rise as a new growth haven over the longer term.

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