Ooi Sang Kuang: Managing risks in mortgage financing Welcoming address by Mr Ooi Sang Kuang, Deputy Governor of the Central Bank of Malaysia, for the talk on “Managing Risks in Mortgage Financing”, Kuala Lumpur, 13 January 2010. * * * It is my great pleasure to welcome all of you today to this dialogue on “Managing Risks in Mortgage Financing”. This event is jointly organised by Bank Negara Malaysia and Cagamas Berhad to review and exchange perspectives on developments in the area of mortgage financing. At least two factors make this a highly topical subject at this particular time. Firstly, the dramatic events of the global financial crisis have shed the spotlight directly on the mortgage market, prompting many questions to be raised about current practices in mortgage financing. These questions have challenged traditional assumptions that mortgage lending is generally a safe and low-risk activity, and drawn attention to the blind spots that we need to be concerned about. Secondly, the current accommodative stance of monetary policy coupled with the increasing intensity of competition in the mortgage market calls for greater vigilance by banks in monitoring risks in the mortgage portfolio. Expectations of faster and stronger recovery prospects for Asia, and that Asia will begin the process of unwinding of accommodative policies ahead of the rest of the world, could also lead to strong capital inflows and asset price increases. These combined conditions require banks to carefully monitor any changes in the direction of risks emanating from the housing market.
It’s not sprinting as fast as you can for 100 meters until the finish line. If you told me today to run a full marathon tomorrow, I could not make it. But, if you gave me time to prepare and get fit, I would be in the run. Monetary policy Let me now devote the last few minutes of my talk to update you about our monetary policy. Throughout the last couple of years, the Monetary Policy Committee has maintained an accommodative policy stance to support the economy. Mindful of downside risks to growth, the Committee carefully adjusted the degree of policy accommodation to ensure sufficient support to domestic demand and to shore up confidence. Since May 2013, the policy rate was cut three times, as lower risks to domestic financial stability and subdued inflation opened room for monetary easing. Nonetheless, since the interest rate has been low for a prolonged period, we continue to be vigilant in monitoring any risks to financial stability. (Slide 6) Ladies and Gentlemen This year marks the 15th anniversary of Bank of Thailand’s adopting of the “flexible inflation targeting’ monetary policy framework. Thus far, this framework has served us well and resulted in a satisfactory record of price stability, which is a remarkable improvement from previous decades. (Slide 7) The headline inflation rates were on average 2.6% since 2000 under inflation-targeting, while they were more than 4% prior to that (15 years during 1985–1999).