It is worth noting that the new square meters available have been reflected in more vacant office space, at more than 10 percent now. Therefore, the rents have dropped, a tendency that is expected to continue in the coming quarters (figure 12). About the financial situation of households, aggregate indicators (i.e. borrowing and financial burden) show slight changes lately. At June 2015, household debt amounted to 61.6 percent of income, 0.8 percentage points more than at end-of-2014, remaining on an upward trend. The financial burden remained stable, closing at 14.7 percent. The latest Survey of Household Finances showed an increase in the financial burden of medium- to upper-income households with respect to 2011 (figure 13). This occurs in a context where household default indicators remain stable. However, credits from family clearing houses (which represent a low fraction of household debt, at 3.4 percent) continue to increase nonperformance. This situation, coupled with flawed management, drove one of these institutions to default on its financial and social commitments, triggering intervention by the supervising entity and starting a restructuring process. These events motivated an increase in the premiums on the debt issued by these institutions, but their effects on the rest of the financial system have been limited. Still, we believe that steps must be taken to boost the convergence of the supervision models of these houses, among others, in order to enhance their corporate governance and their credit risk management, to reduce the probability of new instability episodes.
In November of 2013, the Bank outlined proposed regulatory reforms for the financial advisory industry which formed part of the “Life Insurance and Family Takaful Framework” or in short the LIFE Framework, which we published for consultation. An important aim of the reforms is to support the Bank’s desire to further diversify insurance delivery channels as one – although not the only – way to improve the quality of advice, and enhance choice and value for consumers based on their specific needs and circumstances. This in turn would contribute towards increasing the insurance and takaful penetration rate to 75 percent by 2020 as targeted under the Government’s Economic Transformation Programme (ETP). We received positive feedback from the financial advisory industry on the proposed reforms and while specific elements of the LIFE Framework remain under review to take into account the comments that were received, we have moved ahead to implement several changes proposed which concern the financial advisory industry. The Bank has lowered the minimum capital requirement for financial advisers to RM50,000 which will take effect from 1 January 2015 to encourage more advisers to enter the industry. This follows an increased focus on professionalism, innovation and quality of advice as the hallmark of those who are admitted to the industry.