This is not something we will do for one or two years. We will have to continue this work as our children become young adults and eventually retire, giving rise to a whole new cycle. Hence the work on financial education has to be done continuously, as it is a very important area to help Singaporeans. 1  Financial Literacy Survey of over 1,800 Singaporeans and PRs conducted by The Nielsen Company on behalf of MAS between August and October 2013. Respondents answered questions and participated in focus groups on their knowledge of, attitudes and behaviour towards financial products and management. BIS central bankers’ speeches  1  Towards better financial wellbeing Financial protection 7. What will MAS do? We have a two-pronged approach to help Singaporeans to enhance their financial well-being. The first is to regulate the conduct of our banks and financial institutions. For banking, the key issue is to discourage the imprudent use of unsecured credit facilities. Consumer research has shown the immediate pleasure of purchasing a designer accessory or purchasing the latest gadget using a credit card. If you have a credit card, the immediate pleasure of using it to purchase the latest good that you’re interested in can lead people to spending more than they otherwise would. There was an experiment with a group of students in the US who were asked to bid for a pair of tickets to a basketball match.
The experiment showed that those who bid for the tickets using their credit cards were willing to pay up to 100% more than those who were using cash.2 And this was a group of students that was not a typical population, but a group of MBA students from MIT! Even they, with their credit cards, bid much more when using credit cards than when using cash. This is normal human behaviour. 8. Hence MAS’ credit card rules are important. We have to discourage people from excessive spending using credit cards. Many countries do not impose rules, or some have imposed rules only recently. We moved very early to discourage excessive credit card spending. I think it is a very sensible move, having a minimum income requirement and also making sure that once you have a credit card, you can’t spend too much compared to your monthly income. This is something we have strengthened recently. As some of you may know, we have a total limit on what individuals can borrow on all their credit cards and unsecured facilities combined, with all the banks. The total limit will be capped at 12 months’ of income, which is still a very high borrowing on an unsecured basis. But MAS started with this limit because we are aware that some Singaporeans’ borrowings currently exceed 12 months of income, and we have to give them time to bring their borrowings down. MAS will monitor the situation, and tighten the credit limits further, if necessary. 9.