Omigosh, the proverbial fecal matter has hit the rotating cooling device. Rating agency Moody's Investors Service has downgraded the outlook on Singapore's banking system from "stable" to "negative".
The anticipated rise in interest rates coupled with the high level of household debt - most of it tied down to mortgages - will present a perfect storm to the local lenders' credit profile. CFO Chng said a rise in short-term interest rates will lift DBS's net interest income and mitigate higher credit costs. That may be good news for the bank, but not the house owners.
The latest round of cooling measures introduced last month were meant to make sure outstanding debt obligations do not exceed 60 percent of monthly income, which is another way of saying many have already committed more than 60 percent to service housing loans. The numbers tell us that since 2009, household debt has risen 40.4 percent while monthly incomes rose only 26.3 percent.
Why are the lemmings still leaping off the cliff?
One reason could be the Minister's lack of resolve to burst the festering housing bubble. He may think he's helping the asset enhancement devotees to realise a fat profit for retirement, but by hoping to offload $400,000 public housing flats at $1,000,000 price levels, that's downright ripping off the younger generation coming into the market. The expression that comes to mind is "kicking the can down the road". Not every young person has a godfather with a million dollars paycheck to help with the mortgage payments.
So has the sub-prime crisis made its way across the globe to the little red dot? Moody's noted that Singapore banks have sufficient buffers to withstand losses under stress test scenarios - without spelling out what those stress scenarios are. If they are so confident, why has DBS's outlook been rated "negative" since last August?
The anticipated rise in interest rates coupled with the high level of household debt - most of it tied down to mortgages - will present a perfect storm to the local lenders' credit profile. CFO Chng said a rise in short-term interest rates will lift DBS's net interest income and mitigate higher credit costs. That may be good news for the bank, but not the house owners.
The latest round of cooling measures introduced last month were meant to make sure outstanding debt obligations do not exceed 60 percent of monthly income, which is another way of saying many have already committed more than 60 percent to service housing loans. The numbers tell us that since 2009, household debt has risen 40.4 percent while monthly incomes rose only 26.3 percent.
Why are the lemmings still leaping off the cliff?
One reason could be the Minister's lack of resolve to burst the festering housing bubble. He may think he's helping the asset enhancement devotees to realise a fat profit for retirement, but by hoping to offload $400,000 public housing flats at $1,000,000 price levels, that's downright ripping off the younger generation coming into the market. The expression that comes to mind is "kicking the can down the road". Not every young person has a godfather with a million dollars paycheck to help with the mortgage payments.
So has the sub-prime crisis made its way across the globe to the little red dot? Moody's noted that Singapore banks have sufficient buffers to withstand losses under stress test scenarios - without spelling out what those stress scenarios are. If they are so confident, why has DBS's outlook been rated "negative" since last August?
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