BNM issues revised Policy Document on Credit Risk
19 December 2024
On 5 December 2024, Bank Negara Malaysia (“BNM”) issued a Policy Document on Credit Risk (“2024 Policy Document”) which came into effect on the date of its issuance.
The 2024 Policy Document supersedes the previous Policy Document on Credit Risk dated 31 July 2023 which took effect on 1 January 2024 (“Superseded Policy Document”).
The requirements in the 2024 Policy Document and in the Superseded Policy Document are identical except for amendments to paragraphs 1 and 6 of Appendix 1 (Specific Requirements Relating to the Rescheduling and Restructuring of Loan/ Financing Facilities by Banking Institutions).
Paragraph 1 has been amended to define “significant increase in credit risk” as “SICR”.
Paragraph 6, which relates to the uplifting or removal of a rescheduled and restructured loan from the “rescheduled and restructured loan” classification in BNM’s Central Credit Reference Information System (“CCRIS”), has been amended in two respects: (i) clarifying the original provision to include a reference to MFRS 9 in relation to SICR; and (ii) amending the provision to extend the period for compliance for payment of retail credit facilities that have been restructured or rescheduled from six to 12 months in order to be uplifted from being classified as “rescheduled and restructured loan” under CCRIS.
The new Paragraph 6 reads as follows:
“For the purpose of reporting to CCRIS, the institution shall uplift the “rescheduled and restructured” classification in CCRIS upon meeting the following criterion:
- all payments as per the revised contractual terms have been made in a timely manner over a continuous repayment period of not less than six months and the counterparty no longer exhibits signs of SICR in accordance with MFRS 9; or
- in the case of retail credit facilities1, all payments as per the revised contractual terms have been made in a timely manner over a continuous repayment period of 12 months.”
Our article on the Superseded Policy Document, which remains largely applicable to the 2024 Policy Document, subject to the above amendments, can be accessed
here.
Alert by Javene Fan (Senior Associate) of the Banking and Finance Practice of Skrine.
1 A footnote to paragraph 6 of the 2024 Policy Document explains that “
retail credit facilities” are loans/ financing facilities to individuals and small and medium-sized enterprises that are managed by banking institutions on a portfolio basis or subjected to a simplified review.
This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.