KUALA LUMPUR (July 15): In a rare open letter to editors on Friday (July 15), Bank Negara Malaysia (BNM) governor Tan Sri Nor Shamsiah Mohd Yunus dispelled the alleged link between Malaysia's Overnight Policy Rate (OPR) hike and the rise in individual bankruptcies in the country, saying that the number of individual bankruptcies in the nation has been declining since 2016.
"Letter to editors: Declining bankruptcy case trend; bankruptcy action is the last resort for financial institiutions," Nor Shamsiah said.
Nor Shamsiah said bankruptcy action is the last resort for financial institutions after all other loan-repayment recovery efforts are made to recover the money loaned to the borrower.
"To declare someone bankrupt is not an easy thing," she said.
BNM's Monetary Policy Committee (MPC) during the MPC's two latest meetings raised the OPR by 25 basis points (bps) each to bring the current OPR to 2.25%.
On July 6, 2022, BNM said its MPC decided to increase the OPR by 25 bps to 2.25% as the unprecedented Covid-19-driven conditions that necessitated a historically low OPR continued to recede.
On May 11, 2022, the MPC increased the OPR by 25 bps to 2% from a record low of 1.75% as global inflationary pressures increased sharply and after taking into account that sustained reopening of the global economy and improvement in labour markets continued to support the recovery of economic activity from the impact of Covid-19-driven movement restrictions.
The OPR at 1.75% was the lowest on record, according to data dating back to 2004 on the central bank's website.
The OPR had been maintained at 1.75% since July 7, 2020, when BNM cut the rate from 2% following the Covid-19 outbreak that began in early 2020.
In the open letter, Nor Shamsiah said to declare someone bankrupt is not an easy thing because many procedures need to be adhered to by financial institutions or other creditors.
According to her, the other creditors include non-bank money lenders and goods suppliers.
She said the number of individual bankruptcies in Malaysia has been declining since 2016 based on updates from selected banks and non-bank institutions.
"These include the period when the OPR was rising in 2018," she said.
Nor Shamsiah did not specify the names of the seven domestic financial insitutions, from which the number of individual bankruptcies in Malaysia was derived from.
She, however, said these seven domestic financial insitutions account for 71% of Malaysia's banking-system loans.
Nor Shamsiah's open letter includes a table, which showed the declining number of individual bankruptcies in Malaysia since 2018 when the figure stood at 5,283 individuals.
In 2019 and 2020, the figures stood at 3,948 and 2,844 respectively before falling further to 1,884 in 2021, according to her.
Between January and April 2022, the number of individual bankruptcies in Malaysia stood at 515, she said.
Nor Shamsiah's open letter was in response to allegations by non-government organisation Persatuan Penyelesaian Pengguna dan Peminjam Malaysia, which is said to have linked the OPR's rise to Malaysia's bankruptcy trend.
"Recently, there is a group (Persatuan Penyelesaian Pengguna dan Peminjam Malaysia) [which] linked the OPR's rise to the bankruptcy trend," she said.