"With any luck, this move will hopefully head off trouble..."
The implementation of debt service ratios into banks' credit decisions has been rumoured for some time. Not that this isn't being done by our banks previously, but what BNM is doing is setting an industry standard while at the same time giving teeth to any move towards slackers.
But the more important move is probably that last paragraph, where the same standards are going to be implemented in non-bank financial institutions. It's been a sore point with BNM for a few years now that households are being allowed to leverage up without the credit culture and approval protocols so painstakingly built up over the years within the BNM regulated financial sector. Especially since BNM has had to come to the rescue in years past and could be required to do so again in the future, yet with little influence over the development of non-bank credit. With any luck, this move will hopefully head off trouble from that direction, though I'm not too hopeful - the non-banks have had a field day in the last 2-3 years, and that buildup of exposure combined with lax credit controls might have already gone too far.
Read more at ECONOMICS MALAYSIA.