FINANCE - BRUNEI - Have a brighter future without debt

THE Ministry of Finance's (MoF) regulations on credit card which were implemented in July, are definitely giving Brunei a rosier future as the government "nips the situation in the bud". This statement came from Tareq Muhmood, chief executive officer of HSBC Brunei. He said that although the regulations are harsh, their intentions are good and (the regulations) will put the Sultanate in "very strong" positions in three years time.However, Tareq emphasised that currently, it's still too early to judge (the situation) as the regulations have only been implemented for a few months.

From HSBC's experience, he believed that it usually takes over six to nine months (for the government) before a real issue arises.

During special interview with The Brunei Times, Tareq tells Goh De No the current state of the bank, its customers, and Brunei's position going forward.

BT: So are there a lot of people facing challenges with repayments right now? We have been getting a lot of Letters to the Editor regarding difficult credit card payments.

Tareq: I wouldn't lie and say none of the customers got challenges, but at HSBC, we have over 60 people in that department (credit card department) who work with customers to make sure everything is okay, to preempt any challenges, to catch it early. This is so we can restructure things if necessary.

So if a customer can't for whatever reason repay, then we work closely with him/her to see what could be done. We have also been working closely with the Ministry of Finance (MoF) as well.

Generally, everything seems to be working out pretty well. What I would encourage customers to do is, the faster they can settle or reduce (their debt), the better it is for them. So it's better to not to try and negotiate to make repayments last longer, but to work hard to bring things under control as soon as possible.

From what I've seen regarding our customers and what repayment has been like over the last two to three months, nothing in there is really scary. So this is the overall shape of the portfolio and the bigger picture from the bank's perspective, which is promising.

Since January, we have put a lot of resources into this; like the helpline since January; increasing number of staffs in the front and back end; and so on. Which shows that we really work hard to contact as many (customers) as possible to preempt a lot of these potential challenges.

So that helps a lot, and we are continuing that as the foot is not off the pedal yet. We still have the same amount of people doing the same things.

BT: So HSBC is still continuing the consolidation loan, meaning people aren't entirely decided on who they want to bank with?

Tareq: If you have your salary transferred to HSBC, you'll get to keep your card, as you know. Currently, we are still offering the consolidation loan for customers to pay their debt over the 36 months period. However, the regulation has only been introduced since July, so if they take it now, they will have 32 or 33 months to repay with an effective rate of as low as 5.5 per cent.

It doesn't necessarily mean that people aren't entirely decided, it could be that some of the customers didn't realise their cards were going to be cancelled, because, for some reason, the communication didn't get to them.

So if now, they want to transfer to us but (they) have debt elsewhere, we then consolidate so the offer will continue to run for a few more months.

BT: So has the bank faced anything serious as of late?

Tareq: We haven't seen many challenges so far. Things like salary transfer have been easy and some customers are settling their outstanding debt and they don't have our credit card anymore. We're monitoring that separately and very closely, so far, we haven't seen anything serious. But, I must emphasise that it's still in the early days, it's only October now. What we usually see from other markets is, it takes six to nine months before a real issue arises. Again, MoF is working closely with us to monitor that and one thing about enforcing a regulation is, we need to make sure that we keep it enforced.

Say for example, six months from now, a customer chooses to stop transferring their salary to us, we have to have a proper system in place to make sure that the card is cut off, so that technology is needed.

BT: How is credit spending so far?

Tareq: When I speak to retailers I hear a mix of stories, some say it's tough, some say it's okay, but it's nothing really serious.

What's interesting for us though is the overall card numbers have gone down, but what we have seen with those (customers) who are still with us, is the overall spending is staying similar. So the customers we have kept are generally active.

So spending with HSBC has not gone down, while people are settling their debt which is a good thing.

BT: As debt is being reduced, this is all due to MoF's initiative right?

Tareq: Yes, the intention is really very very good. Where they are taking us in the next three years will be very strong. But it is one of the hardest and toughest regulations on credit card that I've seen. But as I've said before, credit card debt has the potential to get very ugly, so this is the chance to nip it in the bud. We don't want to end up like any other countries, where they (the customers) are effectively frozen because of credit card debt like in Kuwait. Brunei has a rosier future as its population reduces their debt.

Source : http://www.bt.com.bn/over-glass-teh-tarik/2010/10/02/have-brighter-future-without-debt - Oct 2, 2010