ABM: Banks not to blame for retail, office space glut in Klang Valley

PETALING JAYA: The Association of Banks in Malaysia (ABM) has refuted claims that banks are responsible for the glut in supply of retail and office space in the Klang Valley, stating that it is only one part of the ecosystem which is responsible for the creation of these properties.

In a statement released last Friday, ABM reiterated that its member banks have engaged stringent processes for credit risk assessment supported by sound lending and valuation practices, adding that thorough credit analysis is performed before any financing for commercial properties is granted.

ABM said this may include, but are not limited to, conducting project feasibility studies performed by independent parties or in-house commercial property experts, marketability and competitors’ analysis, assessment of economic and market developments, as well as repayment capability.

In cases where borrowers engage independent valuers/ consultants to prepare a feasibility study as part of the submission criterion for the loan applied, ABM said the report will still be subjected to the bank’s own assessment and risk appetite.

Moreover, the association noted that banks do not rely solely on feasibility/valuation reports as other factors and criteria, such as the developer’s financial standing, track record and multiple sources of funds for repayment, would also be considered in the assessment of loan applications.

For purposes of evaluating applications for the financing of shopping malls, ABM said that banks would additionally consider the population size and growth, purchasing power and potential growth in retail spending within the surrounding areas, as well as the outlook of the tourism industry.

“For some of our member banks, the financing of commercial properties and shopping malls requires an elevated degree of risk assessment and higher approving level.