Answer to Oral Question PL234

QUESTION

Yang Berhormat Pehin Orang Kaya Laila Setia Dato Seri Setia Awang Haji Abd. Rahman bin Haji Ibrahim

YANG BERHORMAT PEHIN ORANG KAYA LAILA SETIA DATO SERI SETIA AWANG HAJI ABD. RAHMAN BIN HAJI IBRAHIM asked YANG BERHORMAT Menteri di Jabatan Perdana Menteri dan Menteri Kewangan dan Ekonomi II to state whether there are any plans by the Central Bank (BDCB) to update the regulations governing Financial Institutions, particularly those that can further stimulate economic activity, increase the level of domestic investment, assist the growth of local MSMEs, open up more job opportunities, and ease the repayment burden for borrowers. This is in view of the banking sector being one of the catalysts towards generating sustainable economic growth.

ANSWER

Yang Berhormat Menteri di Jabatan Perdana Menteri dan Menteri Kewangan dan Ekonomi II

Thank you Yang Berhormat Yang Di-Pertua, Assalamualaikum warahmatullahi wabarakatuh and greetings.

Kaola would like to express appreciation for the question from Yang Berhormat Pehin Orang Kaya Laila Setia Dato Seri Setia Awang Haji Abd. Rahman bin Haji Ibrahim.

In carrying out its role in safeguarding the stability of the financial sector, Brunei Darussalam Central Bank (BDCB) actively ensures that the existing regulatory framework remains conducive to the development of the domestic financial market, while at the same time supporting sustainable economic growth.

In line with this, BDCB will continue to assess and ensure that the suitability of the regulatory framework as a whole remains relevant, in order to safeguard the sustainability of financial institutions in this country as well as to ensure that the protection of financial consumers is always maintained.

This includes adjustments to the existing framework to ensure that it is aligned with developments in the latest standards and international banking best practices. In this effort, BDCB will continue to conduct various consultations with the industry and engagement with stakeholders to obtain feedback before any regulations are enforced.

In this regard, I would like to share several developments in the implementation of various initiatives undertaken by BDCB and also the outcomes that support the strengthening of broader economic aspects.

First, in terms of further stimulating economic activity and increasing the level of domestic investment:

• To begin with, banks in Negara Brunei Darussalam remain in a strong and stable position to support economic growth. Banks in the country also maintain sufficient liquidity levels to be used as productive assets to support any financial intermediation activities.

• One way is by channelling such liquidity into productive loans through the provision of a reasonable Single Borrowing Limit. Compared to several other countries, the Single Borrowing Limit regulation in Brunei Darussalam is more flexible. This flexibility provides room for BDCB to assess and ensure that economic projects with the potential to support national development can be granted appropriate financing.

• Apart from that, banks in this country also still have the opportunity to finance large projects through syndicated financing (syndicated loans) or on a consortium basis. Such financing is considered more prudent from the perspective of credit management because credit risk exposure is shared and not limited to only one bank. In addition to providing equal opportunity, it also reduces the concentration of risk on a particular bank.

• BDCB also continues to carry out important reviews of existing regulations. One of the outcomes of this effort includes reducing the Minimum Cash Balance requirement ratio from 6% to 5% in February 2025 (effective April 2025) to support and enable banks to increase productive lending funds to businesses and households. This update is intended to provide banks with flexibility to manage their daily liquidity more efficiently. However, the implementation of both the Single Borrowing Limit and Minimum Cash Balance is subject to certain criteria being fulfilled first.

• As regulator of the financial sector, BDCB also consistently ensures that financial institutions continue to provide financial services that are accessible and reliable. BDCB will also continue to monitor the position of the financial industry so that it remains strong and resilient in supporting activities that are beneficial and have spillover effects on the economy of Negara Brunei Darussalam, including government projects. BDCB will also continue to introduce prudent regulations in line with international standards to ensure that financial institutions remain safe and sustainable.

Second, in terms of helping the growth of local MSMEs and opening up more job opportunities, BDCB has already taken several important steps to ensure a conducive environment for businesses in Negara Brunei Darussalam, particularly in supporting the growth of the micro, small and medium sector (MSME). Among the measures that have been implemented are as follows:

• To facilitate access to financing for MSMEs, several initiatives to further strengthen the relevant financial infrastructure have been introduced, such as the Credit Bureau System (2012), Collateral Registry (2016), and Credit Score (2018). These initiatives have helped establish a more objective credit assessment process, the use of movable property as collateral, as well as increased confidence of financial institutions in borrowers' credit profiles.

In addition, the issuance of the Notice on Equity Based Crowdfunding (ECF) Platform Operators and Notice on Peer-to-Peer Financing (P2P) Platform Operators (2017 & 2019) sets out the requirements for any company wishing to operate ECF and P2P platforms in Negara Brunei Darussalam. These notices open up alternative financing opportunities for start-up companies and MSMEs to generate capital through ECF and P2P platforms, while also further enhancing the growth and development of the capital market sector.

Although lending activities to businesses are driven by demand from businesses and are subject to banks' risk appetite, BDCB will ensure that the regulatory framework or banking regulations will not complicate lending to MSMEs, where BDCB regulations on businesses are mostly more relaxed compared to regulations on individual personal customers. For example, lending regulations on individual personal customers are controlled, whereas the risk weighting for loans to MSMEs is given flexibility under the Capital Adequacy framework, subject to conditions.

• In supporting the country's digital economy efforts and providing opportunities for MSMEs to explore the start-up field in the financial technology (FinTech) sector, initiatives such as the BDCB FinTech Regulatory Sandbox allow companies, especially start-ups, to test FinTech products in a more flexible environment.

In addition, with the establishment of the Mekar Fintech Innovation Centre as a collaboration and innovation hub, MSMEs also have the opportunity to develop new financial solutions and expand their businesses in a rapidly growing digital ecosystem.

• To assist the government in understanding the actual conditions and challenges of businesses through monthly data and reviews, BDCB has published the Business Sentiment Index or Business Sentiment Index (BSI) every month since December 2021, which measures the level of business sentiment and confidence in Negara Brunei Darussalam. It can also assist the government in formulating more effective policies and ensuring more targeted support is channelled to sectors in need.

Third, in terms of easing the repayment burden for borrowers, BDCB has implemented the Total Debt Service Ratio which plays an important role in ensuring that borrowing levels remain prudent. Enforced on 8 June 2015, the introduction of this Total Debt Service Ratio was intended, among other things, to control the level of exposure of financial institutions to credit risk in the provision of credit to the household sector while also protecting borrowers from becoming trapped in uncontrolled debt to the extent that they do not have sufficient salary balance left to cover their daily expenses. In addition, the Total Debt Service Ratio regulation is also intended to ensure that banks and finance companies are able to provide quality, resilient and competitive credit lending services.

Since the Total Debt Service Ratio was enforced, BDCB has made several amendments to this regulation, in line with the current economic and market environment, including the following:

• BDCB has expanded the types of monthly income included in the calculation of a borrower's Total Debt Service Ratio limit. In this regard, monthly pension income, house rental income and income from sole proprietorship businesses may be considered by banks and finance companies in the calculation of net monthly income, subject to certain conditions.

• Since 9 November 2017, BDCB has also provided flexibility to the Total Debt Service Ratio policy whereby banks may exceed the maximum limit of 60% for certain credit facilities. This includes mortgage equity financing facilities, but subject to several conditions (such as the mortgaged property having to generate income and not being the borrower's only property). This amendment is also extended to fully secured credit facilities such as those secured by cash and fixed deposits.

These amendments can benefit borrowers who have retired or are pensioners or people who earn non-fixed income. At the same time, BDCB will continue to monitor the regulations issued to ensure their effectiveness. This is also to help increase more economic activity.

At the same time, Bank Usahawan Sdn Bhd, which was established by the government in 2017, also complements the composition of banking institutions and acts as a strategic channel to bridge the gap in supplying financial products and services needed by MSME enterprises in this country.

In helping the growth of local MSMEs, Bank Usahawan is active in providing facilities in terms of financing to MSME enterprises in this country through asset financing and working capital financing, which have been provided to various MSME sectors, mostly to the services, manufacturing, and trading sectors.

To help ease the repayment burden for borrowers among MSMEs, this matter has already been explained in detail by Yang Berhormat Menteri Kebudayaan, Belia dan Sukan as Chairman of the Board of Directors of Bank Usahawan Berhad during the Oral Question session PL241 on 7 August 2025.

Towards ongoing efforts to contribute to economic development in line with Wawasan Brunei 2035, Bank Usahawan will continue to be committed to supporting MSMEs, particularly new businesses and those operated by local youth, in overcoming the challenges they face and ensuring that the services offered, particularly also in terms of financing facilities, will be more inclusive and easily accessible.

That is all. Thank you Yang Berhormat Yang Di-Pertua.