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• Banking and Financial Legalese (Terms)
• Buying on Hire Purchase
• Commodities
• Danaharta Act
• Exchange Control Rules
• Offshore Banking
• Securities

WHAT HAPPENS IF DURING THE TENOR OF A CREDIT FACILITY THE VALUE OF ANY SECURITY FALLS BELOW THE OUTSTANDING AMOUNT ?

Where at any time during the tenor of a credit facility, any security provided in respect of such facility decreases in value to a value which is lesser than the amount of the credit facility, the bank or financial institution shall

• require the person to whom such credit facility is given to provide additional security so as to increase the value of the security to an amount which is not less than the amount of the outstanding within 14 days and
• if such additional security is not provided within such period, the person liable for the credit facility shall immediately thereupon be deemed to be in breach of the terms of the contract relating to the credit facility and
• the bank or financial institution shall be entitled to enforce its rights under the contract in respect of a breach thereof.

Therefore bank and financial institutions shall monitor the security coverage of all credit facilities at all times and give the borrower the necessary notice the moment the security value falls below the amount of the facility outstanding.

ARE THERE ANY RESTRICTIONS OF CREDIT TO SINGLE CUSTOMER ?

Yes, there are.

Under Section 61 of the Banking and Financial Institutions Act 1989, no licensed bank, merchant bank or finance company shall grant to any single person any credit facility or incur any liability whatsoever on behalf of any single person in excess of any amount which is in excess of such percentage as may be prescribed by the guideline issued by the Central Bank of Malaysia.

The above limitation, however, shall not apply to

• credit facilities given to another bank or finance company or approved financial institution
• any credit facilities given in respect of imports into or exports from Malaysia or trade within Malaysia against letters of credit or bills of exchange or
• any transaction exempted by the Central Bank of Malaysia.