The pricing of loans/financing is a key element in risk management. A risk-informed approach to pricing ensures that financial service providers are adequately compensated for the risks associated with lending/financing activities. This approach also mitigates the risks of a purely commercially-driven pricing strategy, which could undermine the provider’s financial soundness and long-term business sustainability. In a highly competitive environment, Bank Negara Malaysia emphasizes the importance of adopting a risk-informed approach when pricing loan/financing products.
The Risk-Informed Pricing policy document sets out standards that define the responsibilities of financial service providers to adopt a risk-informed approach in the pricing of retail loan/financing products. This is to ensure that decisions on retail loan/financing pricing are consistent with the approved risk appetite.
This policy document sets out requirements that must be complied with by financial service providers on the following:
(i) Governance of loan/financing pricing;
(ii) Retail loan/financing policy;
(iii) Estimation of pricing components; and
(iv) Profit cross-subsidisation practices.
This document belongs to Bank Negara Malaysia (BNM). Full access to the original source is available here: https://www.bnm.gov.my/banking-islamic-banking
