Total Repayments Ratio
CM-5.4.1
Licensees may only provide a new consumer facility (or renew, extend or otherwise modify an existing consumer facility) for an amount so that the obligor’s total monthly repayments on all their consumer finance commitments do not exceed 50 percent of their monthly gross income. This limit may only be exceeded in the circumstances described in Paragraphs CM-5.4.6 and CM-5.4.9.Added: June 2022CM-5.4.2
When reviewing an applicant for a consumer facility,
licensees may only take into consideration regular income. A spouse’s income may only be taken into consideration when the credit facility would be in joint names, so that the spouse would also be legally liable for the obligation incurred.Added: June 2022CM-5.4.3
Notwithstanding the above limit,
licensees must review, in detail, an applicant’s personal financial standing and ability to service their obligations. Where a spouse’s income is being taken into consideration, their individual circumstances must also be similarly assessed. In many cases, these reviews may require consumer finance repayments to be kept significantly below 50 percent of monthly gross income.Added: June 2022CM-5.4.4
Licensees must enquire as to applicants’ sources of income, their credit history, their regular outgoings and other financial commitments, including potential liabilities such as guarantees. Particular attention must be paid to housing costs (such as payments for social housing schemes). A person’s regular income, net of consumer finance repayments and other financial obligations, must remain sufficient for that person to support himself and any dependents.Licensees must also take into account likely future trends in income and outgoings, and the impact this may have on the 50 percent ratio.Added: June 2022CM-5.4.5
When factoring in credit cards into the repayment limit in Paragraph CM-5.4.1 above,
licensees must include 5 percent of the credit limits available on these facilities. If the amounts outstanding (including profit) under such facilities exceed their limit, then the full amount outstanding must be included in the repayments ratio calculation. Charge cards are not included under this definition.Added: June 2022CM-5.4.6
In the case of high earners – defined for these purposes as persons earning more than BHD 3,000 per month – the 50 percent limit may be relaxed, provided that the licensee has undertaken the review required in Paragraph CM-5.4.4 and is satisfied that the obligor can comfortably support a higher facility service ratio.
Added: June 2022CM-5.4.7
The review undertaken to satisfy requirements, as outlined in Paragraph CM-5.4.4, must be documented and made available to the CBB’s examiners upon request. The documentation must include all relevant information used to support the decision to extend credit facilities. In the case of high earners who are granted a facility in excess of the 50 percent limit, the documentation must also include a written statement, signed by an appropriate member of management, explaining the justification for relaxing the limit.
Added: June 2022
