[SINGAPORE] An estimated 100,000 well-heeled people will soon be able to spend more freely on their credit cards as the rules governing unsecured credit are substantially relaxed.

The Monetary Authority of Singapore proposes to exempt card issuers from complying with maximum credit limits for individuals with an annual income of at least $120,000 or net personal assets exceeding $2 million.

In other words, the banks could set their own limits when they issue credit or charge cards to this group.

The latest move will probably unleash a new credit card war as bankers, who have been lobbying the authorities for years to relax its grip on credit spending limits, try to retain customers who can now consolidate their plastic given that they don't have to carry several cards from more than one bank anymore.

The MAS said, in a public consultation paper, that such individuals form the top 5 per cent of income earners based on the 2005 Household Survey.

Current rules cap the credit limit to twice the monthly income of the cardholder who must also earn at least $30,000 a year.

The MAS said that the government's social policy to protect individuals from spending beyond their means and incurring unsustainable debt is best aimed at those that most need this protection.

"We consider that individuals with greater financial means should not require the same level of protection. In addition, the percentage of serious defaults among cardholders in this income group is generally very low," the MAS said.

Chua Hak Bin, Citi economist, said that about 9.3 per cent of households, according to the 2005 survey, had monthly earnings of $10,000 and above.

About 1.009 million households were in the survey, so that would be about 50,000 households that would benefit from this relaxation.

Add another 50,000 or so expatriates who are likely to earn more than $120,000 a year and there would be about 100,000 who qualify for no limits, said Dr Chua.

"These limits are often a hindrance, particularly if Singapore aspires to be a private banking hub."

In fact, he argued that the MAS should relax the rules even more.

"There is probably some scope to reduce the $12k limit to encompass a larger part of the population.

"I don't see why the top 20 per cent of household income earners should not enjoy the same privilege as the top 5 per cent."

Edmund Koh, DBS regional head of consumer banking, said that the latest change is a good move from the regulator.

"It is good to be able to extend higher credit lines to them (the high-earners) so as not to inconvenience them," said Mr Koh.

As for the impact on the intensely competitive credit card industry, he expects consolidation.

"With this change, we will probably see a consolidation of credit cards. Astute card issuers who give the right rewards to this group of customers, such as air mile programmes, and have good customer service, will ultimately emerge winners. In addition, issuers will also have to be more sophisticated in their data mining and credit evaluation."

UOB, too, was pleased with the move. Said Gan Ai Im, head of UOB cards and payment products: "As a leading card issuer in Singapore with over one million cards in circulation, we not only welcome this proposal from MAS but will proactively take steps to avail a higher credit limit to our cardmembers in accordance to their credit profile with us.

"The segment of cardmembers that will immediately benefit will be our top-end UOB Infinite Card members where the minimum annual income on record is $300,000 per annum."

The only high earners who still have to comply with a credit limit are bank directors, as part of good corporate governance.

Directors of the issuing bank will have a maximum credit limit of eight times their monthly income.

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