KUALA LUMPUR: Perbadanan Insurans Deposit Malaysia (PIDM) has issued the revised Guidelines on the Differential Premium Systems (DPS) framework for the Deposit Insurance System.
PIDM said on Monday the DPS framework is a risk-based system to provide financial incentives for member banks to achieve sound risk management as well as to ensure fairness among member banks.
The better the risk profile of the member bank, the lower the premium rate will be.The banks will be assessed in a matrix comprising “capital buffer” and “financial performance and condition”.
The revised DPS framework, effective from assessment year 2015, will supersede the last enhancement in 2011, it said.
PIDM’s executive general manager Rafiz Azuan Abdullah said PIDM was committed to ensuring the DPS framework remains current and relevant.
“2015 marks another significant milestone in the enhancement of the DPS framework with the introduction of the two-dimensional matrix approach, which is designed to incentivise member banks to have strong capital buffers levels, as well as strong financial performance and condition,” he added.
He added the three areas are profitability, asset profile and the newly introduced criterion -- funding profile -- to assess a member bank’s ability to fund the business from stable funding sources and the stability of the bank’s customer deposits.
"The global financial crisis has demonstrated the importance of funding and liquidity management and the repercussions for financial institutions when funding and liquidity are not properly managed.
The introduction of a funding criterion is timely as this will ensure that the DPS framework remains robust and relevant to the operating and regulatory environment,” he added.
The matrix approach will better reflect the inter-linkages between strong capital buffer levels and sustainable financial performance and allows for more granular differentiation of the member banks’ risk profiles.
The DPS is a culmination of extensive research, discussions and feedback from its stakeholders.
PIDM is confident the DPS will continue to encourage member banks to adopt sound risk management practices and minimise excessive risk-taking.
The revised DPS framework can be downloaded from PIDM’s corporate website at www.pidm.gov.my