Malaysian banks have sound buffers, with adequate system profitability, capitalisation and liquidity which will help cushion against rising asset-quality, funding and liquidity risks.
KUALA LUMPUR: The Malaysian commercial banking sector continues to be robust with ample liquidity, says the Association of Banks in Malaysia (ABM).
It said on Tuesday liquidity remains healthy as the sector’s Basel III* liquidity coverage ratio (LCR) was at 125% as at end-December 2016 and loan-to-deposit ratio also robust at 89.8%.
“In the month of December 2016, outstanding business loans of the banking system expanded by 5.0% year-on-year whilst loans to households grew by 5.3% during the same period,” it said.
It also said commercial banks were always active in the business of lending and viable businesses will continue to be able to obtain financing.
“Banks on their part are committed to enhance their capability to support businesses and entrepreneurs which include the offering of various loan packages to meet the needs of innovative enterprises,” it said.
ABM also pointed out the 5% growth in the outstanding business of banking system was driven by the annual expansion of loans to most major sectors such as the wholesale and retail trade, restaurants and hotels, finance, insurance and business services, and transport.
“Businesses are operating in a stable environment with the ringgit stabilising,” it added.
ABM added banks have been pivotak in supporting the country's growth by extending credit facilities to businesses and households and would continue to do so in keeping with the level of economic activities.
Commercial banks, it said, were always active in the business of lending and gave an assurance that viable businesses would continue to be able to obtain financing.
“Businesses which face challenges in their loan applications are encouraged to discuss with their financiers when making the suitability and afforability assessments for any facility they apply for.
“Corporates and entrepreneurs are urged to shop around for a financing package which best meets their targets,” it said.
What Basel III is about:
It is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector.
These measures aim to:
* improve the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source
* improve risk management and governance
strengthen banks' transparency and disclosures.
The reforms target:
* bank-level, or microprudential, regulation, which will help raise the resilience of individual banking institutions to periods of stress.
* macroprudential, system wide risks that can build up across the banking sector as well as the procyclical amplification of these risks over time.
These two approaches to supervision are complementary as greater resilience at the individual bank level reduces the risk of system wide shocks.
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