Malaysia
KUALA LUMPUR: Malaysia’s banking and insurance sectors have continued to demonstrate sound financial positions, and remained resilient to shocks under a range of stress scenarios, said Bank Negara governor Datuk Muhammad Ibrahim.
In his statement accompanying the Financial Stability and Payment Systems Report 2016, Muhammad said volatility in the financial markets was likely to remain elevated in the near term against prospects of interest rate normalisation in the US.
“On the domestic front, low interest rates and rising impairments in some segments will continue to weigh on the profitability of financial institutions.
“Ensuring that key sources of domestic risks remain firmly in check must therefore be a clear priority,” he said.
He said it was important that financial institutions remained vigilant over lending standards and risk-taking.
At the same time, he said, more progress was needed in responsibly addressing financing gaps in new and innovative areas of economic activity.
“The advent of disruptive technologies further threatens to dislodge traditional footholds of banks and insurance companies on the one hand, while opening up new opportunities to increase efficiency and scale on the other.
“Ongoing challenges facing lower income households are additionally shining a spotlight on financial inclusion and the role of financial institutions in encouraging a more inclusive financial system in Malaysia,” he said.
These challenges, he said, placed against a backdrop of more uncertain and unpredictable developments going forward, called for a financial system that exhibited a high degree of flexibility.
Muhammad said Bank Negara would continue to ensure that the regulatory framework was suitable for the domestic financial system and responsive to changing risks.
“This includes risks associated with cyber threats, more pronounced cross-border activity, conduct in the wholesale markets and growing product complexity,” he said.
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