KUALA LUMPUR: Access to house financing, particularly for first-time buyers of affordable houses, has been sustained with approval rates at 73%, according to Bank Negara Malaysia's Financial Stability Committee (FSC).
It said on Wednesday the FSC would also continue to monitor the oversupply in the high-end high-rise residential property, office space and shopping complex segments.
Banks were also cautious in lending to these segments, it said in its financial stability statement.
“The FSC agreed that existing macroprudential measures remain appropriate in managing vulnerabilities from macro-financial linkages,” it said.
On the overall credit outlook for the business sector, the FSC expected it to improve due to the favourable economic conditions.
However, it stated that the "oil and gas and property-related sectors still face some headwinds”.
Potential vulnerabilities from external borrowings of Malaysian corporations weree contained with exposures largely hedged and comprising intra-company borrowings with longer maturities.
At its meeting on March 9, the FSC assessed that domestic financial stability continued to be preserved and well-supported by sound financial institutions and orderly domestic financial markets.
However, since the last meeting in November 2017, global financial market volatility has increased amid renewed uncertainties regarding the pace of interest rate normalisation in the advanced economies, commodity price movements and rising trade tensions.
“External developments are expected to cause bouts of higher volatility amid continued two-way capital flows. Potential risks will be cushioned by the favourable outlook of the Malaysian economy and the presence of large domestic institutional investors,” it said.
Bank Negara said the Malaysian banking, insurance and takaful sectors remained resilient, supported by a high level of capitalisation.
“Funding and liquidity conditions continue to be favourable, with the banking system’s loan-to-fund ratio and Liquidity Coverage Ratio at 84% and 132% respectively as at end-January 2018. Domestic financial intermediation is expected to remain supportive of economic activity,” it said.
In terms of macro-financial linkages, risks to domestic financial stability from exposures to households are low. The debt servicing capacity of households remains intact amid low impairment levels, underpinned by stronger income and employment growth. Household financial assets were high, and grew faster than debt as at end-December 2017.
The FSC pointed out that for Malaysian corporations, aggregate leverage increased in tandem with investment activity, as debt-at-risk trended lower amid sustained financial health and low impairment levels.
On the outlook for domestic financial stability in 2018, the FSC expected it to remain intact.
“Multi-year solvency stress tests conducted by the Bank affirm the strong capacity of Malaysian banks, insurers and takaful operators to withstand simulated macroeconomic and financial stresses,” it said.
The FSC expected overall capitalisation to remain above the regulatory minimum under severe credit, market and insurance-specific shocks that are comparable to past domestic and global crises experience.
It also pointed out this reflected the continued strengthening of balance sheets of households and businesses amid stronger economic conditions.
Bank Negara also said the FSC remained vigilant against risks from cyber security threats, illegal financial schemes and market conduct developments to promote public confidence and the smooth functioning of the Malaysian financial system.
Banks continue to undertake measures to strengthen their defence against cyber threats and increase scrutiny on accounts potentially being used to facilitate illegal financial schemes.