Liquidity rules extension to lower banks’ funding costs

Buying time: With the one-year extension period given by Bank Negara to allow banks to adopt the NSFR requirement, analysts expect some banks to put their house in order in terms of funding practices.

PETALING JAYA: The extension period for the adoption of the net stable funding ratio (NSFR) to 2020 is good news for banks, as it will lower funding costs and improve net interest margins (NIMs) which have been impacted by deposit competition.

Analysts told StarBiz that with the extension, competition for deposits generally would be less intense in the near term and this would lessen the pressure on funding costs and NIMs, which, in turn, would to an extent help improve earnings.