IT is a pleasant surprise when Bank Negara governor Datuk Nor Shamsiah Mohd Yunus walks in the room for this exclusive interview with StarBizWeek – her first since taking over the top job at the central bank.
She is clad in a blue blouse and dark slacks, accessorised only by a pendant chain around her neck.
On her wrist is a glittery-looking physical-activity tracker which monitors health indicators like one’s heart rate and the number of steps one takes in a day.
Hardly the look anyone would associate with a serious central banker, one might say, but her fashion style could very well be in sync with the leadership pattern that she adopts.
Barely two weeks into the job, the 55-year-old Nor Shamsiah streamlined the central bank’s organisational structure, with the objective of keeping it simple and nimble.
For one, the Financial Intelligence and Enforcement Department was strengthened and given more priority.
She also did away with the role of the chief of staff, a position that required direct reporting to the governor, created by her predecessor Tan Sri Muhammad Ibrahim.
“We like to keep all our lines of communication always open here,” she says.
If the activity tracker on her wrist is anything to go by, then Nor Shamsiah is equally concerned about the health of the banking system and the country’s economy as a whole.
“Our mandate is clear – to promote stability.
“Depending where you are in the business/economic cycle in order to achieve that, you have to face different challenges, and our priority is and has always been to discharge stability so that we have sustainable growth of the economy,” Nor Shamsiah tells StarBizWeek.
Nor Shamsiah, who is an accountant by qualification, joined Bank Negara in 1987 and rose the ranks to become the deputy governor from 2010 until 2016.
She left in 2016 amid the unravelling of the 1Malaysia Development Bhd (IMDB) financial scandal that took the global financial world by storm, and went on to become assistant director of the Monetary and Capital Markets Division of the International Monetary Fund, based in the United States.
She was the one who was spearheading investigations into 1MDB when she was still deputy governor at the central bank.
She returned to the central bank last July to succeed Muhammad who tendered his resignation after questions were raised on the central bank’s purchase of a piece of land from the Federal Government for RM2bil.
“I miss the Saturday nightlife there...,” she says, when asked if she misses her life in the States.
By this, she means the wide variety of talk shows aired in America, she adds, with a hearty laugh.
Teamwork to her is important.
She refers to this as “the strength of collective wisdom.”
For now, she certainly has her work cut out for her here.
One of Nor Shamsiah’s biggest challenges is the weakening ringgit.
The local currency has weakened by 4.6% against the US dollar over a one-year period and by about 0.6% since the start of the year, trading at 4.1683 at press time.
Against Singapore’s currency, it has depreciated some 2% over the past one year.
Growing uncertainty brought on by weak oil prices and a trade war between the United States and China that doesn’t seem to be dissipating are the obvious external headwinds.
Mounting concerns that global index provider, the FTSE Russell, may withdraw Malaysian government bonds from the FTSE World Government Bond Index (WGBI) in September, over issues related to market liquidity, poses another worry.
“The new reality is that we are going to see bouts of heightened volatility,” she says without mincing her words.
“So, it is important for us to have the tools to manage the volatility to make sure the financial markets continue to be orderly.”
Having said that, Bank Negara, she says, is no stranger to headwinds.
“We have been hit by many external headwinds before.”
In 2014/15, for example, Malaysia faced massive outflows and the ringgit depreciated, but Nor Shamsiah says, “we managed it”.
She recalls in 2015 a perfect storm made of an oil price crash and the unfolding of the 1MDB saga saw one of the biggest money outflows, but the economy continued to grow.
“Yes, we had a steep depreciation of the ringgit but again our financial markets remained orderly. Bank loans continued to increase.”
Locally, one of the country’s pressure points since the Asian Financial Crisis of the 1990s has been overbuilding in the office space and shopping complex segment.
This, she says, has been what the central bank has been warning the government about.
However, Nor Shamsiah says the exposure for the banks over this remains small for now - at less than 10% of their total loan portfolios.
One other issue that needs attention is the over-leverage situation within the household sector, especially when it comes to property.
She cites the example of 6,000 individuals who were interested in the RM1bil Fund for Affordable Homes which the central bank established in 2018 to help the low-income segment of society own homes.
Interestingly, after the individuals went through an online financial education module that accessed their financial strength, close to 2,000 people opted to put off the decision to buy a home, after realising that they were not yet ready financially.
As of end-2018, the country’s overall debt and liabilities stood at 75.4% of the country’s gross domestic product or GDP.
Notably, this was down from 79.3% in 2017.Embracing changes in banking
When it comes to the banking sector, the governor is all for change, provided the changes are beneficial.
Recall, in March, the central bank said that it was looking to issue virtual banking licences, making Malaysia second only to Hong Kong in recent times to announce such a move.
The idea of virtual banks – which theoretically means a bank without any physical branches whatsoever – however, is not new.
In fact, many countries such as the United States and the United Kingdom have attempted it.
But in Malaysia, the announcement by Bank Negara is quite significant, also because the central bank has not issued any new banking licences for many years
“If there is a digital bank that can bring about change in the best interest of the nation, why should we keep our doors closed? That’s the philosophy we are adopting,” Nor Shamsiah says when asked if foreign parties would be welcomed.
“Again, the potential entrants would be assessed on two aspects (whether they would be in the best interest of the nation and if they fit in the prudential criteria set) before we issue them any new licence,” she adds.
“The disruption of digital banks must bring positive economic development and reinforce market stability.”
Nor Shamsiah says the new licences are not meant to protect the incumbent banks, but instead, meant to serve the economy.
“We’ve had quite a few parties coming to us, but talks are still at the exploratory stage. The discussions have been fruitful.”
With so much on her plate, all eyes will no doubt be on Nor Shamsiah, who is only the second woman to hold the position after Tan Sri Zeti Akhtar Aziz, who remains one of the better-known central bankers in the region, having held the role for 16 years.
“This is definitely a hot seat,” Nor Shamsiah says with a smile.
Click here for more: Central bank needs to be future-ready