PETALING JAYA: Bank Negara Malaysia (BNM) has assured the country’s financial system remains resilient and that domestic financial institutions are able to continue supporting the financing needs of households and businesses.
“The strong (liquidity) buffers of banks, insurers, and takaful operators will continue to ensure the financial system’s resilience against future shocks and unexpected losses.
“This will enable them to continue to support the financing and protection needs of households and businesses,” BNM said in its Financial Stability Review First Half 2023 statement today.
It added the aggregate liquidity coverage ratio and net stable funding ratio remained well above regulatory minima at 154.4% and 117% respectively for banks.
Emphasising that the banking system remains well-capitalised, BNM said the total capital ratio stood at 18.5% with capital buffers of RM138.5 billion in excess of the regulatory minimum as of end-June 2023.
The aggregate capital adequacy ratio and excess capital buffers stood at 225% and RM38.8 billion, respectively, as of end June 2023.
Domestic financial markets
The central bank said despite continued heightened volatility in the global financial markets, domestic conditions “remain orderly”. This was reflected in the smooth intermediation of two-way flows in the bond and equity markets.
The ringgit continued to be primarily influenced by external developments, said BNM. However, it noted foreign exchange (FX) risk exposures in the corporate and banking sectors “remain manageable”.
“This was underpinned by banks’ sizeable foreign currency liquid asset buffers and corporates’ prudent FX risk management practices.
“Continued onshore FX market liquidity is enabling orderly adjustments to external developments, and that this will support businesses and market participants in managing their FX exposures and allocation of resources,” it added.
On domestic business activities, the central bank said it had improved considerably. Nevertheless, recovery remains uneven as certain sectors continue to face challenges arising from elevated input costs and weak eternal demand.
“Overall business loan impairments remain low at 1% of the total banking system loans, whilst share of SME loans with higher credit risk remain at 2.1%,” it said.
“Businesses are likely to face continued headwinds such as elevated costs and weak external demand,” BNM said, adding climate-related risks and opportunities are more likely to be important considerations for business.
Source: https://www.freemalaysiatoday.com/category/highlight/2023/10/09/domestic-financial-system-remains-resilient-says-bnm/