The Bank Negara Malaysia (BNM) has said that the country’s domestic financial system is still strong and that local banks can continue to help people and businesses get the money they need.
The strong liquidity buffers of banks, insurers, and takaful operators will continue to protect the financial system from shocks and losses that come out of the blue in the future.
This will allow them to meet the financial and safety needs of people and companies, BNM said in its Financial Stability Review First Half 2023 statement on 10 October.
It also said that banks’ aggregate liquidity coverage ratio (154.4%) and net stable funding ratio (117%) were still well above the legal minimums.
BNM said the total capital ratio was 18.5%, with capital buffers of RM138.5 billion above the legal minimum as of June 2023. This demonstrates that banks still have sufficient capital.
The total amount of capital available and extra capital cushions were 225% and RM38.8 billion, respectively, at the end of June 2023.
Domestic financial markets
The central bank said that although the global financial markets are volatile, things “remain orderly” in the country. The evidence is by how easily two-way flows went through the bond and stock markets.
BNM said that the ringgit was still mostly affected by events happening in other countries. It did say that foreign exchange (FX) risk exposures in the banks and corporate sectors “remain manageable.”
This was made possible by banks’ large foreign currency liquid asset buffers and companies’ smart FX risk management.
The statement said that continued onshore FX market liquidity allows for orderly responses to changes in the outside world, which will help businesses and market players manage their FX exposures and resource allocation.
The central bank said that things got a lot better for domestic business operations. Still, the rebound isn’t happening evenly because some areas still have trouble because of high input costs and weak long-term demand.
Also, business loan impairments are still low at 1% of all loans in the banking system, and the share of SME loans with higher credit risk is still at 2.1%.
BNM said businesses will likely continue to face headwinds such as high costs and weak external demand. Risks and opportunities linked to climate change are more likely important for businesses to consider.
The Bank Negara Malaysia (BNM) has said that the country’s domestic financial system is still strong and that local banks can continue to help people and businesses get the money they need.