Malaysian bank capitalization remains strong in first half of 2023

Malaysian bank capitalization remains strong in first half of 2023

Malaysian bank capitalization remains strong in first half of 2023Malaysian bank remains strongly capitalized for the first half of 2023, as well as a stable liquidity buffer, said Bank Negara Malaysia (BNM).

In the first half of the 2023 Financial Stability Review statement issued on 10 October, the central bank said the liquidity protection ratio and the aggregate net stable funding ratio also remained well above regulatory minimum levels, at 154.4 percent and 117.0 percent, respectively.

The overall capital ratio is 18.5 percent at the end of June 2023, with a capital buffer amounting to RM138.5 billion, exceeding the regulatory minimum.

The insurance and takaful sectors also remain resilient. The aggregate capital adequacy ratio and excess capital buffer are at 225 percent and RM38.8 billion, respectively, at the end of June 2023.

BNM also described the strong buffers of banks, insurers, and takaful operators will continue to ensure financial institutions are resilient against future shocks and unexpected losses.

The situation, he said, will enable financial institutions to continue to support the financing and protection needs of households and businesses.

Meanwhile, BNM Deputy Governor Jessica Chew said financial institutions have also made progress in aligning business operations with environmental and sustainability goals.

The institution also increasingly applies sustainable investment and lending practices and expands green financial solutions.

In that regard, efforts to address data needs and capacity building in climate risk management remain a constant priority for financial institutions through collaborative initiatives supported by the Joint Committee on Climate Change (JC3) with private industry and government agencies.

In addition, BNM said that although the volatility of the global financial markets continued to be significant, domestic market conditions remained orderly, as reflected by the smooth intermediation of two-way flows in the bond and equity markets.

The debt to gross domestic product (GDP) ratio for households remained stable at 81.9 percent.

Generally, the median debt-to-income (DTI) ratio for all households is stable at 1.4 times due to the robust lending standards that Malaysia bank maintain.

BNM said domestic business activities improved significantly in the first half of 2023.

However, the recovery remains uneven as specific sectors face challenges due to high input costs and weak external demand.

The central bank also expects businesses to face ongoing challenges such as high costs and weak external demand.

Businesses will also give more serious consideration to climate-related risks and opportunities.

However, most businesses are expected to be able to face potential new shocks due to improved business leverage, strong cash buffers, and a more agile business model.


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