LAST_UPDATEWed, 20 Jun 2018 10pm

Domestic Financial Stability To Remain Intact In 2018

KUALA LUMPUR – The outlook for domestic financial stability is expected to remain intact this year, Bank Negara Malaysia (BNM) said.

Its Financial Stability Committee (FSC) assessed at a meeting last Friday that stability continued to be preserved and well-supported by sound financial institutions and orderly domestic financial markets.

In a statement here today, BNM said, the multi-year solvency stress tests it conducted affirmed the strong capacity of Malaysian banks, insurers and takaful operators to withstand simulated macroeconomic and financial stresses.

“Overall capitalisation is expected to remain above the regulatory minimum under severe credit, market and insurance-specific shocks that are comparable to past domestic and global crises experience.

“This reflects the continued strengthening of balance sheets of households and businesses amid stronger economic conditions,” BNM said.

It said the local banking, insurance and takaful sectors remained resilient, supported by a high level of capitalisation.

Funding and liquidity conditions continued to be favourable, with the banking system’s loan-to- fund ratio and liquidity coverage ratio standing at 84 per cent and 132 per cent respectively as at end-January 2018, it said.

For Malaysian corporations, BNM said, the aggregate leverage increased in tandem with investment activity, as debt-at-risk trended lower amid sustained financial health and low impairment levels.

“The overall credit outlook for the business sector is expected to improve given favourable economic conditions, although the oil and gas and property-related sectors still face some headwinds.

“Potential vulnerabilities from external borrowings of Malaysian corporations are contained with exposures largely hedged and comprising intra-company borrowings with longer maturities,” it added.