KUALA LUMPUR, Oct 9 — Malaysia’s banking system remained well-capitalised throughout the first half of 2023 (1H 2023), with the banks continuing to maintain strong liquidity buffers, said Bank Negara Malaysia (BNM).
In its Financial Stability Review for 1H 2023, the central bank said the aggregate liquidity coverage ratio and net stable funding ratio remained well above regulatory minima at 154.4 per cent and 117.0 per cent, respectively.
“The total capital ratio stood at 18.5 per cent at end-June 2023 with capital buffers of RM138.5 billion in excess of the regulatory minimum.
“Similarly, the insurance and takaful sector also remained resilient. The aggregate capital adequacy ratio and excess capital buffers stood at 225 per cent and RM38.8 billion, respectively, as of end-June 2023,” it said.
BNM said the strong buffers of banks, insurers, and takaful operators would continue to ensure the financial system’s resilience against future shocks and unexpected losses, enabling them to continue to support the financing and protection needs of households and businesses.
Deputy Governor Jessica Chew said financial institutions are also making progress in aligning business operations with environmental and sustainability goals.
“Financial institutions are increasingly adopting sustainable investment and lending practices, as well as expanding green financial solutions.
“To this end, addressing data needs and capacity building in climate risk management continue to be an ongoing priority for financial institutions, through collaborative efforts supported by the Joint Committee on Climate Change with private industry and government agencies,” she said.
BNM said despite continued heightened volatility in the global financial markets, domestic market conditions remain orderly, reflecting the smooth intermediation of two-way flows in the bond and equity markets.
It also noted that the overall households’ and businesses’ debt repayment ability remained healthy in 1H 2023 amid sound lending standards maintained by banks.
“The household debt-to-GDP (gross domestic product) ratio remains stable at 81.9 per cent. The median debt-to-income ratio for overall households had been broadly stable at 1.4 times,” it said.
According to the report, although domestic business activity has improved considerably in 1H 2023, recovery remains uneven as certain sectors continue to face challenges arising from elevated input costs and weak external demand.
BNM expects businesses are likely to face continued headwinds such as elevated costs and weak external demand.
“Additionally, climate-related risks and opportunities are more likely to be important considerations for businesses.
“However, most businesses are expected to be able to withstand potential new shocks amid improvements in business leverage, healthy cash buffers, and more agile business models,” it added.
— Bernama
