Lower cash threshold report won’t hit banks badly, says analyst

Banking processes have already been digitalised and automated, hence do not necessarily require more staff or incur higher costs


Banks in the country are not expected to be badly hit by the lowering of the daily cash threshold report (CTR) to RM25,000 next year.

MIDF Amanah Investment Bank Bhd analyst Imran Yassin Yusof said the reduced CTR could also promote the usage of online transactions.

“Lowering the CTR would increase the instances of reporting but we don’t think it will add much further cost to banks, nor will it impact the economy.

“The potential is there for more manpower at banks, but it’s not likely to be a critical need. There are not many cash transactions above RM25,000,” he told The Malaysian Reserve yesterday.

He added that many banking processes have already been digitalised and automated.

“As such, the lower CTR would increase the potential number of reports, but not necessarily require more staff or higher costs.

“We also see this as another way to promote cashless transactions, which the central bank has been pushing. Online or cashless transactions are also easier to monitor than physical cash,” Imran said.

Bank Negara Malaysia (BNM) governor Datuk Nor Shamsiah Mohd Yunus (picture) had recently announced that the daily CTR would be halved to RM25,000 starting Jan 1 next year, from the current level of RM50,000.

The move is aimed at reducing financial crime, in light of recent high-profile cases that involved criminals using cash to launder illegal proceeds. Cash is also the preferred mode to finance terrorist activities.

In her keynote address at the International Conference on Financial Crime and Terrorism Financing (IFCTF 2018) in Kuala Lumpur on Tuesday, the governor said the current CTR is too high and disconnected from the size of the Malaysian economy, especially relative to Malaysians’ purchasing power.

The central bank does not anticipate any impact on economic activity from the reduced CTR, but sees greater effectiveness in “taming the black economy that is still heavily reliant on cash transactions”.

Nor Shamsiah said domestic mobile-banking transactions multiplied from around 500 million transactions in 2016 to almost 1.3 trillion transactions in August this year.

Virtual assets have also seen tremendous growth, with the market capitalisation of virtual assets having risen over 1,000% from around US$20 billion (RM84 billion) as at end-2016 to around US$200 billion to date.

According to current data from BNM’s website, CTR refers to cash transactions exceeding RM50,000 involving physical currencies — domestic or foreign — and bearer negotiable instruments such as travellers’ cheques, but excludes bank drafts, cheques, electronic transfers or fixed- deposit rollovers or renewals.

The requirements for CTR are applicable to single or multiple cash transactions within the same amount specified in a day, while in cases involving deposits and withdrawals, the amount must be aggregated.

Compliance Officers’ Networking Group chairman V Maslamani said the reduced CTR would likely result in a slight increase in compliance costs for banks, although this would be “very minimal”.

“The lower CTR will create more frontline work for banks, as they would need more details on transactions.

“It would also be more resource-intensive for BNM, as the job of analysing the data will be more difficult. But most banks have already automated the data capturing process anyway,” he told reporters at the IFCTF 2018.

Maslamani also said the central bank had already engaged with several key banking institutions to gather feedback on potential challenges following the 50% reduction in the CTR.

“Except dealing with public perception on giving additional details to banks, I don’t think banks will have much of an issue in implementing this requirement,” Maslamani stated.

Meanwhile, Imran said he did not expect any negative surprises from local banks in their results for the third quarter ended Sept 30, 2018 (3Q18).

“We’ll likely see some pressure on net interest income and also on non-interest income due to volatility in our market, but other than that, banks should perform within expectations,” he said.

Among local lenders, Public Bank Bhd was the first to release its 3Q18 earnings. The bank’s net profit slipped 1.4% to RM1.38 billion due to a one-off capital gain on investment recorded in the same quarter last year, while its revenue climbed 5.8% to RM5.62 billion.