by SHAHEERA AZNAM SHAH / Pic by MUHD AMIN NAHARUL
BANK Negara Malaysia (BNM) has identified Public Bank Bhd, CIMB Group Holdings Bhd and Malayan Banking Bhd (Maybank) under its Domestic Systemically Important Banks (D-SIBs) assessment.
The central bank said D-SIB assessment identifies financial institutions which have the potential to cause damages to the domestic financial system and the country’s economy if they were to fail.
“D-SIB refers to banks whose distress or failure has the potential to cause considerable disruption to the domestic financial system and the wider economy.
“Higher capital requirements introduced for such banks will complement the regulatory framework in place to mitigate the risks posed by D-SIBs to the stability of the Malaysian financial system and the wider economy,” BNM said in a statement yesterday.
The three financial institutions combined have RM213.23 billion in market capitalisation.
BNM has issued a policy document on the D-SIB framework yesterday, which sets out its assessment methodology to identify significant banks in Malaysia.
The central bank said a D-SIB-status financial institution is required to maintain higher capital buffers to meet regulatory capital requirements that include a higher loss absorbency (HLA) requirement.
“This serves to increase a D-SIB’s capacity to absorb losses thereby reducing its probability of distress or failure during periods of stress.
“In turn, this will contribute to a safer and more resilient Malaysian financial system,” it said.
In line with the framework, the applicable HLA requirement for D-SIBs has been set up between 0.5% and 1% of risk-weighted assets, which is at the consolidated level, said the central bank.
It added that the HLA requirement will come into effect on Jan 31, 2021.