by S BIRRUNTHA / pic TMR File

MALAYSIA’S banking system remains resilient, with sufficient capacity to absorb losses under a severe simulated downturn scenario, said Bank Negara Malaysia (BNM) Governor Tan Sri Nor Shamsiah Yunus (picture).

She added that in fact, the effect of recent pressure from the US and Switzerland’s banking sector on banks in this country is also minimal.

She said banks in Malaysia have limited exposure to troubled US and Swiss banks.

Furthermore, Nor Shamsiah also explained that the bank’s depositor base in this country is also more diverse.

“In terms of the impact of losses according to the market following the increase in interest rates on the bond holdings of banks in Malaysia, it remains within the bank’s internal capital target.

“The bank also continues to hold high levels of high-quality liquid assets (HQLA) in the form of placements with BNM and government bonds that can be collateralized to meet any additional liquidity needs,” she said during the press conference following the launch of BNM’s 2022 Annual Report today.

Commenting further, Nor Shamsiah said despite the challenging operating environment, the banking system in this country remains resilient, with a robust level of capital and liquidity buffers.

She noted that the total capital ratio was at 18.8% as of December 2022, higher than the level observed during the Global Financial Crisis.

She also said the liquidity coverage ratio and net stable funding ratio also remained stable at 154% and 118%.

Additionally, Nor Shamsiah said the central bank also test the resilience of banks and insurance companies through its annual stress test exercise, where banks, as well as insurance and takaful operators (ITOs) are subjected to worse operating environment scenarios than those observed during the Global Financial Crisis and the 2020 pandemic.

“The results of the stress test confirm that our bank is strong, with the total capital ratio remaining well above the minimum requirement of eight percent under a severe scenario,” she said.