The Malaysian banking sector is likely to remain resilient and profitable amid global crisis due to its improved risk management standards and practices, and strong capitalization.
According to Public Bank founder and Chairman Tan Sri Teh Hong Piow, the banking sector of Malaysia is likely to remain healthy and profitable, though the country’s economy is expected to moderate to nearly 3.5% in 2009, as reported by thestaronline.
The Malaysian banking sector had a risk weighted capital ratio of about 12.6% in October 2008, much higher than 8% (minimum international requirement). This makes the country’s banking sector apparently well-capitalized. Further, the industry had net Non-Performing Loan (NPL) ratio of 2.4%, the lowest level since the Asian financial crisis in 1997-98.
Post Asian economic crisis, the Malaysian banks came under strict supervision of Bank Negara and thus, have largely remained insulated to the financial meltdown. Apart from local incorporation requirements for overseas banks, acquisitions and mergers under the consolidation plans of the banking sector have also fortified the position of banks.
The Malaysian banking sector is expected to remain resilient due to its healthy asset quality, strong capitalization, and enhanced practices and standards of risk management. Also, due to the success of Bank Negara’s reforms and capacity-constructing steps, the country’s banking sector is expected to remain firm.
Malaysian banks have established stronger risk management and corporate governance models to combat the challenges posed by ongoing economic slowdown. Keeping in view the fact that some of the developed nations are badly affected by the recession and are likely to remain in the same phase for some more time, growth prospects for the Malaysian banking sector, relying on the proactive economy management and strength of domestic demand, are appearing far more respectable.
Despite sluggish exports, Malaysia is not expected to slip into recession. However, the country’s economy may be in a need of another stimulus package, as per the central bank.
According to a Research Analyst at RNCOS, “Malaysian banking sector has successfully withstood the global financial crunch up till now and is expected to continue its growth in future also. However, if the economic situation in the leading economies further slips out of hand, then further stimulus will definitely be required to lessen the negative impacts on Malaysian economy.”
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