Banking sector in Malaysia has retained its strength even in the phase of global crisis, due to sound liquidity flow and higher domestic savings and external reserves.
According to the Association of Banks in Malaysia (ABM), in the tough phase of financial meltdown prevailing in the global markets, Malaysian banking sector is standing firm and is well-capitalized. Commercial banks in the country too have remained strong and are expected to remain resilient in coming times also, as reported by bernama.
Currently, 22 commercial banks are operating in the country, including nine national and 13 locally-incorporated overseas banks. Commercial banks represent the biggest and most significant financial institutions in the country, with total assets of nearly RM1.231 Billion as of June 30, 2008. The end of August 2008 saw the industry’s loan to deposit ratio resting at 74.5% as compared to the 90% recorded in 1997.
The major factor responsible for healthy financial atmosphere in Malaysia is the strong liquidity of the financial system of the country, complemented by the high rate of domestic savings and foreign reserves of the country. It will push the economic growth of the country, although moderately.
Moreover, Malaysian banks are predominantly having local area of concentration with ringgit-dominated assets taking up 90% of the total assets. Also, most of the assets and investments of these banks are focused in the ASEAN region that is least affected by the global economic turmoil.
Further, strict surveillance and supervisory system has assured that the banking sector of Malaysia would maintain its resilience amidst the global economic meltdown. Also, the commercial banks operating in Malaysia are highly capable of performing their intermediation activities constantly and in complete support of country’s financial activities. Smooth loans offered by the banks have enabled the business activities to continue as normal.
Additionally, the steady and low quarterly interbank rates, and comparatively slow growth of interest rate against the Malaysian Government Securities, also show the strength of the banking structure in Malaysia.
According to a Research Analyst at RNCOS, “Although the financial market of Malaysia has been affected by the worldwide market meltdown, but still there is sufficient liquidity in the economic system of the country. As a result, the financial markets are able to carry out their regular functions. Banking institutions in Malaysia, supported by strong capital and liquidity buffers, are continuously offering finance to the Malaysian economy.”
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