> Sound financial system

The Malaysian financial system can weather the global financial turmoil and remains resilient, says Bank Negara.

The central bank said on Tuesday that it has a fully developed supervisory and surveillance system. It was also continuously monitors all financial institutions under its purview and will take appropriate action to safeguard the soundness of the financial system.

“The (central) Bank stands ready to provide liquidity, whenever necessary, to financial institutions under its purview. The Bank is also closely engaging with the other monetary authorities in the region to monitor and respond with co-ordinated measures in managing the current challenging environment,” it said.

Commenting on the resilience of the local financial institutions, it said this was due to several years of reforms, institutional development and capacity building, continuous efforts to enhance corporate governance and risk management standards and practices.

Bank Negara said the level of non-performing loans had also improved to 2.5%. It said the standardised approach of the Basel II capital adequacy framework was implemented effective January 2008.

“There is also ample liquidity in Malaysia’s financial system to facilitate the orderly functioning of economic and financing activities,” it said.

As at end-August 2008, net interbank placements with Bank Negara by the banking system totalled RM198.5bil.

“The banking and insurance industries are therefore operating with adequate capital and liquidity buffers that have been accumulated over several years.

Malaysia’s financial institutions also have negligible exposure to both sub-prime related securities and to the affected financial institutions of other countries, with more than 90% of total assets of the banks and insurance companies in ringgit denominated assets.

Bank Negara also said all foreign financial institutions in Malaysia were locally incorporated and had a high level of capital that is committed to support their domestic operations.

As at end-August 2008, the risk-weighted capital ratio for these foreign financial institutions was at 12.6% - The Star.