BNM: Malaysia's banking system remains well-positioned to support economic recovery

The central bank said that as at March 2022, the banks have maintained strong capitalisation levels, with excess capital buffers of RM125.5 billion.

"Capital ratios declined marginally, mainly driven by valuation adjustments on available-for-sale financial instruments amidst rising bond yields," it said in its monthly highlights-March 2022 report, which was released today.

The central bank added that the bank's asset quality remained sound in March 2022 with overall gross and net impaired loans ratios remaining broadly stable at 1.5 per cent and 0.9 per cent, respectively.

BNM said the banks' provisioning levels remained high, as banks continue to be prudent, with loan loss coverage ratio of 133 per cent compared to an average of 129 per cent in 2020-2021.

"Total provisions eased marginally to 1.8 per cent, as a share of total banking system loans, compared to 1.9 per cent in February," said BNM.

On domestic financial markets, BNM said the conditions were tightened, following the increase in 10-year Malaysian Government Securities (MGS) yields by 20.6 basis points, and the decline in the FBM KLCI by 1.3 per cent.

The local financial market was also driven by tighter global financial conditions and geopolitical developments as the global financial market sentiments were affected by the faster-than-anticipated monetary policy normalisation path by the US Federal Reserve and the conflict in Ukraine.

"The corresponding broad US dollar strength during the month also resulted in a marginal depreciation of the ringgit," said BNM.

Despite the weaker financial market performance, BNM said adjustments remained orderly amid sufficient trading liquidity.