Malaysian banks remain resilient, Credit Suisse incident unlikely to happen here - BNM Governor

KUALA LUMPUR: Bank Negara Malaysia (BNM) firmly believes that the global banking crisis, which saw the collapse of Switzerland's second-largest bank, Credit Suisse, is unlikely to happen in Malaysia as banks in the country are still resilient in severe adverse scenarios.

Governor Tan Sri Nor Shamsiah Mohd Yunus said that based on the macro stress test conducted on the banking system, the banking sector maintains healthy levels of capital and liquidity buffers.

"Our banks are still resilient and we do not expect what we see (happening) in other countries to happen here in Malaysia," she told a press conference on BNM's flagship publications - Annual Report 2022, Economic and Monetary Review 2022 and Financial Stability Review for the Second Half of 2022 (FSR 2H2022) here today.

The governor also pointed out that all banks in Malaysia are subjected to very stringent capital and regulative rules in order to ensure the safety and stability of the banking system.

"Regardless of your size, you are subject to the same rules, unlike in the United States where such rules are only applicable to the large banks," she said.

Meanwhile, Deputy Governor Jessica Chew said the liquidity pressures that surfaced following the episodes of global banking stress have had a very limited impact on the domestic banking system.

She said as a regulator, BNM would always supervise and would continuously remind the banks to manage their liquidity, adding that depositors would also be more alert to rate changes to ensure diversification.

"This event (Credit Suisse's collapsed) is still unfolding in the United States and Switzerland and the international standard-setting bodies are also following these events very closely.

"We will be looking to see what lessons can be learnt, and the potential policy implications," she said.

According to the FSR 2H2022 report released today, BNM's latest solvency stress test affirmed that banks can withstand significant macroeconomic and financial shocks, and are well-positioned to sustain lending to businesses and households.

BNM said the stress test results reaffirm the resilience of financial institutions even under severe simulated shocks.

"The exercise is premised upon two adverse scenarios to evaluate the resilience of financial institutions to distinct paths of contractions or slowdown in economic growth," it said.

Every year, the bank conducts multi-year, top-down macro and micro solvency stress test exercises to assess the possible impact of protracted financial and macroeconomic stresses on individual banks and insurers, as well as on the broader financial system.

The latest top-down macro solvency stress test was conducted in early 2023 and covers a three-year horizon up to end-2025.

The stress test results revealed that the aggregate capital ratios of the banking system will remain comfortably above the regulatory minimum.

"The vast majority (over 80 per cent) of banks would be able to maintain capital ratios above their internal capital targets, although 24 out of 54 banks, with a cumulative share of 25 per cent of total banking system assets, would report losses in at least one year throughout the stress horizon.

"Only two banks, which account for less than 1.0 per cent of total banking system assets, are projected to breach the minimum regulatory capital requirements under these adverse scenarios," it said.

-- BERNAMA