Banking
From The Report: Malaysia 2014
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In a stress test conducted in early 2014, the central bank found that Malaysia’s banks would be able to hold up even if the system faced shocks greater than those in the 2008 crisis. After a number of years of consolidation and in an environment of tight regulation, Malaysia’s commercial banks have continued to improve. Local banks have been ordered by Bank Negara to increase their collective assessment ratio to 1.2% by the end of 2015. The ratio was previously called the general provisions ratio and was set at 1.5%. Macroprudential measures will help the country get its household debt under control while small and medium-sized enterprise financing is likely to improve over time. The vision of creating a regional banking giant remains unfulfilled for the time being; nevertheless, organic growth opportunities exist and banking targets may become available from time to time, allowing some of Malaysia’s larger players to cobble together a regional footprint. This chapter contains an interview with Kelee Kam, Group Managing Director, RHB Capital.

Articles from this Chapter

Overview

The next step: Regulatory reforms have laid the groundwork for further expansion
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The Malaysian banking system is characterised by strength: its eight main institutions are well capitalised, stress tested and solid, while the country has some of the most satisfied banking customers in the world. After a number of years of consolidation and in an environment of tight regulation, Malaysia’s commercial banks have continued to improve and have become better able to withstand shocks. Regulation was further tightened and refined in 2013, and the measures implemented promise to make…

Analysis

Tweaking the rate: A new reference rate is due to be set by the central bank
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Bank Negara Malaysia is instituting a new retail loan pricing system in 2015. The central bank will create a reference rate framework to replace the base lending rate (BLR), a benchmark that has become less relevant as banks offered discounted loans, especially mortgages, priced below the BLR. It is hoped that the reference rate reform will help both the consumers, by giving them more transparent and easily understandable pricing, and the banks, by enabling them to set a rate that more closely tracks…

Analysis

Curbed lending: Mixed reaction to rising debt levels
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Pressure is mounting on Malaysia’s central bank to tighten loan restrictions after its annual report showed household debt levels inching towards 87% of GDP at the end of 2013. With the highest household debt levels in Asia, demand for credit is driven primarily by the purchase of property and vehicles. Keen to allay concerns, the central bank recently highlighted Malaysia’s strong fundamentals, while also pointing to measures introduced in 2013 which, it said, had improved lending practices.…

Interview

OBG talks to Kellee Kam, Group Managing Director, RHB Capital
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Interview:Kellee Kam How does loose monetary policy help expand credit and what risks are there for bank loan portfolios? KELLEE KAM: The low interest rate environment has helped credit expansion, especially lending to the household segment. As a result, household indebtedness rose to 86.8% of GDP by December 2013 from 66.7% in 2004. This has led to concerns regarding the potential for deterioration in the banks’ asset quality. The high household debt is, however, cushioned by high savings…