The Malaysian banking system continues to maintain healthy liquidity

KUALA LUMPUR: The banking system continued to maintain sound liquidity and funding positions, recording an overall liquidity coverage ratio of 148.4%, a position that remains supportive of intermediation activities, Bank Negara Malaysia said (BNM).

In a June 2022 monthly highlights report released today, the central bank said the loan-to-funds ratio remained stable at 81.8% in June.

“Bank funding sources have remained stable and support credit intermediation in the economy amid sustained deposit growth,” he said.

Meanwhile, BNM said net funding rose 5.0% in June from 4.5% in May, driven by growth in outstanding loans of 5.6% from 5.0% in May, while growth in the stock of corporate bonds remained unchanged at 3.4%.

“Outstanding household loan growth increased to 5.9% for all loan types, from 5.0% in May, reflecting higher growth in loan disbursements, particularly for cars and houses.

“For businesses, outstanding loans rose 5.8% from 5.4% in May, as growth in loan disbursements (23.0%; May: 20.8%) outpaced that of repayments ( 20.0%; May: 23.6%).

“By sector, the higher growth in outstanding loans reflects stronger growth in wholesale and retail trade, as well as transportation, warehousing and communications,” the June report said.

On the financial market, BNM said domestic financial market conditions have tightened following the sharp rise in interest rates in the United States.

“In June, global financial market conditions tightened following the 75 basis point hike – the largest since 1994 – in the US federal funds rate, amid high inflationary pressures in the United States. This had subsequently raised concerns about the prospects for economic growth in the United States and around the world,” it said.

BNM said adjustments in domestic financial markets “remain orderly” amid a positive outlook for economic recovery.

“Amid foreign portfolio outflows from the domestic bond market, yields on 10-year Malaysian government securities (MGS) rose 9.0 basis points, a smaller increase from regional bond yields of 21.5 basis points on average,” the report said.

The ringgit depreciated by 0.7% (regional average: 3.1%) in June amid general US dollar strength, while the FBM KLCI fell by 8.0% against the regional average : 7.1%,” he said.

The central bank said the asset quality of the banking system remained intact.

“The overall gross impaired loan ratio increased slightly to 1.7% in June from 1.6% in May, but net impaired loan ratios remained broadly unchanged at 1.0%.

“Banks continued to be cautious in loan provisioning to protect against potential credit losses, with total provisions and regulatory reserves standing at RM41.1 billion (May: RM40.7 billion ).

“Total provisions were 1.8% as a percentage of total banking system loans and 108.5% of impaired loans,” he said. – Bernama

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