After announcing repayment freeze, BNM says local banks responding from ‘position of strength’

BNM is permitting banks to draw down on capital and liquidity buffers accumulated over the years, saying they may tap their 2.5 per cent capital conservation reserves and dip under the 100 per cent liquidity coverage ratio between now and December 31. — Picture by Firdaus Latif
BNM is permitting banks to draw down on capital and liquidity buffers accumulated over the years, saying they may tap their 2.5 per cent capital conservation reserves and dip under the 100 per cent liquidity coverage ratio between now and December 31. — Picture by Firdaus Latif

KUALA LUMPUR, March 25 — Malaysia’s banking sector is robust and has adequate capital with which to respond to the country’s coronavirus disease (Covid-19) crisis, Bank Negara Malaysia said today.

The central bank announced earlier a six-month moratorium on individual and SME loans as well as the option to restructure credit card and corporate debt as part of a RM100 billion initiative to preserve Malaysia’s economic health.

“The banking system is facing these challenges from a position of strength, with excess capital buffers above the minimum regulatory requirement of RM119.7 billion as at end January 2020,” the central bank said in a statement.

It said it was also easing compliance and operational guidelines for banks so they may adequately support their customers at this time.

BNM is permitting banks to draw down on capital and liquidity buffers accumulated over the years, saying they may tap their 2.5 per cent capital conservation reserves and dip under the 100 per cent liquidity coverage ratio between now and December 31.

The Net Stable Funding Ratio will still be implemented on July 1, but BNM said it will lower the floor to 80 per cent instead of 100 per cent until September 2021.

BNM was also providing flexibility to banks in terms of honouring regulatory submissions given the government’s measures to contain Covid-19.

“With these flexibilities and sustained resilience of the banking system, which is underpinned by sound prudential and risk management practices, Malaysian banking institutions are well-placed to respond to the needs of the economy during this period of challenges.

“The flexibilities form part of the new measures that will be put in place under the Second Economic Stimulus Package 2020, to alleviate the challenges faced by individuals and businesses affected by the Covid-19 outbreak, preserve jobs and ensure continuity of viable businesses,” BNM said.

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