Malaysia has capacity to absorb any exogenous shocks — BNM governor - Mukah Pages : Media Marketing Make Easy With 24/7 Auto-Post System. Find Out How It Was Done!

KUALA LUMPUR: Malaysia has the capacity to absorb any exogenous shocks should the global economy deteriorates, with excess capital in the banking industry of about RM120 billion, says Bank Negara Malaysia Governor, Datuk Muhammad Ibrahim.

He said Malaysia had since the 1997/1998 Asian financial crisis, undertaken a lot of reforms which did well in strengthening the banking sector with far-reaching impact.

“Some of those reforms were very much fundamental. For instance, consolidating the banking sector from over 60 institutions to 10 and now eight banking groups, and these are far-reaching measures that we have done,” he told Bernama in his first exclusive media interview since his appointment as the central bank’s governor on May 1, 2016.

He was responding to a question of the need to revert to unorthodox measures introduced during the Asian financial crisis such as the ringgit peg and other capital controls, should the global economic outlook deteriorates due to impact from major economies and the UK’s withrawal from the European Union following the ‘Britain exit’ referendum.

Muhammad said that the consolidation of banks to eight banking groups was the right move as this has strengthened the banking sector in enabling the domestic banking institutions to stand on their own feet and compete with foreign banks as well as expanding their operations abroad.

“The biggest test is that they [the banks] can expand their operations outside Malaysia and they thrive in the new economies they are operating in.

“This shows they are competitive now and that is a big development for the domestic banking industry”, he added.

He emphasised that other measures undertaken also involved the development of new entities such as deposit insurance corporation, or Perbadanan Insurans Deposit Malaysia, which has strengthened the banking sector in ensuring depositors’ money were fully insured.

Meantime, the measures introduced in the banking sector, such as a more effective risk management practice and a stronger corporate governance culture, have been an anchor for the nation’s financial and economic fundamentals.

“We want Malaysians to be confident of the banking sector, of the integrity and sanctity of the financial system and for it to be the epitome of good corporate governance.

“Recently, we issued a new consultative document on Corporate Governance Guidelines for Financial Institutions which comprise several enhancements, much higher than what other entities are subjected to,” he added. — Bernama