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Banking system continues to maintain healthy capitalisation: BNM

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KUALA LUMPUR: The banking system continued to maintain healthy capitalisation amid sustained profits and improved asset quality in 2018, said Bank Negara Malaysia (BNM).

The banking system continued to record healthy profits in 2018, largely supported by income from financing activities and continued efficiency gains, while asset quality remained sound and at an aggregate level continued to improve with gross and net impaired loans declining in both absolute value and as a share of total loans from the previous year, it said.

BNM, in its Financial Stability and Payment Systems Report 2018, said financing by the banking sector including Islamic banks remained supportive of economic activity throughout 2018 with total outstanding financing growing faster by 5.6 percent to RM1,673.5 billion.

The report was released together with its Annual Report 2018.

It said household financing, which accounted for 57.3 percent of total financing extended by the banking sector, expanded by 5.6 percent during the year, after a period of moderating growth that followed the implementation of macroprudential measures in 2013 to encourage more responsible lending.

“Business sector financing similarly recorded a stronger growth of 5.4 percent (2017: 1.8 percent), contributed mainly by financing to the construction sector to support infrastructure projects such as the Pan Borneo Highway and LRT 3,” BNM said.

The report said financing to small and medium enterprises (SMEs) also remained a strategic focus of banking institutions, having increased substantially over the years to account for about half of outstanding financing to businesses.

“SMEs continued to be supported by the banking sector during the year, with RM65.5 billion in financing approved to over 108,700 SME accounts,” it said.

Development financial institutions (DFIs), BNM said, continued to play an important role in supporting strategic economic sectors and advancing Malaysia’s developmental and socio-economic objectives.

“Total outstanding financing by DFIs amounted to RM143.1 billion as at end-2018, mainly channelled to infrastructure, SMEs, exports, agriculture and underserved household segments.

“In particular, financing to SMEs and the agricultural sector registered double-digit growth of 11.7 percent and 10.7 percent, respectively,” it said.

BNM said DFIs also account for the bulk (75.5 percent) of financing to micro entrepreneurs under the Skim Pembiayaan Mikro which saw a total of RM292.2 million disbursed during the year with total outstanding financing under the scheme standing at RM910.7 million as at end-2018.

It said work continues to progress in building the necessary systems and capabilities within DFIs, to effectively monitor and evaluate performance and development outcomes.

Going forward, it said institutionalising the new framework and ensuring its effective implementation will continue to be a key priority for DFIs and a focus of BNM regulatory and supervisory activities.

In parallel, BNM is also engaging with the Government to review the DFI landscape to take into account developments in the financial system and changes in Malaysia’s economic structure and priorities to provide a sharper focus in the mandates of DFIs while optimising performance and synergies, the report said.

The report said BNM supports technological advances that can improve the quality, efficiency and accessibility of financial services, and therefore the Fintech Regulatory Sandbox continues to be an important avenue to test innovative financial solutions and business models.

Malaysia has also made significant strides in financial inclusion, as a result of intensified efforts over the years in promoting access and usage of financial services to all segments of society, it said.

Financial access points are present in almost all sub-districts, propelled by the introduction of agent banks since 2012, while supply-side data provided by financial institutions show that 95 percent of Malaysian adults have deposit accounts, it said.

BNM said it views digital innovation as an important enabler to promote greater access, quality and responsible usage of financial services. –Bernama

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