Malaysia: Financial Sector Assessment Program Financial Sector Performance, Vulnerabilities and Derivatives-Technical Note
IMF Staff Country Reports, April 15, 2014
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Bibliographic details
- Published: April 15, 2014
- Series: IMF Staff Country Reports
Overview and scope
- Title: Malaysia: Financial Sector Assessment Program Financial Sector Performance, Vulnerabilities and Derivatives-Technical Note
- Publication date: April 15, 2014
- Pages: 55
- Volume: 2014
- Issue: 098
- Series: Country Report No. 2014/098
- Stock No: 1MYSEA2014006
- ISBN: 9781484352601
- ISSN: 1934-7685
- Subject keywords: Bank credit, Banking, Commercial banks, Credit, Financial institutions, Financial services, Islamic banking, Loans, Money, Nonperforming loans
- Additional keywords: Asia and Pacific, bank lending, banking sector, banking system, Commercial banks, CR, Credit, equity capital, financial system, Global, interest rate, ISCR, Islamic bank, Islamic banking, Loans, Nonperforming loans, plain vanilla, return on equity, unit trust
Financial sector performance — key findings
- Banking sector has undergone consolidation while competition has increased following measures implemented under the Financial Sector Master Plan 2001–2010.
- Malaysian banks are presently well capitalized with comfortable Tier 1 capital ratios.
- Stronger financial positions and risk management capability have enabled domestic banking groups to pursue overseas expansions, mostly within the region.
- The importance to some banks of overseas assets and earnings is reaching levels which, based on international experience, warrant a review of internal controls.
Vulnerabilities and risk considerations
- Increased competition and consolidation coexist; implications for profitability, market structure, and systemic risk are central themes.
- Overseas expansion raises governance and operational control considerations:
- Some banks’ overseas assets and earnings have grown to levels that warrant a review of internal controls based on international experience.
- Nonperforming loans and credit risks are explicitly listed as subjects of focus.
Derivatives and market infrastructure (coverage note)
- Derivatives are included among the Technical Note’s focal areas; the note addresses related market performance, vulnerabilities, and oversight implications consistent with the broader assessment of financial stability.
Implications for policy and supervision
- Continued vigilance on capital adequacy: maintain comfortable Tier 1 capital ratios and monitor capitalization through consolidation and competitive pressures.
- Strengthen internal controls and governance for banks with growing overseas assets and earnings:
- Prioritize reviews of internal controls where overseas exposures reach materially significant levels.
- Monitor interaction between increased competition and systemic risk, including effects on loan quality and profitability.
- Ensure supervisory frameworks and risk management practices evolve in line with cross-border expansion and derivative market activity.
International Monetary Fund. Monetary and Capital Markets Department "Malaysia: Financial Sector Assessment Program Financial Sector Performance, Vulnerabilities and Derivatives-Technical Note", IMF Staff Country Reports 2014, 098 (2014).
Content in this bundle
- IMF Country Report No. 14/98; Malaysia Financial Sector Assessment Program; April 2014