Malaysia: Financial Sector Assessment Program Stress Testing the Malaysian and Labuan IBFC Banking Sectors-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
- Purpose: Summarizes the stress tests (ST) undertaken for the Malaysian banking system as part of the Financial Sector Assessment Program (FSAP).
- Scope: All banks subject to solvency, liquidity, and contagion tests in the macroeconomic stress testing set-up.
Methodology and Tests
- Solvency tests:
- Assessed the resilience of the Malaysian banking system under three macroeconomic scenarios from 2012 to 2016.
- Bottom-up (BU) sensitivity tests:
- Single year BU sensitivity tests for Malaysian banks covered various single-factor credit and market risk shocks.
- A multi-factor BU sensitivity liquidity test was carried out by participating banks.
- The liquidity BU tests were extended to key onshore banks, some Labuan entities, and overseas subsidiaries.
- Contagion tests: Included alongside solvency and liquidity in the macroeconomic stress testing framework.
Coverage
- Banking sectors covered:
- Onshore Malaysian banking system.
- Some Labuan entities.
- Overseas subsidiaries of Malaysian banks.
- Bank types referenced:
- Conventional banks.
- Islamic banks (contextual subject/keyword presence).
Key Findings
- Capital buffers:
- The onshore banking system in Malaysia has substantial capital buffers to absorb credit losses on its credit risk exposures.
- Role of income:
- Conventional banks can benefit from buffers provided by significant income as a first line of defense against credit losses.
- Some larger domestic banks benefit from income in terms of strong revenues from domestic operations as well as potential income from overseas operations.
Subject Areas and Keywords (as stated)
- Subject: Banking, Commercial banks, Credit risk, Financial institutions, Financial regulation and supervision, Financial sector policy and analysis, Financial services, Investment banking, Islamic banking, Stress testing
- Keywords: bank solvency, banking group, banking system, BU bank data, Commercial banks, CR, credit risk, credit risk parameter, Global, Investment banking, ISCR, Islamic bank, Islamic banking, Malaysian bank, parent bank, risk profile, solvency deterioration, Stress testing
Malaysia: Financial Sector Assessment Program Stress Testing the Malaysian and Labuan IBFC Banking Sectors-Technical Note, April 15, 2014, IMF Staff Country Reports
Content in this bundle
- IMF Country Report No. 14/97; Malaysia Financial Sector Assessment Program; April 2014