Malaysia's Advanced Financial Regulatory Framework, Supervisory Practices Attract Investors

KUALA LUMPUR, April 12 (Bernama) — Malaysia’s advanced financial regulatory framework and supervisory practices make it an attractive place for investors, said World Bank Lead Financial Sector Specialist, Jose de Luna-Martinez. He said many international banks Recognised the fact that Malaysia had adopted the best international standard in terms of regulations and supervisory practices, and was one of the early adopters of Basel III, the international regulatory framework for banks. “Additionally, Malaysia’s economy is dynamic and is growing rapidly, hence it is a good place for international banking activities,” he told reporters on the sidelines of the World Bank Group and Bank Negara Malaysia’s joint launch of the Global Financial Development Report 2017/2018: Bankers without Borders here Thursday. Meanwhile, World Bank Research Economist, Ata Can Bertay, said Malaysia was much involved in international banking, both as a host country and as the owner of some internationally-active banks. He said international banks might contribute to faster growth and stability by providing much-needed capital, expertise and new technologies, which made domestic financial systems more competitive. “They also enable risk-sharing and diversification, thereby smoothing out the effects of domestic shocks. “But international banking is not without risk, as it can also transmit shock across the globe as evidenced in the global financial crises,” said Bertay. On another note, he said, Malaysian banks had been strengthening internationally – particularly in the ASEAN region – with increasing cross-border activities and a large part of their deposits were retail deposits. “This is in contrast to the current global phenomenon, where global banks are scaling back,” he said. Bertay said this was supported by report findings which highlighted that international banking had suffered a setback after the global financial crisis, which saw multinational banks from developed countries scaling back their international operations, while banks in developing countries continued their expansion. “Cross-border bank claims and syndicated loans also decreased significantly, but ‘South-South’ transactions from developing countries to other developing countries started to grow and replace ‘North-South’ transactions in the aftermath of the global financial crisis,” said Bertay. He said South-South banking units raised most of their funds from local sources, which tended to be stable. “Research shows that foreign banks’ subsidiaries, which have a higher share of retail deposit funds, are more independently managed from their parents, and those operating in host countries with stronger regulations and disclosure requirements tend to be better insulated from their parent banks during crises,” he said On investor’s perspectives, Bertay said, the trend where emerging markets funded each other’s growth would continue, as developed market normalised interest rates over the long run. — BERNAMA