Banking System's Liquidity Still Healthy, Says RAM Ratings

KUALA LUMPUR, March 29 (Bernama) -- The liquidity in the Malaysian banking system remains healthy despite some tightening, says RAM Ratings. The agency said the sector's Basel III liquidity coverage ratio (LCR) stood at 125 per cent, as at end-Jan 2016, higher than the final requirement of 100 per cent to take effect from Jan 1, 2019. "We also derive comfort from the knowledge that Bank Negara Malaysia (BNM) has various tools to manage the system's liquidity," RAM Ratings' Co-Head of Financial Institution Ratings Sophia Lee said in a statement. Based on the US$12.50 billion (RM50 billion) statutory deposits, as at end-Jan 2016, the recent 50-basis point cut in the statutory reserve requirement (SRR) ratio would provide a RM6 billion boost to the system's liquidity. "In addition, BNM will establish a committed liquidity facility, which will offer banks another option for liquidity management," she said. Lee added that BNM still had room to further lower the SRR ratio, which had descended to a historical low of 1.0 per cent between March 2009 and March 2011. As for the banking sector's deposit growth, she said it dwindled to only 1.1 per cent last year compared with +7.7 per cent in 2014, due to the reclassification of certain Islamic deposits to investment accounts. Capital outflows last year also had been the key reason for the slump, as foreign investors pulled out RM31 billion or two per cent of the system's deposits, from the local equity and bond markets. Correspondingly, the system's loans-to-deposits ratio had climbed up to 87 per cent, as at end-Jan 2016, compared with 81 per cent, at end-Dec 2014. Lee said the banking sector's external liabilities are manageable despite the rising trend due to the weaker ringgit, expanding regional operations and centralised liquidity management. Such external liabilities are partly covered by external assets, which amounted to less than six per cent of its total assets, as at end-Dec 2015, she added. (US$1 = RM3.99) -- BERNAMA