This article first appeared in The Edge Financial Daily on December 14, 2017
KUALA LUMPUR: Malaysian Insurance Deposit Corp (PIDM) has revised its differential premium systems (DPS) framework for the country’s deposit insurance system to reflect banks’ diversified funding sources.
The DPS framework determines the differential premium rates to be paid by member banks. PIDM said it had recently revised the framework to introduce new indicators in member banks’ funding profiles.
“The ‘loans to available funds’ ratio and the ‘composition of core funds’ indicator replace the ‘loan-to-deposits’ ratio and the ‘composition of individual depositors’ indicator, respectively,” PIDM said in a statement yesterday.
It added that the revised DPS framework is effective beginning 2018. As such, the assessment of the indicators under the revised framework will be based on member banks’ positions as at Dec 31.
“Over time, banks have increasingly diversified their funding sources. Apart from traditional deposits, long-term debt instruments are gaining prominence as a source of stable funding, given the recognition under Basel III’s liquidity standards and advancements in Malaysia’s capital market. The revision to the DPS framework is timely to reflect such developments,” said PIDM chief executive officer Rafiz Azuan Abdullah.
PIDM is a statutory body which provides protection against the loss of deposit and insurance or takaful benefits with its member institutions in the event of a failure.