Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on October 18, 2019

KUALA LUMPUR: The proposal to merge SME Bank, Bank Pembangunan Malaysia Bhd, Exim Bank Malaysia (Mexim) and Danajamin Nasional Bhd into a new financial institution is not expected to affect the entities’ ratings, says RAM Rating Services Bhd (RAM)

The restructuring exercise involving the four developmental financial institutions (DIFs) was announced by Finance Minister Lim Guan Eng in his Budget 2020 speech last week.

“The proposed exercise is not anticipated to affect the respective AAA/Stable/P1 financial institution ratings of Bank Pembangunan and Mexim, nor have any impact on Danajamin’s AAA/Stable/P1 insurer financial strength ratings or the ratings of Danajamin-guaranteed issues.

“The rating assessments for Bank Pembangunan, Mexim and Danajamin already consider the solid backing of the government of Malaysia, anchored by each entity’s strategic role in fulfilling the nation’s developmental goals,” RAM said in a statement yesterday.

It noted that the four entities have a combined asset base in excess of RM45 billion and an aggregate guarantee portfolio of about RM6 billion.

With a larger market impact, the merged DFIs’ strategic importance is expected to remain well preserved, said RAM.

The DFIs’ credit profile and the ratings of debts that may be transferred to it will continue to benefit from a strong likelihood of government support if required, it added.

“While the details remain vague at this juncture, intricacies unique to this proposed corporate exercise include the amalgamation of the entities’ public policy roles and the scope of the enlarged DFIs.

“The integration of resources, cultures and systems is critical to a merger of this scale. If well implemented, the proposed realignment of the strategic mandates of DFIs will support the nation’s aspirations in a new global digital economic landscape,” said RAM.

Bank Pembangunan provides medium- to long-term financing to sectors vital to the nation’s socio-economic development, while Mexim supports and promotes Malaysia’s external trade.

National financial guarantee insurer Danajamin is tasked with developing the debt capital markets through credit enhancements for bond and sukuk issuances. Meanwhile, SME Bank nurtures and serves the financing needs of small and medium enterprises — a segment which accounts for more than a third of the country’s gross domestic product.

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