This article first appeared in The Edge Financial Daily on September 19, 2019
KUALA LUMPUR: Bank Negara Malaysia’s (BNM) recent stress tests show that the country’s financial system is still resilient enough to withstand adverse simulated shocks amid various risks from the external and domestic environment.
“Stress tests conducted by the bank affirm that the resilience of the Malaysian financial system to severe macroeconomic and financial strains with financial institutions maintaining capital buffers in excess of regulatory minima even under adverse simulated shocks,” BNM said in its Financial Stability Review for the first half of 2019.
The central bank also said that the financial sector is underpinned by strong capital and liquidity buffers, and sustained profitability.
“Based on data gathered during the observation period, most banks are well-positioned to meet these requirements. Banks, and insurers and takaful operators also maintained strong capitalisation levels, well above the regulatory minimum and higher than internal target capital levels.
“This is further underpinned by strong buffers against potential losses in line with more forward-looking financial reporting standards and regulatory requirements. In the insurance sector, regulatory reforms are supporting improvements in persistency and pricing, which in turn will sustain longer-term performance,” BNM said.
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