KUALA LUMPUR (March 27): While banks have continued to be proactive in managing their credit risks, a number of banks have intensified their monitoring and pre-emptive restructuring of accounts that exhibited signs of temporary repayment difficulties, according to Bank Negara Malaysia (BNM).

“Banks are also increasing the rigour of stress tests on exposures to vulnerable sectors and simulating the impact of major global or market events on banks’ asset quality, capital and liquidity buffers,” said BNM, in its Financial Stability and Payment Systems Report 2018.

Nonetheless, BNM said banks’ asset quality has continued to improve in 2018 with gross and net impaired loans declining in both absolute value and as a share of total loans from the previous year.

“The implementation of responsible financing standards is helping to ensure that newer loans granted since 2012 are of sound quality, as revealed by the improving vintage of loans granted in more recent years,” said BNM.

Having said that, a closer examination of household loans, however, shows certain segments exhibiting higher incidents of impairment, noted BNM.

In particular, impairments of loans for the purchase of higher-valued properties and personal loans have recently been on an increasing trend, the central bank added.

Meanwhile, BNM noted that the loan loss coverage ratio of banks has strengthened further to 97.9% with the implementation of Malaysian Financial Reporting Standards (MFRS 9) which calls for a more forward-looking approach to provisioning.