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Financial sector well prepared to deal with global uncertainties [21-03-2013]  
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HE financial sector is well placed to cope with uncertain external developments due to the sound credit risk management practices of local banks.

Bank Negara Malaysia said the modest global growth outlook due to prevailing concerns on the fiscal issues in Europe and the United States are expected to continue this year, affecting regional economies, including Malaysia, via the trade channel.

However, it said credit risk exposures of banks are expected to be contained within acceptable levels this year, driven by balance sheet strength of businesses and continued expectations of stable income and employment prospects, thus preserving household incomes.

"We will monitor the business expansion and lending activities of non-bank financial institutions and the high leverage of the lower income households.

"There will also be greater engagement and coordination with other relevant authorities to improve transparency of over-the-counter derivative exposures," it said.

The central bank expects the retail lending market to remain highly competitive and will require supervisory attention to focus on the effective implementation of responsible financing practices, banks' risk appetite, lending standards and risk pricing practices.

"The market risk exposures of financial institutions, domestic financial markets as well as liquidity and funding conditions in 2013 are expected to remain orderly," it said.

The central bank said it would continue to monitor closely the developments in the household sector leverage, residential property prices and supply conditions in the office space segment, as well as changes in the risk-taking activities of financial institutions.

"The capital position of financial institutions remained solid, both in the level and quality of capital.

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