Friday, October 29, 2010

BNM: Banking system well capitalised

KUALA LUMPUR: Malaysia's banking system remained well-capitalised with the risk-weighted capital ratio (RWCR) and core capital ratio at 14.8% and 13.1% respectively in September.

Bank Negara said on Friday, Oct 29 the level of non-performing loans (NPLs) including impaired loans improved in September to account for 2% of net loans, attributable to lower amount of new defaults and management of impaired assets by a banking institution.

In its monetary and financial developments report for September, it said loan loss coverage remained above 90%.

On the monetary conditions, it said interbank rates were stable in September. In terms of retail interest rates, the average base lending rate (BLR) of commercial banks was unchanged at 6.27%. Retail deposit rates were also stable.

'Broad money (M3) increased during the month, reflecting mainly higher credit extension by the banking system to the private sector. The increase in M3 was also supported by foreign inflows,' it said.

Bank Negara said net financing to the private sector increased by RM10.4 billion in September due mainly to higher PDS issuances and loan disbursements during the month. PDS issuances increased due mainly to a large scale issuance by a telecommunications company,' it said.

Loans outstanding to businesses expanded reflecting mainly higher loans extended to the CONSTRUCTION [], manufacturing and finance, insurance and business services sectors. Household loans also continued to increase.

Meanwhile, loan applications from businesses and households moderated from their relatively high levels in September.

As for the consumer price index (CPI), it moderated in September as reflected in a slower rate of increase of 1.8% on an annual basis.

The central bank said this was primarily driven by slower price increases in the food and non-alcoholic beverages and transport categories.

Commenting on the ringgit in September, Bank Negara said the performance of the local unit against the currencies of Malaysia's major trade partners was mixed.

The ringgit appreciated against the US dollar and Japanese yen, but depreciated against the Chinese renminbi, Singapore dollar and the euro.

The positive growth outlook for Asia relative to the developed economies saw regional currencies appreciating against the US dollar. Investor expectations for further monetary easing by the US Federal Reserve also lifted sentiments towards regional financial markets.

'Domestically, the FTSE Group's upgrading of Malaysia's capital market from 'secondary emerging' classification to 'advanced emerging' also further enhanced sentiments towards Malaysia,' it said.

As for Bank Negara's international reserves, they were RM322.7 billion (US$104.6 billion) as at'' Oct 15, sufficient to finance 8.7 months of retained imports and were 4.5 times the short-term external debt.

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