MALAYSIA’S banking system remained healthy in May, supported by strong liquidity buffers and steady credit growth, according to Bank Negara Malaysia (BNM).
In its May 2025 Monthly Highlights, the central bank reported a liquidity coverage ratio (LCR) of 150.4 per cent, indicating a strong capacity among banks to withstand short-term financial stress.
“The banking system maintained robust liquidity buffers, with an aggregate liquidity coverage ratio of 150.4 per cent (April 2025: 156.1 per cent),” BNM stated.
The loan-to-fund ratio rose marginally to 83.6 per cent (April: 83.3 per cent), reflecting continued growth in loans.
Asset quality remained sound, with the gross impaired loans ratio slightly higher at 1.5 per cent in May (April: 1.4 per cent), while the net impaired loans ratio held steady at 0.9 per cent.
“The loan loss coverage ratio, including regulatory reserves, remained prudent at 128.9 per cent of gross impaired loans,” the report said.
Credit to the private non-financial sector grew by 5.4 per cent, unchanged from April. Business loans rose to 5.0 per cent, driven largely by working capital demand among non-SMEs, while household loan growth remained stable at 6.0 per cent.
In the domestic financial markets, sentiment was shaped by evolving United States tariff policies.
“Global financial conditions eased in May following the US administration’s announcement of a 90-day truce. However, investors remained cautious due to lingering uncertainties,” BNM noted.
Headline inflation moderated to 1.2 per cent (April: 1.4 per cent), driven by lower prices in fresh vegetables and fuel. Core inflation also eased to 1.8 per cent (April: 2.0 per cent), attributed mainly to lower costs in rent and digital services.
On the supply side, the manufacturing sector showed strong performance.
“The Industrial Production Index for manufacturing recorded a 5.6 per cent increase in April (March: 4.0 per cent), with export-oriented clusters expanding by 6.4 per cent,” the central bank reported, citing higher output in electronics and food-related products.
Reserves and External Position
Malaysia’s official reserve assets stood at US$119.59 billion as of end-May, with other foreign currency assets totalling US$955.2 million.
BNM confirmed that the reserves remain “usable” under the IMF’s Special Data Dissemination Standard (SDDS).
Over the next 12 months, predetermined short-term foreign currency outflows—including debt repayments and maturing instruments—are projected at US$13.43 billion. Net short forward positions stand at US$24.18 billion, in line with liquidity management operations.
Projected inflows, including interest income and project loan drawdowns, amount to US$2.63 billion. Contingent liabilities from government-guaranteed foreign currency debt total US$419.0 million.
“BNM does not engage in foreign currency options vis-à-vis the ringgit,” the report clarified.
The central bank reaffirmed its commitment to maintaining financial stability and effective liquidity management as Malaysia navigates global uncertainties and economic headwinds. - June 30, 2025
