PETALING JAYA - Bank Negara Malaysia today said the ability of households and businesses to pay their debts remained healthy as banks maintained sound lending standards.
BNM also said the household debt-to-GDP ratio remains stable at 81.9 per cent supported by income and employment growth.
In its Financial Stability Review First Half 2023, it said despite continued heightened volatility in the global financial markets, domestic market conditions remain orderly.
"However, recovery remains uneven as certain sectors continue to face challenges arising from elevated input costs and weak external demand.
"Businesses are likely to face continued headwinds such as elevated costs and weak external demand," said the central bank.
Climate-related risks and opportunities are more likely to be important considerations for businesses.
However, it said, most businesses are expected to be able to withstand potential new shocks amid improvements in business leverage, healthy cash buffers, and more agile business models.
BNM also said that the e household debt-to-GDP ratio remains stable at 81.9%.
The median debt service ratios (DSRs) for newly approved and outstanding household loans remain prudent at 42 per cent and 36 per cent, respectively, helping to preserve healthy loan servicing buffers among households.
"Any drop in household borrowing quality is expected to be well within the existing provisioning and capital buffers of the banking system," it said.
BNM also said that financial institutions continue to invest significant resources in managing operational and cyber-related risks.
"Significant resources will continue to be directed towards increasing public cooperation in reporting fraud incidents and raising awareness of safe banking".
“Financial institutions are increasingly adopting sustainable investment and lending practices, as well as expanding green financial solutions.
"To this end, addressing data needs and capacity building in climate risk management continues to be an ongoing priority for financial institutions, through collaborative efforts supported by the Joint Committee on Climate Change (JC3) with private industry and government agencies,” said BNM's Deputy Governor Jessica Chew.
She also said banks continued to maintain strong liquidity buffers.
"The strong buffers of banks, insurers, and takaful operators will continue to ensure the financial system’s resilience against future shocks and unexpected losses.
"This will enable them to continue to support the financing and protection needs of households and businesses," she added. - The Vibes, October 9, 2023
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