Bank of Malaysia has confirmed that the country’s banks are well capitalized and extremely resilient overall, with no signs of a banking crisis similar to that in Europe and the United States. The announcement comes after a stress test was conducted by Bank Negara on 54 banks, revealing that the capital ratio of the banks in the country is still above the minimum requirements.
According to Bank Negara President Tan Sri Nor Shamsiah, the stress tests were assessed against “very extreme” scenarios, including a recession worse than the Covid-19 pandemic, bond interest rates, and the ringgit against the US dollar at unprecedented levels.
She also pointed out that Bank Negara has very strict requirements on domestic financial institutions, large and small, compared to the United States, which only targets large banks. Nor Shamsiah emphasized that in Malaysia, regardless of size or origin, banks must follow very strict capital compliance.
Moreover, bonds account for only 6% to 7% of the total asset value in Malaysia, while Silicon Valley Bank (SVB) accounts for as much as 40%. “Even if we completely exclude this 7%, the bank’s capital ratio will only fall by 1%,” said Nor Shamsiah.
It is also revealed that Chinese banks do not rely on additional tier 1 capital (AT1) bonds as a capital buffer, unlike Malaysia’s capital regulations.
Overall, the stress test results indicate that the banking system in Malaysia remains resilient, and the country is not expected to face a banking crisis similar to those in Europe and the United States.