REPORT: BANKING SYSTEM FUNDING, LIQUIDITY REMAIN SUPPORTIVE OF INTERMEDIATION ACTIVITY -- BNM

KUALA LUMPUR, April 3 -- The banking system funding and liquidity conditions remain supportive of intermediation activity despite continued volatility in the domestic financial markets, Bank Negara Malaysia (BNM) said today.

Overall funding conditions remained stable with banks remain well-positioned to meet the revised Net Stable Funding Ratio (NSFR) requirements.

"As part of measures recently introduced to preserve stability in funding markets and support bank lending activity, the implementation of the NSFR requirement will be phased-in with a minimum compliance ratio of 80 per cent in July 2020 and 100 per cent in September 2021," said BNM in its second half 2019 Financial Stability Review report released here today.

BNM said the Liquidity Coverage Ratio (LCR) of the banking system, which indicates banks’ ability to meet liquidity needs over a 30-day stress period, stood at 149.1 per cent as at end-2019, with all banks recording LCR levels above the regulatory minimum of 100 per cent. 

"These liquid assets are available for banks to draw upon during periods of stress," said BNM.

The central bank said the domestic financial markets were affected by external and domestic headwinds, but adjustments have been orderly.

It noted that the global spread of COVID-19 and measures taken to contain the spread have further weighed on the sentiment, leading to non-resident outflows from the bond and equity markets. 

"These developments contributed to the higher broad-based stress levels in domestic financial markets. Market volatility has surpassed stress levels observed over the past decade and is expected to remain heightened at least in the near term. 

"However, the continued presence of domestic institutional investors, as well as the deep and liquid financial markets, is expected to continue to support the intermediation of portfolio flows, thus preserving orderly market conditions," it added.

-- BERNAMA