PETALING JAYA: A prolonged and severe impact from the Covid-19 pandemic remains a key downside risk to the economy and financial stability, however, the financial system is on a strong footing to withstand such stress, Bank Negara Malaysia stated in its Financial Stability Review report.
Nevertheless, for 2020, banks are expecting weaker credit growth compared to 2019, which is highly dependent on the duration of the Covid-19 pandemic.
“Banks are entering this period from a position of strength with significant capital and liquidity buffers. The prudent managemnt of credit risks and diversified income sources will provide support to profitability.
“In additon, banks’ digitalisation strategies are expected to drive further opeational efficiencies, lending additonal support to long-term profitability and overall viability,” it said.
The recent measures introduced by the central bank, such as the revisions to the Overnight Policy Rate and the statutory reserve requirement, will support banks’ efforts to assist affected households and businesses in the wake of the Covid-19 outbreak.
“The sustained profitability of banks, underpinned by sound underwriting and risk management practices will also help banks gradually restorte their buffers once the flexibilities are lifted,” it added.
source https://www.thesundaily.my/business/financial-system-on-strong-footing-to-face-market-stresses-bnm-HD2207449
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