KUALA LUMPUR: Malaysia’s banking sector remains strong and well capitalised despite the turmoil in the global financial markets, says the Association of Banks in Malaysia (ABM).

In a statement yesterday, the association said commercial banks operating in Malaysia were healthy and would remain resilient.

“ABM is confident that the commercial banks are in position to continue to perform their intermediation function in full support of domestic economic activities,” its chairman Datuk Seri Abdul Hamidy Abdul Hafiz said.

“It is business as usual and commercial banks are not putting any brakes on lending,” he added.

He said banks in Malaysia are mainly domestic focused with more than 90 per cent of total assets in ringgit-denominated assets and most investments/assets concentrated in the Asean region.

Unlike the liquidity crunch that is seizing some of the key developed markets such as the United States, United Kingdom and the Eurozone, Abdul Hamidy said Malaysia, has been relatively unaffected.

He said the liquidity level in the banking system was healthy.

As at the end of August this year, the loan to deposit ratio stood at 74.5 per cent, when compared to the high 90 per cent seen in 1997.

“The stable and low three-month domestic inter-bank rates and relatively narrow spread against the three-month Malaysian Government Securities (MGS) yields are also indicative of the robustness of our banking system,” he said.

He also said the local financial system’s strong liquidity, backed by a high domestic savings rate and Bank Negara Malaysia’s mid-September external reserves of US$119 billion, would continue to facilitate the orderly functioning of transactional and lending activities to spur domestic economic growth, albiet at a more moderate pace.

“In addition, through the consolidation process, Malaysian banks are now much stronger. There are presently a total of 22 commercial banks, comprising nine domestic banks and 13 locally incorporated foreign banks, which operate in Malaysia and are members of ABM,” he highlighted.

Commercial banks constitute the largest and most important group of all financial institutions in Malaysia with total assets of approximately RM1.231 billion as at June 30, 2008.

He said the central bank’s stringent supervisory and surveillance system has ensured that the Malaysian banking industry remained resilient in the face of the global financial crisis.

— Bernama