KUALA LUMPUR, April 23 — Malaysia has agreed to open its financial sector for review by the International Monetary Fund (IMF) and the World Bank, the Edge Financial Daily reported today, noting that this reflects the government’s confidence in the country’s economy and banking system.
According to a report in the business daily, this is the first time the government has agreed to the review, to be done under the multilateral agency’s Financial Sector Assessment Programme (FSAP), since it was established in 1999 after the Asian financial crisis.
At the time, said the report, the Malaysian government had declined the mandatory assessment as the country was struggling with problems in the banking sector caused by the sharp depreciation of the ringgit.
“Investment analysts said conducting the FSAP shows the government is now confident of the country’s financial sector and it wants an endorsement from the agencies on the overall health of the economy,” the report said.
“The domestic banking system is well capitalised. Bank Negara Malaysia’s (BNM) latest statistics show that the banking sector’s risk-weighted capital ratio stood at 14.8 per cent and 13 per cent respectively at end-February.
“The level of net impaired loans also remained healthy, accounting for 1.9 per cent of net loans, while the loan loss coverage remained high at 97.5 per cent,” the report added.
Citing analysts, the daily said the only key concern at present is Malaysia’s household debts to GDP ratio, which climbed from 76.6 per cent as at end 2011 from 75.8 per cent in 2010.
“It is one of the highest in Asia,” the report said.
It added that the FSAP review, according to government officials, should be completed by this week.
“Representatives from IMF and World Bank are currently carrying out so-called acid tests on the financial sector, including banks and regulators BNM and Bursa Malaysia,” it said.