Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan ...
Transcript of Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan ...
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Taklimat Laporan Tahunan
2010 dan
Laporan Kestabilan
Kewangan
dan Sistem Pembayaran
2010
Gabenor Bank Negara Malaysia23 Mac 2011
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Global growth projection for 2011
Challenge for global economy going into 2011 is sustaining growth with job creation
Source: National authorities, IMF World Economic Outlook, January 2011 Update
2009 2010 2011f
Annual change (%)
World GDP -0.6 5.0 4.4World Trade -10.7 12.0 7.1
US -2.6 2.8 3.0
Euro area -4.1 1.7 1.5
Japan -6.3 3.9 1.6
Developing Asia 1/ 7.0 9.3 8.4
China 9.2 10.3 9.6
ASEAN-5 2/ 1.7 6.7 5.5
Note: Forecasts for 2011 are IMF’s projections1/ IMF: Asia ex-NIEs2/ IMF: Indonesia, Malaysia, Philippines, Thailand and Vietnam
• Significant improvement in 2010
• Continued recovery in advanced economies although growth remains slow
• Strong growth in emerging economies, particularly in Asia underpinned by domestic demand and recovery in world trade
• More recently, rising commodity and energy prices are leading to higher global inflation
3
Global growth mainly from EMEs in 2011
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-80-60-40-20020406080100120140160Advanced economies EM: Africa
EM: Asia EM: Eastern EuropeEM: Middle East EM: Latin AmericaEM: CIS EME contribution to global growth (RHS)
Contribution to world growth, p.p. share of world growth. %
Source: IMF World Economic Outlook Note: CIS is the Commonwealth of Independent States, formerly Soviet republics
While accounting for 47% of global economy, emerging economies expected to contribute more than 70% of global growth
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3
5
7
9
11
Dec
-07
Mar
-08
Jun-
08S
ep-0
8D
ec-0
8M
ar-0
9Ju
n-09
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-09
Dec
-09
Mar
-10
Jun-
10S
ep-1
0D
ec-1
0
0
1
2
3
4
5
6
US Euro area UK Japan (RHS)
%% -14
-12
-10
-8
-6
-4
-2
0
22001 2003 2005 2007 2009
-12
-10
-8
-6
-4
-2
0
% of GDP % of GDP
Advanced economies still need to address structural problems
-10
-5
0
5
10
15
Dec
-07
Mar
-08
Jun-
08S
ep-0
8D
ec-0
8M
ar-0
9Ju
n-09
Sep
-09
Dec
-09
Mar
-10
Jun-
10S
ep-1
0D
ec-1
0
-4
-3
-2
-1
0
1
2
3
4
5
6%%
Restrained credit conditionsHigh unemployment rate High fiscal deficit1 32
Source: National authorities, Haver, IMF
Unemployment rate (%) Fiscal deficit, % of GDP
Credit to private sector, growth
5
0
1
2
3
4
5
6
Dec
-07
Mar
-08
Jun-
08S
ep-0
8D
ec-0
8M
ar-0
9Ju
n-09
Sep
-09
Dec
-09
Mar
-10
Jun-
10S
ep-1
0D
ec-1
0
Index
0
1
2
3
4
5
6
7Index
Korea Singapore Hong KongChina C. Taipei (RHS) Thailand (RHS)
-30
-20
-10
0
10
20
30
40
50
Dec
-07
Apr
-08
Aug
-08
Dec
-08
Apr
-09
Aug
-09
Dec
-09
Apr
-10
Aug
-10
Dec
-10
-15
-10
-5
0
5
10
15
20
25
Regional economies supported by resilient domestic demand
-10
0
10
20
30
40
Dec
-07
Mar
-08
Jun-
08S
ep-0
8D
ec-0
8M
ar-0
9Ju
n-09
Sep
-09
Dec
-09
Mar
-10
Jun-
10S
ep-1
0D
ec-1
0
-8
-4
0
4
8
12
16yoy,%
Continued access to creditRising retail salesUnemployment trending down1 32
Source: National authorities, Haver
Unemployment rate Lending growth *
Note: * Refers to loans as reported in banks’ balance sheet, except for Indonesia which refers to loans outstanding
Indonesia
yoy,%Retail salesyoy,% yoy,%
6
-3
-2
-1
0
1
2
3
4
5
6
7
8
2003
2004
2005
2006
2007
2008
2009
2010
2011
Rising commodity prices have increased the risk to higher global inflation
0
50
100
150
200
250
300
350
400
450
500
2003
2004
2005
2006
2007
2008
2009
2010
2011
Metals
Crude oil
Food
US
Euro
UK
East Asia-9
…driving up inflation in most economies
Index (Jan ’03 = 100) Yoy (%)
Rising commodity prices amid supply disruptions and geopolitical tensions…
7
Different degrees of monetary policy response
0
2
4
6
8
10
2008 2009 2010 2011
PR China
Thailand
Indonesia
Korea
%
Malaysia
Ch Taipei
0
1
2
3
4
5
6
2008 2009 2010 2011
%
US
Euro area
UKJapan
…while most regional economies have started to normalise
or tighten since 2010Some advanced economies are expected
to begin to normalise
rates this year…
Key interest rates, % Key interest rates, %
8
Global shifts in liquidity: Volatile capital flows…Large capital inflows driven by growth differentials and the search for yield…
0 4 8 12 16 20
C. Taipei
Thailand
India
Malaysia
Singapore
Philippines
Korea
Indonesia
PR China
20092010
Total flows into equity and bond markets
USD billionSource: EFPR
0 50 100 150 200
Hong Kong
P.R China
Malaysia
Singapore
Korea
C. Taipei
Philippines
Thailand
Indonesia
Stock market
Property prices
% change from end-2008 till end-2010
Stock market and property price performance
…driving stock and property prices higher
1
1/ till 3Q 10 for property pricesSource: Haver and Bloomberg
9
Several countries have implemented measures to manage the consequences of these flows
Measures introduced in the region to manage capital flows
Hong Kong SAR & Singapore
Philippines
Indonesia
Thailand
Chinese Taipei
Korea
PR China
Limit capital inflows – capital account measures
Prudential & liquidity measures (macroprudential)
Greater flexibility for capital outflows (liberalisation)
Administrative measures (real estate)
10
The Malaysian economy is projected to grow by 5% −
6% in 2011
-2
-1
0
1
2
3
4
5
6
7
8
2005
2006
2007
2008
2009
2010
p
2011
f
Annual change (%)
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
5.0%
6.0%7.2%
p preliminary f forecast
• Slower growth in 1H 2011 – High base in 1H 2010, particularly
for exports and investment– Lower demand for electronic
exports
• Growth is expected to improve in 2H– Stronger expansion of domestic
demand, particularly, private consumption and investment
– Higher exports
11
Strong growth in domestic demand to be driven by private sector activity
2010p 2011f 2010p 2011f
Annual change (%)
Contribution to growth (p.p)
Domestic demand 6.3 6.7 5.6 6.0Private sector 7.8 7.4 4.9 4.7
Consumption 6.6 6.9 3.6 3.7Investment 13.8 9.7 1.4 1.0
Public sector 2.5 5.1 0.6 1.3Consumption 0.1 7.2 0.0 1.0
Investment 5.5 2.7 0.6 0.3Net exports -24.2 2.3 -3.3 0.2
Exports of G&S 9.8 2.7 10.5 3.0Imports of G&S 14.7 2.8 13.8 2.8
Real GDP 7.2 5.0~6.0 7.2 5.0~6.0
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
p preliminary f forecast
• Private domestic demand to be the main growth driver
- Strong private consumption
- Rising investment activity
• Public sector to remain supportive of growth
12
Strong expansion in private consumption
Stronger expansion in consumer spending supported by:
– Favourable labour market conditions
– Rising disposable incomes
– Sustained consumer confidence
– Continued access to credit
p preliminary f forecast
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
Real private consumption
9.1
6.8
8.5
0.7
6.9
10.5
6.6
0
2
4
6
8
10
12
2005 2006 2007 2008 2009 2010p 2011f
Annual change (%)
13
Strong performance in private investment
Annual change (%) 2009 2010p 2011f
Real private investment -17.2 13.8 9.7• Increased capital spending in all
economic sectors- Key sectors: services,
manufacturing and mining
• Factors supporting private investment:
- Expansion of new growth areas- Strengthening domestic demand- Implementation of Government
initiatives- Sustained business confidence
Nominal Private Investment
0
10
2030
40
50
6070
80
90
2006 2007 2008 2009 2010p 2011f
RM billion
Agriculture Mining ManufacturingConstruction Services
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
62.1
76.6 79.8
65.2
76.9
86.9
p preliminary f forecast
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FDI to increase further in 2011
• Higher net inflows of FDI in 2011
- Better corporate earnings
- Rising business confidence
- Further improvement in global FDI flows
- Liberalisation
- Implementation of Government ETP projects
• Inflows channeled mainly into the manufacturing, services, and oil and gas sectors
Net FDI inflows into Malaysia
29.5
24.1
5.0
27.632.4
0
10
20
30
40
50
2007 2008 2009 2010p 2011f
RM billion
p preliminary f forecast
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
15
Annual change (%) 2010p 2011f
Agriculture 1.7 3.4
Mining 0.2 2.0
Manufacturing 11.4 5.7
Construction 5.2 5.4
Services 6.8 5.9
Real GDP 7.2 5.0 ~ 6.0
Broad-based growth across all sectors
• Supported mainly by the continued growth of domestic economic activity
• Trade-related services and export-oriented manufacturing industries to record slower growth in line with the expected moderation in external demand
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
p preliminary f forecast
16
External trade to expand in 2011
• Exports– Moderation from the high base
of 2010, particularly in manufactured exports
– But, strong support from commodity exports due to higher prices and sustained regional demand
• Imports– Modest growth in intermediate
imports– Growth in capital and
consumption imports reflects strong domestic demand
Annual change (%) 2010p 2011f
Gross exports 15.6 5.4Manufactured 13.0 4.4
E&E 9.9 3.7
Non-E&E 17.3 5.2
Commodities 26.9 10.1Agriculture 30.8 12.4
Minerals 23.4 8.0
Gross Imports 21.7 5.7Capital 16.2 10.3
Intermediate 22.1 5.3Consumption 10.1 8.4
Trade balance (RM bn) 110.2 114.6
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
p preliminary f forecast
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Current account to remain in surplus
• Larger trade surplus supported by higher commodity exports
• Services surplus, benefiting from higher tourism receipts
• Lower income deficit
- Higher earnings by Malaysian companies investing abroad
- Lower repatriation of profits and dividends by MNCs
Widening current account surplus
-50
-20
10
40
70
100
130
160
190
220
2007 2008 2009 2010p 2011f
RMb
-5
0
5
10
15
20% GNI
Goods ServicesIncome Current transfersCurrent Account, % GNI (RHS)
12.5%12.2%RM90.5b RM100.7b
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
p preliminary f forecast
18
Headline inflation to range between 2.5 – 3.5% in 2011
Inflation Forecast 2011
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2005 2006 2007 2008 2009 2010 2011/f
Annual growth (%)
2.5 –
3.5%
• Driven mainly by higher global commodity and energy prices, inflation is expected to increase in 2011.
• This trend is similar to other regional economies
Regional Countries Headline Inflation Forecast
3.8%
3.3%
1.7%
2.8%
3.0-5.0%3.0-5.0%
2.5-3.5%
3.0-4.0%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Singapore Malaysia Thailand Phillippines
Annual growth (%)
2010 2011 forecast
Note: Inflation forecast refer to the central bank official forecast
19
Malaysia has adopted a comprehensive approach to manage inflationary pressures from commodity prices
In addition to macroeconomic policies, other measures taken are
• Increasing food production and its distributional efficiency
• Promoting greater energy efficiency by households and industry
• A more gradual subsidy rationalisation programme
• Providing income support to targeted groups
20
Monetary policy in 2011 will remain supportive of growth, while managing risks to inflation
2.75%
2.50%
2.0%
3.5%
2.25%
1.5
2.0
2.5
3.0
3.5
4.0
Jun-
08A
ug-0
8O
ct-0
8D
ec-0
8Fe
b-09
Apr
-09
Jun-
09A
ug-0
9O
ct-0
9D
ec-0
9Fe
b-10
Apr
-10
Jun-
10A
ug-1
0O
ct-1
0D
ec-1
0
% Overnight Policy Rate (OPR)
• Given improved economic outlook, the OPR was adjusted in 2010 to
– Normalise monetary conditions
– Prevent the risk of financial imbalances
• For 2011, focus of monetary policy is to manage the risk of a more modest growth and higher inflation
– Monetary policy has the flexibility to remain accommodative
– The degree of accommodation may however, need to be reviewed to ensure sustainable economic growth
21
Financing conditions expected to remain favourable
Net financing growth sustained…
3
6
9
12
15
Jan-
09
Mar
-09
May
-09
Jul-0
9
Sep
-09
Nov
-09
Jan-
10
Mar
-10
May
-10
Jul-1
0
Sep
-10
Nov
-10
Annual change (%)
Loan growth: 12.7%
Net financing growth: 11.3%
Total Financing
30
40
50
60
70
80
90
100
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
BusinessesHouseholds
Loans Applications by Businesses and Households RM billion
20102009
…supported by robust demand for loans from businesses and households
22
Two-way capital flows expected to continue
• In 2010, the capital inflows to Malaysia went into both the bond and equity markets• Strong economic fundamentals and positive prospects will continue to attract portfolio inflows• But this is likely to be interrupted by intermittent reversals driven by external events
-15
-10
-5
0
5
10
15
20
25
Q1 Q2 Q32009
Q4 Q1 Q2 Q32010
Q4
Net Portfolio Investment into Malaysia
RM billion
Source: Department of Statistics Malaysia
Cumulative net equity fund flows (since Jan 07)
-40
0
40
80
120
160
200
Dec
-06
Apr
-07
Aug
-07
Dec
-07
Apr
-08
Aug
-08
Dec
-08
Apr
-09
Aug
-09
Dec
-09
Apr
-10
Aug
-10
Dec
-10
USD billion
-0.5
0.0
0.5
1.0
1.5
2.0
2.5USD billion
All Emerging Markets (LHS)Malaysia (RHS)
07
Source: Emerging Portfolio Fund Research Global
23
Domestic equity market had sustained growth in line with regional trends
KLCI and Bursa Malaysia sectoral indices
80
100
120
140
160
180
200
220
Jan-
09M
ar-0
9M
ay-0
9Ju
l-09
Sep
-09
Nov
-09
Jan-
10M
ar-1
0
May
-10
Jul-1
0
Sep
-10
Nov
-10
Jan-
11M
ar-1
1
Index (Jan 2009=100)
Finance
Industrial
KLCI
Plantation
Construction
Performance of Major Indices (% growth)
87.0
63.2
63.0
49.7
45.2
23.5
64.5
78.3
22.1
52.0
19.0
46.1
40.6
37.6
21.9
19.3
12.8
10.1
9.6
9.0
5.3
-3.0
-20 0 20 40 60 80 100
Indonesia
Thailand
Philippines
Korea
Msia
US
Singapore
Taiwan
UK
HK
Japan
%
20102009
24
-20 -15 -10 -5 0 5 10 15 20
AUD
JPY
THB
SGD
PHP
IDR
CNY
KRW
USD
GBP
EUR
2010
2009
-21.7%
20.6%
Ringgit performance driven by external and domestic developments• MYR appreciated against most currencies in 2010 following a relatively
subdued performance in 2009• Despite volatile capital flows, ringgit adjustments have been orderly
MYR performance against selected currencies in 2009 and 2010
% MYR appreciation% MYR depreciation
25
Measures undertaken to allow more efficient management of foreign financial transactions
To allow more efficient management of foreign transactions, several measures have been undertaken, including:
• Allow settlements in local currencies
• Facilitate hedging activities by residents
• Allow unlimited holding of foreign currency accounts
• Allow settlement of transactions in foreign currency by exporters and importers
26
Large inflows have also led to increases in international reserves
Net International Reserves(Jan’08 - Mar’11)
130.5
110.4
80
90
100
110
120
130
140
Jan-
08
Apr
-08
Jul-0
8
Oct
-08
Jan-
09
Apr
-09
Jul-0
9
Oct
-09
Jan-
10
Apr
-10
Jul-1
0
Oct
-10
Jan-
11
USD bn3.0
3.5
4.0
4.5
5.0
5.5
6.0
USD/MYR
Deleveraging activities by international investors
Resumption of capital inflows
Source: BNM
• Large inflows have led to increases in international reserves
– Since the resurgence of capital inflows in 2H 2009, net international reserves at USD110.4 bn in 15 March-11.
– During previous episode in Aug-08: USD130.5 bn
27
Capital flows currently well intermediated
• More diversified and developed financial system has helped to intermediate the capital flows
• Managed float regime has the necessary flexibility for the exchange rate to adjust to changing conditions
• Wider range of instruments for effective monetary operations
• Rigorous surveillance and information systems
• Stronger fundamentals and a healthy level of international reserves
• Closer cooperation and communication among central banks
Large inflows have increased liquidity in the domestic financial
system but, this has been well managed
28
Bank Negara Malaysia Annual Financial Statements 2010
29
Financial position remained strong in 2010:
• Total assets of BNM amounted to RM390.2 billion with International Reserves of RM328.7 billion (USD106.5 billion)
• Net profit of RM6.2 billion
• Dividend paid RM2 billion
30
FINANCIAL STABILITY AND PAYMENT SYSTEMS REPORT 2010
31
Financial system expanded in 2010 with higher value-added to the economy
• Contribution of financial sector to GDP at 11.6%
• Banking and insurance sector employs more than 143,000 staff
• Financial intermediation continued to function efficiently with sustained access
to financing
• Money, foreign exchange and capital markets remained orderly with
capacity to
absorb greater volume and volatility
32
Stability of the financial sector was preserved throughout 2010
- strong fundamentals contributed towards efficient financial
intermediation
- orderly conditions in financial markets and payment and settlement systems facilitated trade and domestic economic
activity
33
Financial system continues to be resilient
• Strong capital and liquidity buffers
• Improved profitability
• High asset quality
• Stress tests affirmed capacity to withstand extreme macroeconomic and financial conditions
Banking Sector (%) 2009 Jan’11Capital Adequacy
Risk-Weighted Capital RatioCore Capital RatioCapital Buffer (RM bil)
15.413.864.6
14.112.460.5
ProfitabilityReturn on AssetsReturn on Equity
1.214.0
1.819.7
Asset QualityNet Non Performing Loan* Ratio 1.8 2.2
Liquidity PositionLiquidity buffer (<1 mth, % of deposits) 18.2 14.8
Insurance/Takaful Sector (%) 2009 2010Capital Adequacy
Capital Adequacy Ratio^Capital Buffer^ (RM bil)
225.718.6
224.618.6
ProfitabilityProfit Before Tax (RM bil) 14.7 16.3
* Inclusive of impaired loans ^ Conventional industry only
34
Continued access to financing by all sectors
• Loan outstanding in banking system grew by 13.1% to amount to RM893.3 bil
(January 2011)– Continued expansion to all segments,
including SMEs
• Bank deposits increased by 9.1%– Loan-to-deposit ratio stable at 81.2%
• New PDS issuances of RM76 bil– Danajamin approved RM4.6 bil worth of
guarantees
Financial System: Outstanding Financing1,190.21,145.11,120.11,080.9
0
200
400
600800
1000
1200
1400
Mar Jun Sept Jan 2011
RM bil
6
8
10
12
14%
Large Enterprises SMEHousehold OthersDebt securities Annual growth (RHS)
Banking System: Deposits
1,091.41,073.3 1,159.41,113.7
0200400600800
1,0001,2001,400
Mar Jun Sept Jan 2011
RM bil
8.0
8.2
8.4
8.6
8.8
9.0
9.2%
Business HouseholdOthers Annual growth (RHS)
35
Overall financing quality remained intact
Net NPL ratio (%)
4.8
3.2
2.21.8
2.3 2.2
0
1
2
3
4
5
6
2006 2007 2008 2009 2010 Jan-11
%Loans in arrears
0
10
20
30
40
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
RM bil
0
1
2
3
4
5%
1 - <2 month (LHS) 2 - <3 month (LHS)
1 - <2 month (% of total loans) 2 - <3 month (% of total loans)
20102008 2009
Banks adopted Financial Reporting
Standards (FRS) 139 since Jan 2010
Loans-in-arrears remained stable to account for 4.1% of total loans
Increase in NPL reflects new accounting standards
36
Rising household indebtedness supported by strong financial buffers…
Household Debt-to-GDP Ratio (%)
50
60
70
80
2006 2007 2008 2009 2010
Household debt-to-GDP ratio unchanged at 75.9%
Household financial assets are 2.4 times of household debts
Household Financial Assets, Deposits and Debts
0
200
400
600
800
1,000
1,200
1,400
1,600
2006 2007 2008 2009 20100
50
100
150
200
250
300
Financial Assets (LHS) Debts (LHS)
Fin. Asset-to-Debt Ratio Deposit-to-Debt Ratio
RM billion %
37
Composition of HH Financial Assets(RM1,386 bil)
Savings with EPF
30%
Unit Trust funds
Equity Holdings
17%
Endowment
policies 6%
Deposits with FIs
31%
…and high level of liquid assets, with bulk of borrowings for purchase of assets
Secured financing constitute 64.9% of household debt
Composition of HH Financial Debts(RM581 bil)
Others10%
Purchase of
Securities5%
Car financing
20%
Personal use15%
Credit Card5%
Housing loan45%
Liquid assets accounted for 64.6% of financial assets
38
Household NPLs Ratio by Purpose (%)
3.2
1.22.5
1.90.70
3
6
9
12
2006 2007 2008 2009 2010Housing loans Car financingPersonal use Credit cardsPurchase of securities
Quality of household loans continue to improve
• Debt servicing capacity remains sound
– Delinquencies continued to improve– Gross NPL ratio: 2.3% (2009: 3.1%)– LIAs at 4.7% of total loans
• Banks maintain prudent loan underwriting standards and risk management practices
• Supported by comprehensive credit information system and infrastructure
Household NPLs and Loans in Arrears Ratio (%)
0
2
4
6
8
10
2006 2007 2008 2009 2010
NPL ratio
LIA ratio
39
Comprehensive, pre-emptive strategies to preserve household sector resilience
Prudential policies
- Maximum loan-to-value ratio and new credit card guidelines
Intensive supervisory oversight
- Risk management practices including pricing
Standards on prudent and responsible lending practices
- Suitability and affordability assessments
Targeted financial education programme by AKPK
- Including advisory and support arrangements
40
Ensuring prudent and responsible conduct for retail financing as part of measures to preserve household sector resilience• Inculcate responsible lending practices by financial institutions in dealing with
retail customers
• Requirements NOT intended nor expected to hamper credit availability
• Key requirements include– Suitability and affordability assessment– Verification of customers' income– Product disclosure sheet to facilitate informed decision making– Compensation of sales and marketing personnel to take into account fair dealing
conduct
• Complete submissions should not result in processing delays
41
Key contents of product disclosure sheet• Borrowing rate, variable / fixed rate, tenure, repayment structure
• Repayment obligation– Installment amount, total repayment (entire duration), changes to installment
amount for 100-200bps increase in borrowing rate
• Applicable charges – Stamp duty, disbursement fee, processing fee
• Implications of non-repayment – Late payment penalty, review of borrowing rate, legal implications
• Risk associated with the product
• Assistance and redress mechanism
42
Financial markets exhibited enhanced capacity to intermediate larger and more volatile portfolio flows
Volatility of asset prices remained low
90-day volatility (%)
0
5
10
15
20
25
30
35
40
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
KLCI MGS (5-year yield) [RHS]
Lehman collapse
European sovereign debt crisis
Lower returns to turnover ratio, denoting higher resilience
Ratio
0.000
0.004
0.008
0.012
0.016
0.020
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
0
0.1
0.2
0.3
0.4
FBM KLCI MGS [RHS]
Ratio
Avg 2010: 0.04
Avg 2010: 0.006
Source: Bloomberg
43
Limited impact from developments in Europe and Middle East
• Banks’
exposures at 18.3% of external exposures or 5% of capital base– No adverse spillovers from interbank
funding strains in Europe
– Regional operations of domestic banks’ unaffected due to strong fundamentals
• Counterparty risks to European reinsurers well-contained– High net retention ratio of 71.4%
– Reinsurance exposures to Europe only 8.5% of total capital available for general insurance
Banking System: External Exposures
(RM bil, % of cap base)
GIIPS (0.1, 0.1)
US (0.2, 0.2)
Others (2.0, 1.3)
Asia (25.7, 17.1)Middle
East (2.2, 1.4)
Europe (5.3, 3.5)
Labuan (5.4, 3.6)
Distribution of Premium Income
0% 20% 40% 60% 80% 100%
Direct Insurers Domestic Reinsurers Offshore Reinsurers Foreign Reinsurers
44
Foundations for financial stability were further strengthened
Enhanced robustness of risk management,
stress testing and capital management
More effective governance in financial institutions
Strengthened cross-border supervisory cooperation
Strengthened prudential standards for Islamic finance
Enhanced protection for depositors and policyholders
Adoption of more advanced capital approaches under
Basel II
45
Malaysian banking system well-positioned to meet Basel III requirements• High level and quality of bank capital
• Liquidity standards have been in place since 2000
– Banks to further strengthen buffers going forward
• Implementation strategy for local adoption of Basel III to be communicated to industry in 2011
– Address specific characteristics of domestic market
– Minimise impact on bank lending and economic growth
Share premium
14.6%
Ordinary share capital22.9%
Retained profits19.5%
Others6.1%
Stat reserve fund14.9%
General provisions
7.1%
Sub debt capital14.8%
More than 70% is comprised of equity and reserves
46
Growth potential of financial sector reinforced by further strategic initiatives in 2010
Enhanced inter-linkages with regional and international economies– Expanding regional footprint of Malaysian FIs– Issuance of new commercial banking and family takaful licences– Enhancing post-trade processing infrastructure for capital market– Enhancing cross-border payment infrastructure– Strengthened regional and international frameworks for cooperation
Improved environment for financing to SMEs– With comprehensive institutional framework and proactive measures by FIs
Continued development of human capital– ICLIF Leadership and Governance Center– Asian Institute of Finance
– INCEIF
Improving accessibility and sustainability of motor insurance
47
High global financial inclusion rankings
No. 1
for 3 years
No. 2 out of 87 countries
No. 10 in 2010 out of 139 countries (up from no.13 in 2009)
No. 9 out of 110 countries
‘Getting Credit’World Bank (Doing Business 2009, 2010 & 2011 Reports)
‘Loan accountsper 1,000 adults’
CGAP (Financial Access Report 2010)
‘Ease of Accessto Loans’
WEF (The Global Competitiveness Reports
2009-2010 and 2010-2011)
‘Deposit accountsper 1,000 adults’
CGAP (Financial Access Report 2010)
Recent Achievements
Pembiayaan Mikro1
• Financing grew by 25.8% yoy to RM776 million benefiting over 66,000 microenterprises
Physical Outreach of Financial Services
• 8 unserved districts in East Malaysia will have physical access to financial services in 2011 via mini branches, mobile units & Pos Malaysia
Comprehensive Mechanisms for Consumer Education and Protection
• POWER: Educate young adults & first time borrowers on good money management & living with manageable debt
• Mobile LINK: Enhance accessibility of financial assistance & education to non-urban population
2
1
3
1. As at end 2010
Expanded outreach of financial services
48
Migration to electronic means of payments has achieved significant advancements
Following successful launch of eShare Payment and eDividend
Capital market
Driving efficiency gains in various economic sectors and expanding the payment infrastructure
Mobile banking and payment
Unit trust, rights issues & refund of unsuccessful Initial Public Offering (IPO) applications
Multi-bank and mobile network operator neutral ecosystem to be piloted in 2H 2011
Internet B anking T ransact io ns
0
50
100
150
200
2004 2005 2006 2007 2008 2009 2010
millionVolume Ind Corp
D ebit C ard T ransact io ns
0
5
10
15
20
2004 2005 2006 2007 2008 2009 2010
million
0
1
2
3
4
5
RM bil
Volume Value (RHS)
49
Outlook for domestic financial stability in 2011 remains positive
• Risks to financial stability likely to be largely externally driven
• Pre-emptive measures taken and strong financial buffers ensure that Malaysia’s financial system is well-placed with capacity and flexibility to respond to emerging risks
• Macrosurveillance
and supervisory activities in 2011 will focus on:– Ensuring prudent and responsible risk-taking and market conduct by FIs– Ensuring resilience and robustness of major payment and settlement systems– Active engagement in global regulatory and accounting reforms– Further strengthening of regulatory laws and prudential guidelines– Promoting closer domestic, regional and global cooperation and coordination
50 50
Malaysia maintains a leading role in development of Islamic finance
Malaysia tops global league tables in sukuk equity and fund management
Source: “Gateway to Asia: Malaysia, international Islamic finance hub” by Pricewaterhouse Coopers 2010
…and home to largest sukuk market
Global Sukuk Outstanding by Country*USD148 billion
*Source: Bloomberg Professional Services Terminal, as at end-2010
Malaysia66%
Indonesia4%
Offshore Centres
16%
Others1%
Saudi7%
Bahrain2%
UAE4%
Singapore0.1%
(USD94 billion)
51
Malaysia plays key role in development of Islamic international architecture
Islamic Financial Services Board11
• Global standard-setting body based in Malaysia for prudential standards in Islamic finance – 11 standards issued to date
• 195 members of which 53 regulators and supervisory authorities from Muslim and non-Muslim countries
Islamic Financial Stability Forum (IFSF)22
• Established following recommendation in Financial Stability Report led by Bank Negara Malaysia.• Strategic platform for dialogue among regulators of international Islamic financial system to promote financial
stability
International Islamic Liquidity Management Corporation (IILM)33
• Established in 2010 in Kuala Lumpur with participation of 12 central banks and regulatory agencies and 2 multilateral development institutions.
• Milestone in regional & international cooperation to build a robust liquidity management infrastructure at national, regional & international levels
• Facilitate cross-border liquidity management among players in the Islamic financial industry via regular issuances of short term high-grade Shariah-compliant instruments in major reserve currencies
52
Significant achievements since 2001 FSMP
Robust regulatory, supervisory & surveillance framework
- Strengthened prudential standards- Risk-based supervisory framework- Stronger cross-border cooperation
Growing Islamic finance and MIFC- Accounts for >20% of banking sector assets- Comprehensive infrastructure and diversified players
- Global leader in sukuk issuances
More developed financial markets
Enhanced financial inclusion- Wider outreach of banking services- Higher lending to SMEs- Comprehensive consumer education and protection framework
Strong and mature domestic players- Larger domestic banks with average assets of >RM95 b
- Domestic banks market share > 75%- Wide array of products and services
Strengthened linkages with international and regional economies
- 6 banking groups in 19 countries- New licences
to global and regional players
- Higher PDS and sukuk financing with active secondary trading
- Increased breadth and liquidity of FX market
More market driven and competitive financial system
53
Moving forward…
The new financial sector blueprint will build on the strong foundations of the Malaysian financial system to:
– remain resilient in withstanding any potential disruptions in the financial system and broader economy;
– to best serve the needs of a high value-added and high income economy;
while further promoting financial inclusion and regional financial integration