Taklimat Laporan Tahunan 2016 dan Laporan Kestabilan ... · Taklimat Laporan Tahunan 2016 dan...
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Taklimat Laporan Tahunan 2016 danLaporan Kestabilan Kewangan dan Sistem Pembayaran 2016
Gabenor Bank Negara Malaysia
23 Mac 2017
1
Taklimat Laporan Tahunan 2016 danLaporan Kestabilan Kewangan dan Sistem Pembayaran 2016
Gabenor Bank Negara Malaysia
23 Mac 2017
2
In 2016, the Malaysian economy continued to expand despite multiple external shocks and domestic adjustments
Domestic Demand: 2014
Source: National authorities, Department of Statistics, Malaysia
…amid a period of adjustment
to various challenges
Within the region, Malaysia was among the
faster-growing economies…
5.0
4.2
0
1
2
3
4
5
6
7
8
PH ID MY TH KR SG
2015 2016
Annual change (%)
Real GDP growth of selected countries
• Volatile global commodity prices
• Weak global demand
• Depreciation of the ringgit
• Lingering impact of GST implementation
• Domestic price adjustments
3
Note: PH= Philippines, ID= Indonesia, MY= Malaysia, TH= Thailand, KR= South Korea, SG= Singapore
3.6 3.1 3.2
1.8
1.1 0.7
0.6
0.60.1
-0.5-0.1 0.0
1.2
-0.4 -0.2
6.0%
5.0%
4.2%
-2
0
2
4
6
8
2014 2015 2016p
Change in Stocks Net Exports
Public Investment Public Consumption
Private Investment Private Consumption
GDP Growth (%, yoy)
• Sustained private consumption:
- Supported by continued wage and employment growth,
with additional impetus from Government measures
• Private investment continued to expand:
- Supported by implementation of new and ongoing
projects in the manufacturing and services sectors
• Smaller negative contribution from net exports:
- Import growth moderated at a faster pace than exports
Private domestic demand remained the key growth driver
Contribution to
growth (ppt.)
Real GDP Growth
Source: Department of Statistics, Malaysia
p preliminary
4
2017 will be characterised by several developments
3
5
Volatile
financial markets
Improvement in
global growth
Higher
commodity prices
Socio- and geopolitical
developmentsPolicy adjustments
in advanced economies
Global Landscape
in 2017
Malaysia is positioned to benefit from positive developments and to withstand negative shocks
Diversified economic and trade structure
Well-developed and resilient financial system
Adequate reserves and manageable external debt
Policy space and flexibility
Structural transition towards high-value added sectors with varied export products and markets
Strong capital and liquidity buffers with continued access to financing
Ample international reserves and increased foreign asset holdings act as buffer against external shocks
Flexible exchange rate and monetary policy space
6
Higher global manufacturing and industrial production
data signal better global growth prospects
Recent indicators point to an improvement in global growth
Global Manufacturing Indicators
Exports in Asia has been recovering
48
49
50
51
52
53
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
3Q-13 1Q-14 3Q-14 1Q-15 3Q-15 1Q-16 3Q-16 Jan-Feb17
Global Industrial Production Index* (IPI)
Global Purchasing Managers' Index (RHS)
%, yoy Index
Source: Bloomberg, Haver, BNM
)
7
Export Value Growth in Selected Asian Economies
-25
-20
-15
-10
-5
0
5
10
15
20
25
-20
-15
-10
-5
0
5
10
15
20
3Q-13 1Q-14 3Q-14 1Q-15 3Q-15 1Q-16 3Q-16 Jan-Feb17**
KR MY
SG TH
ID (RHS)
%, yoy %, yoy
*Data available as at 2016
** January 2017 data for Malaysia and Thailand
Broad-based expansion in growth across regions
Source: International Monetary Fund (IMF)
Global growth and trade projected to expand in 2017
World trade to world GDP ratio to improve after
reaching the lowest ratio since 2001
GDP Growth By Region World Trade Growth and Trade to GDP Ratio
0
2
4
6
8
10
12
2010 2011 2012 2013 2014 2015 2016e 2017f
Global
Adv. economies
Asia
Other EMEs
%, yoy
8
e estimates f forecast
0
1
2
3
0
2
4
6
8
10
12
14
2010 2011 2012 2013 2014 2015 2016 2017f
World Trade Growth
World Trade to WorldGDP Ratio (RHS)
%, yoy Ratio
-1.8
2013 2015 2017f
4.4
2013 2015 2017f
6.1
2013 2015 2017f
L
4.2
2013 2015 2017f
Annual change (%)Real GDP Growth
4.8
4.3
The Malaysian economy to expand by 4.3 – 4.8% in 2017
Annual change (%)Private Consumption
Annual change (%)Private Investment
Annual change (%)Net Exports
Growth to remain anchored by private domestic demand,
with support from external sector
Source: Department of Statistics, Malaysia, Bank Negara Malaysia
f forecast
6.0 4.1
5.3
9
Real GDP by
Expenditure
(Annual change, %)
Share2
2016 (%)2016p 2017f
Domestic demand1 91.8 4.4 4.4
Private expenditure 70.2 5.7 5.6
Consumption 53.3 6.1 6.0
Investment 16.9 4.4 4.1
Public expenditure 21.6 0.4 0.5
Consumption 13.1 1.0 -0.2
Investment 8.5 -0.5 1.5
Net exports 8.1 -1.8 5.3
Exports 70.0 0.1 2.2
Imports 61.9 0.4 1.8
Real GDP 100.0 4.2 4.3 – 4.8
Domestic demand to remain a key driver, with support from improvement in net exports
Real GDP by
Economic Activity
(Annual change, %)
Share2
2016 (%)2016p 2017f
Services 54.2 5.6 4.9
Manufacturing 23.0 4.4 4.3
Mining & Quarrying 8.8 2.7 2.7
Agriculture 8.1 -5.1 4.0
Construction 4.5 7.4 8.0
Real GDP 100.0 4.2 4.3 – 4.8
1 Excluding stocks, 2 Numbers may not add up due to rounding and exclusion of import duties
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
p preliminary f forecast
10
Updated
Private consumption to remain supported by continued employment and income growth
Real private consumption
Annual change (%)
Sustained household spending…
6.1 6.0
4
5
6
7
8
9
2013 2014 2015 2016p 2017f
Source: Department of Statistics, Malaysia
p preliminary, e estimate, f forecast
13.9
14.1
14.2
13.6
13.7
13.8
13.9
14.0
14.1
14.2
14.3
2014 2015 2016e
Employment
+112k jobs
Wage growth in the manufacturing and
major services sectors
Annual change (%)
… and wage growth…supported by continued
employment growth…
Million Persons
5.34.9
4.2
0
1
2
3
4
5
6
7
2014 2015 2016e
Private
sector wages
11
65
16
17
3
Households have the capacity and resilience to support expenditure
Determinants of Private Consumption
(%share)
Source: Bank Negara Working Papers (WP7/2015), Department of Statistics, Malaysia, Bank Negara Malaysia, Malaysian Employers Federation
1Q’05 - 4Q’13
HH Liquid Financial Assets and Debt
1.01.1
1.51.5
2015 2016
HH Debt HH Liquid Financial Assets
Disposable income
(MEF salary increment in
2017f: 5.4%; 2016: 5.5%)
Others
Financial wealth
Housing wealth
(RM trillion)
Continued expansion in income,
the primary driver of private consumption
On aggregate, households have ample liquid
financial assets to cover debt
12
Private investment to register modest growth
Source: Department of Statistics, Malaysia, Bank Negara Malaysia, MIER
p preliminary, f forecast
Private investment activity to
grow at 4.1%
6.4
4.4 4.1
0
5
10
15
20
25
2011 2013 2015 2017f
Real Private
Investment GrowthAnnual
change (%)
Malaysia continues to attract FDI,
but in lower amounts
13
0
10
20
30
2011-2015 2015 2016p
23%
19%
22%
Share to Nominal
Private Investment (%)
Foreign Direct Investment
Avg.
Annual FDI:
RM36.6 bn
81.2
70
80
90
100
110
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
Business sentiments
remain soft
FDI:
RM41.2 bn
Business Condition Index
Points
Optimism threshold
(100 points)FDI:
RM43.4 bn
Private investment will be supported by the ongoing projects in the services and manufacturing sectors
Source: Department of Statistics, Malaysia, Bank Negara Malaysia
Services and manufacturing sectors account
for 75% of private investment activity
16
63
26
49
0
20
40
60
80
100
Manufacturing
Mining
Construction
Agriculture
Private Investment by Sector
(2010-2015)
Services
Services
• Transport and storage:
Oil and gas storage terminals,
seaports and aircrafts
• Telecommunication:
4G/LTE network expansion
• Electrical and electronics (E&E)
• Resource-based industries
Manufacturing
Key quality projects to increase efficiency,
productive capacity and employment
Share (%)
14
p preliminary, f forecast
Note: G3 refers to the US, EU and Japan, NIEs refers to Hong Kong, Korea and Chinese Taipei, ROW refers to rest of the world
External trade performance to improve
Annual change (%)% share
(2016)2016p 2017f
Gross exports 100.0 1.1 5.5
Manufactured 82.2 3.2 3.7
E&E 36.6 3.5 4.2
Non-E&E 45.5 3.0 3.3
Commodities 17.1 -8.6 14.8
Gross imports 100.0 1.9 6.4
Intermediate goods 57.1 -0.1 5.4
Capital goods 14.3 4.9 7.9
Consumption goods 9.6 7.3 9.9
Trade balance (RM billion) - 87.3 86.4
Higher export and import growth, lifted by positive
global factors amid sustained domestic demand
Diversified export structure across products and
markets to help mitigate shocks
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
Exports by Product, 2016
%share of total exports
45.5
36.6
17.1
E&E
Commodities
Non-E&E
Exports by Market, 2016
%share of total exports
29.4
28.412.5
10.4
19.3
G3
ASEAN
China
NIE
ROW
15
-15
0
15
30
2006 2008 2010 2012 2014 2016p0
20
40
60
2006 2008 2010 2012 2014 2016p
Current account balance to narrow but remain in surplus
17.6
1-2%
-12
-8
-4
0
4
8
12
16
20
24
-100
0
100
200
2006 2008 2010 2012 2014 2016p
Goods Services
Primary income Secondary income
% of GNI (RHS)
Current Account BalanceRM billion % of GDP
Moderating
savings
Rising
investment
Higher domestic investments
and moderating savings
Smaller CA surplus reflect global conditions
and domestic structural transformation
Source: Department of Statistics, Malaysia, Bank Negara Malaysia
Lower private sector surplus,
due partly to higher investment
Savings-Investment Gap
% of GNI % of GDPSavings-Investment Gap Saving-Investment Gap
by Sectors
2017f 2017f
Pvt. investment
growth (2011-16):
10.9%
Private sector
Public sector
2017f
16
-1.3
0.6
0.7
0.9
1.3
2.1
3.1
3.4
3.5
5.9
6.6
7.9
-5.3
-6.6
-17.1
2.8
-4.3
-3.7
0.4
-2.2
3.2
2.0
-1.0
-2.5
-25 -15 -5 5 15
PHP
CNY
GBP
IDR
MYR
EUR
THB
SGD
JPY
TWD
AUD
KRW
2016
2017 YTD
% change
The ringgit exchange rate has stabilised in 2017, in line with most major and regional currencies
The ringgit followed two distinct phases in 2016, with
most of the depreciation occurring after the US electionThe ringgit has, however, recovered slightly in 2017,
in line with most major and regional currencies
Performance of Selected Currencies against the
US dollar (USD) Exchange Rate of the Malaysian Ringgit (RM) and Selected
Regional Currencies against the US Dollar (USD)
Updated
90
95
100
105
110
115
De
c-1
5
Jan-1
6
Feb
-16
Ma
r-1
6
Apr-
16
Ma
y-1
6
Jun-1
6
Jul-
16
Aug-1
6
Sep-1
6
Oct-
16
No
v-1
6
De
c-1
6
Jan-1
7
Feb
-17
Ringgit
Index (Dec 2015 =100)
2017Appreciation
period
Depreciation
period
+9.9% -13.0%
1 Regional currencies: Chinese renminbi, Indonesian rupiah, Korean won, Philippine peso, Singapore dollar, New Taiwan dollar and Thai baht.
Each currency carries equal weight.
YTD year-to-date
Source: Bank Negara Malaysia
Index of Selected Regional
Currencies against the USD1
17
The FMC measures have lent stability to the ringgit and domestic foreign exchange market
4.65.2
0
1
2
3
4
5
6
Nov-16 Feb-17
219
53
0
50
100
150
200
250
Nov-16 Feb-17
65
40
0
10
20
30
40
50
60
70
Nov-16 Feb-17
504
275
100
200
300
400
500
600
Nov-16 Feb-17
Average Volatility of MYR/USD
Average MYR/USD
Bid-Ask Spread
Average Daily Turnover of
MYR Currency Pair
Average Daily MYR/USD
Offshore-Onshore GapUSD bnPoints
Points
Points
Daily turnover remained stable Ringgit volatility declined Offshore-onshore gap narrowed
Bid-ask spread narrowed
18
Source: Bloomberg, Bank Negara Malaysia
Note: Volatility refers to the difference between MYR/USD interbank intraday highest and lowest rate. Offshore rate refers to the NDF 3-month rate
while onshore rate refers to the spot rate.
FX conversion increased post-measures 5Y CDS spread narrowed
150.6
117.4
60
100
140
180
Nov-16 Feb-17
USD bn
Basis
points Average Daily 5-year CDS spreadNet Foreign Exchange Conversion
from Exports (Cumulative)
-0.5
2.0
-0.5
0.0
0.5
1.0
1.5
2.0
Jan - Nov-16 Dec-16 - Feb-17
42%
30%
17%
8%
2% 1% <0.5%0
20
40
60
80
Asse
tM
ana
ge
me
nt
Cen
tra
l B
ank/
Go
vern
me
nt
Pe
nsio
nF
unds
Ba
nks
Insura
nce
Co
mp
an
ies
Nom
inees/
Cu
sto
dia
ns
Oth
ers
RM billion
Non-resident holdings of Malaysian government bonds remained broadly stable as at end-2016
2014:28.2%
2015:29.6%
2016:30.6%
0
5
10
15
20
25
30
35
40
0
50
100
150
200
250
300
Dec-14 Jun-15 Dec-15 Jun-16 Dec-16
% share of total
RM billion
Outstanding Government Bond (LHS)
Non-Resident Holdings of Govt. Bonds (RHS)
Source: Bank Negara Malaysia
Distribution of Non-resident Holdings in
Government Bonds as at end-Dec’16
Non-Resident (NR) Holding of
Malaysian Government Bonds
Non-resident holdings of Malaysian Government
bonds stabilised towards the end of the yearMajority of non-residents holdings are by
long-term investors
Note:
- Malaysian Government Bonds includes Malaysian Government Securities (MGS), Malaysian Government Investment Issues (MGII), and Sukuk Perumahan
Kerajaan (SPK).
- ‘Others’ include individuals, non-financial corporations and unidentified sectors.
- Data may vary pending further classification by reporting entities.
19
Malaysia’s external debt remains manageable given its currency, maturity and balance sheet profiles
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
60.0%*
48.5%
25.4%
1998 2016
Ringgit-denominated debt
Foreign currency-denominated debt
*Based on previous definition of external debt
Medium- to
Long-term
58.6%
Short-term
41.4%
Limited
rollover risks
Foreign currency-denominated
debt remains low relative to Asian
Financial Crisis
Breakdown by Currency
(% of GDP)
59% of total external debt is in
medium- to long-term tenures
Breakdown by Maturity
(% of total share)
Short-term external debt partly
covered by short-term external assets
Short-term External Position of
Banks and Corporations (end-2016)
300
377
0
100
200
300
400
Short-termExternal Assets*
Short-termExternal Debt
RM billion
Total:
73.9%
*Debt instruments only
20
Going forward, Malaysia is well-positioned to intermediate volatile capital flows
Short-term capital flows were driven by
prevailing conditions in the global financial markets
• Going forward, large and volatile shifts in global
liquidity will continue to shape capital flow
movements
• Malaysia will be able to withstand these external
shocks, drawing on its diversified economic
structure, financial buffers and prevailing robust
policy framework
• Well-developed and resilient financial system
accord Malaysia the capacity to intermediate
large and volatile flows
-30
-20
-10
0
10
20
30
1Q2015
2Q2015
3Q2015
4Q2015
1Q2016
2Q2016
3Q2016
4Q2016
Resident Non-Resident
RM billion
Net Portfolio Flows
Source: Department of Statistics, Malaysia
21
0
20
40
60
80
100
2005 2016
Malaysia’s External Assets1
International reservesBank & non-bank corporates external assets
USD118.7
billion
USD265.4
billion
Ample international reserves and increased foreign asset holdings act as buffer against external shocks
8.3
1.1
0
2
4
6
8
10
12
14
0
50
100
150
200
1991 1996 2001 2006 2011 2016
Net International Reserves
Retained import cover (RHS)
Reserves/ST ext debt* (RHS)
15 Mar. 2017
USD94.9 bn
AFC 1997:
USD21.7 bn
Reserves position remains at about four-times
the level during the Asian Financial Crisis
Net International Reserves
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
2005
59%
26%
41%
74%
% share
Increased holdings of foreign assets by
banks and corporations
1 Based on the International Investment Position
2016
USD billion Times
22
*Lower ratio since 2009 following redefinition of external debt
0
1
2
3
4
5
Fe
b-1
4
Ma
y-1
4
Aug
-14
Nov-1
4
Fe
b-1
5
Ma
y-1
5
Aug
-15
Nov-1
5
Fe
b-1
6
Ma
y-1
6
Aug
-16
Nov-1
6
• For 2017, headline inflation to average
3 – 4% reflecting primarily the pass-through
impact of the increase in global oil prices on
domestic retail fuel prices
• Headline inflation would be relatively high in
1H 2017 before moderating thereafter
• The cost-driven inflation is not expected to
have significant spillovers given the
moderate domestic demand conditions
− Core inflation to increase only modestly
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
23
Higher average headline inflation driven by cost factors
Headline and Core Inflation
Annual Growth (%)
4%
3%
Core inflation
Headline inflation
Headline inflation outlook is subject to uncertainty in global oil prices
Source: Bloomberg and Bank Negara Malaysia
• Trajectory of domestic headline inflation
will be dependent on the future trend in
global oil prices which remain highly
uncertain
• The uncertainties in global oil prices arises
mainly from:
− Possible extension of OPEC's agreement on
the cut in crude oil production
− Recovery in the global growth
− Geo-political tensions
USD per barrel
0
10
20
30
40
50
60
70
80
Ja
n-1
5
Ma
r-15
Ma
y-1
5
Ju
l-1
5
Sep
-15
Nov-1
5
Ja
n-1
6
Ma
r-16
Ma
y-1
6
Ju
l-1
6
Sep
-16
Nov-1
6
Ja
n-1
7
Ma
r-17
Ma
y-1
7
Ju
l-1
7
Sep
-17
Nov-1
7
Brent Global Oil Price
Updated
24
Monetary policy will focus on supporting the sustainable
growth of the economy while maintaining price stability
• OPR of 3.00% is currently consistent with steady growth and stable inflation
• The MPC will continue to assess balance of risks on outlook of domestic growth and inflation
GDP growth
4.3 – 4.8%
Inflation
3 - 4%
• Baseline: Sustained domestic demand supported by more
positive contribution from external sector
• Risk factors: Threats of protectionism, geopolitical
developments, cautious sentiments, financial disruptions
• Baseline: Cost-driven inflation primarily due to pass-through
impact of higher global oil prices on domestic fuel prices
• Core inflation to increase modestly
• Risk factors: Developments in global oil prices and higher
spillovers from cost-push inflation
25
151 184 220 232 239 273 268
0
200
400
600
800
1000
1200
1400
201
0
201
1
201
2
201
3
201
4
201
5
201
6
Funds Raised via Capital Markets
Loan Disbursements by the Banking System and DFIs
Loans Disbursed to SMEs
RM bn
1,084
842926
1,124
Financing to the private sector remained healthy with relatively stable borrowing costs
Gross Financing*
Broad-based loan disbursed across all economic
sectors for both businesses and households
1,209 1,2251,194
2
3
4
5
6
7
Overallprivatesector
Households Overallbusinesses
SMEs LargeCorporate(5y AAA
PDS)
Long-run average**
Jan-17
Interest Rates on New Loans to the
Private Sector
Private sector continue to benefit from stable
financing costs
Updated
Source: Bank Negara Malaysia
*Comprises gross loans from the banking system and DFIs, and gross funds raised from the capital markets
**Average (Jan 2002 – Dec 2016)
26
%
ROW
Market% share of exports
54
23
9 85
Services Mfg. Mining Agri. Const.
55.595.3
11.816.5
0
10
20
0
50
100
150
1998 2016p
Size of Bond MarketCapital Ratio* (RHS)
Malaysia’s macroeconomic fundamentals remain supportive of growth
Diversified sources of growth Stable labour market conditionsDiversified export market
and product
Deeper markets and
strong financial buffers
Current account balance
reflects strong investment
10.4
2.1
2010 2012 2014 2016p
% of GNI
Current Account Balance
Malaysia GDP by Economic Sectors (2016)
% of
nominal
GDP
Size of Bond Market
and Banking Capital Ratio %
* Capital ratio in ‘98 refers to the risk-weighted capital ratio; Ratio in 2016 refers to total capital ratio, reported based on Basel III Capital Adequacy Framework adopted since January 2013;
Note: HK= Hong Kong, SG= Singapore, JP=Japan, CN=China, US=United States, NL=Netherlands, UK= United Kingdom, KR=South Korea, CH= Switzerland
Source: Department of Statistics, Malaysia and Bank Negara Malaysia p preliminary
Conducive investment
destination for foreign investors
FDI Inflows by Source Country (2016)
% share of GDP
% share of total FDI inflows
Employment
(million)
2015 2016p
14.1
14.2
2015 2016p
4.94.2
Wage Growth
(%)
37
46
17
2016p
28
29
1310
20
2016p
Product% share of exports
E&E
Non-E&E
Commodities
PR ChinaNIE
G3
ASEAN
36
16
9 9 85 5 4 3
HK SG JP CN US NL UK KR CH
27
The economy remains resilient with the ability to manage potential downside risks to growth
The Malaysian economy to expand by 4.3 – 4.8% in 2017, driven by domestic demand
While headline inflation to range between 3.0 – 4.0%, underlying inflation is expected to
increase only slightly
Risks to growth emanating from global and domestic fronts
Malaysia’s strong fundamentals to provide resilience in confronting these risks
- Diversified economic, trade and FDI structures
- Stable labour market conditions
- Current account surplus and ample international reserves
- Strong financial buffers with well-capitalised banking system and developed capital markets
- Policy flexibility
1
3
4
2
28
• Upside: Positive spillovers from expansionary policies by major economies
• Downside: Slower global growth emanating from global policy uncertainties, volatility in capital flows
and exchange rates, and weaker consumer and business sentiments
Financial position remained strong in 2016:
• Total assets of BNM amounted to RM450.98 billion with
International Reserves of RM423.9 billion (USD 94.5 billion)
• Net profit of RM6.48 billion
• Dividend of RM2.5 billion to the Government
Bank Negara Malaysia: Annual Financial Statements 2016
29
Bank Negara Malaysia: Annual Financial Statements 2016
RM billion
Total Income 9.02
Less:
Recurring Expenditure 1.12
Development Expenditure 1.37
Taxation 0.05
Total Expenditure 2.54
Net Profit 6.48
Income Statement
(Year ended 31 December 2016)
Statement of Financial Position
(as at 31 December 2016)
390
400
410
420
430
440
450
460
Assets
Other Assets
Land and Buildings
Loans and Advances
Deposits with FIs
MGS
SDR
IMF Reserve Position
Gold and Foreign exchange
RM billion
0
50
100
150
200
250
300
350
400
450
500
Liabilities and Capital
Capital
Liabilities
RM billion
30
Laporan Kestabilan Kewangandan Sistem Pembayaran 2016
31
Laporan Kestabilan Kewangandan Sistem Pembayaran 2016
32
Financial stability was sustained in 2016
33
Source: Bank Negara Malaysia
Banking Sector (%) 2015 Jan 2017
Capitalisation
Common equity tier 1 ratio
Total capital ratio
Excess capital buffer (RM bn)
13.3
16.6
124.3
13.1
16.9
131.0
Profitability
Return on assets
Return on equity
1.3
12.3
1.3
11.6
Asset Quality
Net impaired loans ratio
Loans in arrears (1-<3 months)
1.2
2.2
1.2
2.2
Insurance/Takaful Sector (%) 2015 2016
Capitalisation
Capital adequacy ratio
Insurance
Capital adequacy ratio
Takaful
Capital buffer (RM bn)
251.6
191.6
45.9
248.5
205.3
47.9
Profitability
Profit (RM bn)
Claims ratio
14.7
60.2
16.6
56.0
• Domestic financial stability was sustained in
2016 amid heightened financial market
volatility
• Sound financial institutions and orderly
financial market conditions preserved
• Stable outlook for financial stability in 2017
• Financial institutions remain resilient to any
severe macroeconomic and financial
shocks, supported by strong financial buffers
2
1
43
73
115 106
178
269
0
50
100
150
200
250
300
2008 2012 2016
RM billionLong-term borrowing Capital
Healthy banking system liquidity positions, supported by diversified funding sources
481.3
385.7
124.8
80
100
120
140
0
400
800
Jun2015
Sep Dec Mar2016
Jun Sep Dec
Stock of HQLA
Net cash outflows
Liquidity Coverage Ratio (RHS)
RM billion %
Sufficient liquidity buffer to withstand
potential shocks
Increased contribution of equity and long term
debt instruments to support asset growth
CAGR (2008-2016):
12.5%
34
Source: Bank Negara Malaysia
0
2
4
6
8
10
12
14
0
1,000
2,000
3,000
4,000
2012 2013 2014 2015 2016
Debt Financial Assets
Debt (RHS) Financial Assets (RHS)
Income (RHS)
Annual change (%)
Source: Bank Negara Malaysia and Malaysia Employers Federation
Household debt accumulation more in line with asset and income growth
Growth in debt converged towards
financial assets and income growth
Debt: 5.4%
RM billion
Lower share of debt to vulnerable borrowers
0
10
20
30
40
0
10
20
30
40
50
Bottom20
20-40 40-60 60-80 Top 20
Debt (% of total debt)
Median DSR (RHS)
% of total household debt DSR (%)
Bottom
20Top 20
Financial assets: 5.4%
Income: 5.5%
35
Continued access to house financing, especially for first time home buyers
Source: Bank Negara Malaysia
Growth in financing mainly driven by
sustained demand for affordable housing
477.3
9.2
5.3p
0
4
8
12
16
0
200
400
600
2013 2014 2015 2016
Outstanding financing
Annual change (RHS)
MHPI - annual change (RHS)
RM billion Annual change (%)
72% of housing loan borrowers are first time
home buyers of houses priced <RM500K
0
1
2
3
4
5
0
20
40
60
80
100
2013 2014 2015 2016
< RM500K RM500K - RM1M
> RM1M 2 HLs (RHS)
≥3 HLs (RHS)
% Annual change, %
Houses
priced
< RM 250K,
mainly first-
time home
buyers
36
p preliminary
37
Houses are unaffordable in major
urban centres
Most unsold* houses are in the
higher-priced segments
*Includes unsold properties that were completed and under construction
Source: NAPIC, DOSM and BNM estimates. For details, refer to 2016 AR Box Article “Demystifying the Affordable Housing Issue in Malaysia”
Housing affordability remains low, amid slow pace of new supply in affordable segment
560
470
335
600
0
100
200
300
400
500
600
700
KL C
ity
Peta
ling
Jo
ho
r B
ah
ru
Geo
rge
tow
n
Estimated affordable house price
Median House Prices (actual)
RM 000
68
47
26 27
22
33
42 36
10 19
33 37
0
25
50
75
100
2008-2009
2010-2011
2012-2014
2015-2016
Above RM500,000
RM250,000-RM500,000
Below RM250,000
Higher-priced property forms
most of new launches
% share
Affordable segments,
20.9%
Higher-priced segments, 79.1%
• Raise productivity and income
• Reduce unproductive debt through debt
rationalisation and consolidation
• Accelerate supply of affordable housing
and rental schemes
• Ensure efficient allocation of affordable
housing units to eligible target buyers
Note: Delinquent loans refer to loan-in-arrears of between one and three months
1.8
6.3
6.5
-15
-10
-5
0
5
10
1Q2015
2Q 3Q 4Q 1Q2016
2Q 3Q 4Q
Delinquent household loans
Impaired household loans
Impaired housing loans
Annual change, %
38
Source: Bank Negara Malaysia
Existing measures still needed but
more can be doneIncrease in impairment and delinquency in recent
period, particularly for housing
Measures to encourage prudent financial discipline remain important, as signs of risk are emerging
1
2
3
4
Financing activities broadly in line with
domestic economic activities
39
Corporate sector borrowings continue to support domestic economic activities
Source: Bank Negara Malaysia
-6
-4
-2
0
2
4
6
8
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2014 2015 2016
GDP Business Sector: Domestic financing
Quarterly change, %
131.7%
99.6% 97.9%
105.5% 107.9%
0
50
100
150
1998 2013 2014 2015 2016
Domestic Loans to GDP
Domestic corporate bonds to GDP
External debt to GDP
% of GDP
Higher corporate debt driven by new
bond issuances
Debt servicing capacity of businesses remained sound
40
43.6
9.4
1.2
0
5
10
15
0
10
20
30
40
50
2012 2013 2014 2015 2016*
Debt-to-equity ratio
Interest coverage ratio (RHS)
Cash-to-short-term debt (RHS)
Times%
Low leverage, with debt servicing
capacity and liquidity sustained
above prudent thresholds
4.2 4.47.0
13.24.6 3.3
4.3
3.6
0
10
20
30
EMEA Malaysia LatinAmerica
EmergingAsia(ex-
Malaysia)
ICR ≤ 1 1 < ICR ≤ 2 2 < ICR ≤ 3
%
Debt-at-risk within
manageable levels
Source: Bank Negara Malaysia, International Monetary Fund
0
1
2
3
4
2012 2013 2014 2015 2016
Business: Impaired loans
SME: Impaired loans
Business: Delinquent loans
SME: Delinquent loans
%
Impaired and delinquent loans
broadly low and stable
*For 2016, data as at first nine months
^Debt-at-risk is measured as the share of debt borne by firms with an interest coverage ratio (ICR) of less than two times
ICR= Earnings before interest expense, taxes, depreciation and amortisation / interest expense
Overseas operations of domestic banks remain financially sound amid continued regional expansion
Source: Bank Negara Malaysia
Net external liabilities largely driven by LIFBs, while
DBGs continue to maintain net external assets
175
114
4.1
-150
-100
-50
0
50
100
-450
-300
-150
0
150
300
2012 2013 2014 2015 2016
RM billionRM billion
Others Debt securities
Securities under custody Loans
Capital funds Deposits & nostro
Interbank Banking system net exposures
Net exposures of LIFBs (RHS) Net exposures of DBGs (RHS)
50
150
Assets
Liabilities
100
0
10
20
30
3Q 2015 3Q 2016 3Q 2015 3Q 2016 3Q 2015 3Q 2016
Capital ratio Return on equity Gross impairedloans ratio (RHS)
%
0
5
10
%
Max
Min
Median
Continued earnings resilience and sustained asset
quality of DBGs’ overseas operations
41
LIFBs: Locally incorporated foreign banks; DBGs: Domestic banking groups
Continued regional expansion expected under ASEAN Banking Integration Framework
Source: Bank Negara Malaysia
• Presence in 15 countries
worldwide
• Bilateral arrangements with
Indonesia and other ASEAN
countries pave the way for
further regional integration
1
2
42
Assets (RM bn) 306.7 559.3
20123Q 2016
0
4
8
12
0
10
20
30
2012 2013 2014 2015 2016
%RM billion
OthersMotorMarine, aviation and transitFireGross premiums growth (RHS)
Additional
RInsurance and takaful sector continued to record positive growth
0
2
4
6
8
10
12
0
2
4
6
8
10
12
14
16
18
2012 2013 2014 2015 2016
%RM billion
OthersMedical and healthTemporaryEndowmentWhole lifeNew premiums growth (RHS)
0
100
200
300
2007 2010 2013 2016
Total assetsCorporate BondsMGSEquitiesCash and depositsOthers
RM billion
New life/family takaful premiums
driven by growth in endowment
and group term policies
In the general sector, growth in fire
premiums offset slower growth in
motor & MAT premiums
Insurance and takaful assets
expanded, with a shift to higher
yielding corporate bonds and equity
43
Source: Bank Negara Malaysia
0
20
40
60
80
100
2007 2010 2013 2016
%
Overall
Marine, aviation and transit
Additional
RGreater focus on strengthening domestic underwriting capacity and reducing the protection gap
Domestic underwriting capacity for more
complex & non-traditional risks remains
underdeveloped, mainly in the MAT sector
General Insurance/Takaful Retention Ratio
20%
30%
40%
50%
60%
2011 2012 2013 2014 2015
Number of policies per capita
Number of policies per capita
(without multiple policies)
Life Insurance/Family Takaful Penetration RateInsurance penetration plateaued, with
significant protection gap
• Only 35% of the population have at least 1 life
insurance/family takaful policy, with average
sum assured of RM61k per capita
• Initiatives being pursued to expand the
provision of simple & affordable products,
leveraging on technology & alternative
channels to enhance access
1
2
44
Source: Bank Negara Malaysia
20
30
40
50
60
%
Additional
RSustained demand for Islamic financial services, with encouraging growth in investment intermediation
Investment Account Framework and Implementation
Guide
• regulatory expectations on product structuring,
operational management & business conduct
• protection of investors
• recognition of distinct risk characteristics compared
to Islamic deposits
Composition of Investment Accounts out of Total Islamic Deposits & Investment Account (IDIA)
Investment Account Platform (IAP)
• Operationalised in April 2016 by a consortium of
6 Islamic banking institutions
• Raised RM20 million in new funding to date
• Combines wakalah or mudarabah with debt based
contracts (e.g. tawarruq)
Increasing share of investment accounts as a new
source of funding for Islamic banks, facilitated by:
√
√
45
Source: Bank Negara Malaysia
RM36.3 bn
RM37.4 bn
49.3%
50.7%
8.6%12.2%
91.4%
87.8%
Additional
RIslamic finance poised to assume a larger role in value-based intermediation
EfficiencyInclusivity
and Diversity
Institutional
QualitySustainability
Financial
Deepening
Contribution
to GDP
Growth
Cu
rre
nt
Me
as
ure
s
Fu
ture
Me
asu
res
Diversifying measures of effective intermediation in
realising socio-economic impact of Islamic finance
Impact and
Value
Creation
Institutional
Dynamism
and Agility
Institutional
Strength
Delivery
Channels
Range of
Products &
Services
Profitability
Cost
Efficiency
Business
Models
Entrepreneurial
Mindset
Community
Empowerment
Innovation
Technology
Adoption
1
2
46
Development of Corporate Value Intent
framework and value-based scorecard
• Promote high quality disclosures on intent,
strategy and performance of business
• Broader dimensions of performance
measurement to accelerate value creation
for the economy, shareholders and wider
community
Waqf and sadaqah applications in financial
products to deliver positive socio-economic
impact
• Cash waqf arrangements
• Debit card with waqf features
• Banking charity accounts
R
Regulatory measures taken to further strengthen financial system resilience and integrity
• Greater emphasis on
sound risk culture and
risk-aligned
compensation
• Strengthened
requirements for
independent boards
• Enhanced operational
and credit risk
management standards
• Improvements to stress
testing practices
Supported by supervisory and enforcement actions
• Proposed enactment of
Consumer Credit Law
• Financial Education
Network established to
drive the national
financial education
strategy
• Operationalisation of the
Ombudsman for
Financial Services
AML/CFT
• Strengthened compliance
with international
AML/CFT standards
• Enhanced cooperation to
combat terrorism
financing threats
• Smooth transition to
higher Liquidity
Coverage Ratio
• Implementation of
ICAAP for takaful
operators
Capital and
liquidity
Consumer
protection and
financial literacy
Corporate
governance and
risk management
47
Stable outlook for financial stability in 2017
Source: Bank Negara Malaysia
Stable labour market conditions, continued economic growth and sound lending and risk management practices expected to support asset quality
Ample domestic liquidity to remain supportive of financial intermediation
Banks and insurance companies are well positioned to manage transition to strengthened regulatory standards and more competitive environment
Effects from measures to deepen and broaden domestic foreign exchange market will contribute to orderly market conditions
48
Implementation of the Financial Sector Blueprint is on track with further priorities identified
Evolving a vibrant FinTech ecosystem
Key Initiatives Implemented
Developing more market-based funding
solutions
Developing deep and liquid financial
markets to manage risk exposures
Expanding insurance and takaful to
address protection gaps
Enhancing the role of
development financial institutions
Strengthened and new legislation (i.e. FSA
2013, IFSA 2013 and DFIA 2002)
Implementation of Payment Card Reform
Framework
Financial Ombudsman Scheme
Agent Banking Framework
ASEAN Banking Integration Framework
Reforms under the motor and LIFE
Framework
New/Expanded Priorities
6% Yet to
Commence
9% Under
Review41% Completed 44% On Track
1
2
3
4
5
49
Development of alternative finance to meet diverse financing needs of new economy
0
1
2
3
4
5
6
7
Lea
sin
g
Paw
nb
roker/
Ar-
Rah
nu
Coop
era
tives
Fa
cto
ring
Lic
en
se
d m
on
ey le
nde
rs
Ven
ture
ca
pita
l
Ang
el in
ve
sto
rs
Inve
stm
ent
Accou
nt P
latfo
rm
Cro
wdfu
nd
ing
1Q 2016
3Q 2016
SMEs Using Alternative Financing
Source: SME Corporation Malaysia
• Strengthen institutional arrangements
• Improve data on alternative finance and
the innovative economy
• Establish a unified collateral registry
• Promote the development of open
Application Programme Interfaces
• Raise SMEs’ awareness on alternative
financing avenues.
Policy priorities moving forward
% of SMEs
50
R
Providing a conducive regulatory environment for fintech innovation
Currency
ExchangePeer-to-peer
currency
exchange
model
Product
AggregatorComparison of
insurance
product
Artificial
IntelligenceDigital
identification
verification &
Chatbot
Remittancee-money
transfer to
parties across
countries
Solutions applied through
Regulatory Sandbox
• The Regulatory Sandbox
Framework allows innovative
fintech solutions to be tested
safely in a live environment
• Further initiatives planned to
facilitate open banking models,
common KYC utilities,
distributed ledger applications
and cloud computing
1
2
51
Motor insurance reform on track
From 1 July 2016 From 1 July 2017From 1 April 2017
New products and add-on
covers introduced by insurers
• Flexibility for insurers to
introduce new motor products at
market-based pricing
• Additional options for
consumers e.g. Guaranteed
Asset Protection product
• Important information will be disseminated
via print and social media, online, agents
and customer support channels
• Empowering consumers to compare
products, understand policy options and
be aware of price drivers
• Public encouraged to visit
www.bnm.gov.my; www.piam.org.my; or
www.malaysiantakaful.com.my for more
information
Nation-wide awareness campaign to
inform and empower consumers
Pricing of motor
comprehensive and third
party fire & theft products will
be liberalised to reflect risks
• More equitable and competitive
pricing based on risk
• Improved incentives for safe
driving and prevention of
vehicle theft
52
R
Increasing momentum in migration to e-payments
Transaction Volume for Cheques, IBG and Instant Transfer
Cheques
IBG
0
5
10
15
20
M J S D M J S D M J S D M J S D
Million
2013 2014 2015 2016 -
50
100
150
200
250
300
350
2011 2012 2013 2014 2015 2016
Thousands
Number (‘000)
Instant Transfer
Sustained decline in cheques with increasing use of electronic fund transfers
Average growth:
6.5% p.a.
Number of Point-Of-Sale (POS) terminals
Accelerated expansion of payment card acceptance points
Average growth:
18.6% p.a.
Source: Bank Negara Malaysia
53
0
R
Fostering stronger payment card security
Enhancement of payment card infrastructure Transition period Mandatory PIN verification
Jul 2015 1 Jul 2017Jan 2017
Migration to PIN-based transactions
6-month period to
adapt to the usage
of PIN at POS
terminals
All payment card
transactions at POS
terminals must be
completed with PIN
Migration from signature to PIN verification for
payment card transactions at POS terminals
Cardholders and merchants are urged to adopt the use of PIN today, before PIN is made
mandatory for all payment card transactions effective 1 July 2017
54
End of Presentation
55
56
End of Presentation