KUALA LUMPUR: Malaysian households’ debt servicing capacity remains intact amid low impairment levels, underpinned by stronger income and employment growth, said Bank Negara Malaysia.
The central bank said household financial assets were high and grew faster than debt as at end-December 2017.
Access to housing loans, particularly for first-time buyers of affordable houses, was sustained with approval rates at 73 per cent, it added.
These are the assessments made by Bank Negara’s Financial Stability Committee (FSC) at its meeting last Friday.
FSC is responsible for monitoring and taking actions to reduce or avert risks to financial stability stemming from both system-wide and institutional developments.
For Malaysian corporations, Bank Negara said the overall credit outlook for the business sector is expected to improve given favourable economic conditions, although the oil and gas and property-related sectors still face some headwinds.
“The aggregate leverage increased in tandem with investment activity, as debt-at-risk trended lower amid sustained financial health and low impairment levels,” it said.
Potential vulnerabilities from external borrowings of Malaysian corporations are contained with exposures largely hedged and comprising intra-company borrowings with longer maturities, it added.
Meanwhile, the Malaysian banking, insurance and takaful sectors remain resilient, supported by a high level of capitalisation, Bank Negara said.
The bank said funding and liquidity conditions continue to be favourable, with the banking system’s loan-to-fund ratio and liquidity coverage ratio at 84 per cent and 132 per cent respectively as at end-January 2018.
Domestic financial intermediation is expected to remain supportive of economic activity, it added.
“The outlook for domestic financial stability in 2018 is expected to remain intact. Multi-year solvency stress tests conducted by the bank affirm the strong capacity of Malaysian banks, insurers and takaful operators to withstand simulated macroeconomic and financial stresses.
“Overall capitalisation is expected to remain above the regulatory minimum under severe credit, market and insurance-specific shocks that are comparable to past domestic and global crises experience,” it said.
This reflects the continued strengthening of balance sheets of households and businesses amid stronger economic conditions, the central bank added.