date
string | title
string | link
string | pdf_links
string | link_opt
string | content
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22 Aug 2022 | Bank Negara Malaysia and the Companies Commission of Malaysia Strengthen Strategic Collaboration on AML/CFT Regulation and Supervision | https://www.bnm.gov.my/-/bnm-ssm-signed-toc2022 | null | null |
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Bank Negara Malaysia and the Companies Commission of Malaysia Strengthen Strategic Collaboration on AML/CFT Regulation and Supervision
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Bank Negara Malaysia and the Companies Commission of Malaysia Strengthen Strategic Collaboration on AML/CFT Regulation and Supervision
Embargo :
For immediate release
Not for publication or broadcast before
1637 on
Monday, 22 August 2022
22 Aug 2022
Bank Negara Malaysia (BNM) and the Companies Commission of Malaysia (SSM) today signed a Terms of Collaboration to strengthen collaboration in the regulation and supervision of anti-money laundering, countering financing of terrorism (AML/CFT) and targeted financial sanctions (TFS).
The Terms of Collaboration set out the respective regulatory and supervisory responsibilities of BNM and SSM in the regulation and supervision of company secretaries and trust companies. It will also provide for a more structured approach to assess money laundering and terrorism financing (ML/TF) risks in these two sectors, as well as to promote institutional capacity building in these areas.
BNM Governor Tan Sri Nor Shamsiah Yunus said, “The signing today is the result of the close partnership between BNM and SSM over the years. BNM is pleased to have SSM working closely with us to secure and maintain the integrity of the financial system. We are confident that SSM will be able to take on greater responsibility to conduct AML/CFT supervision on company secretaries and trust companies in the near future.”
SSM CEO Datuk Nor Azimah Abdul Aziz said, “It is important for company secretaries and trust companies to know and understand their roles and risk exposures related to ML/TF. This will form the basis for them to understand and develop countermeasures against these criminal activities. Today’s signing is a significant stride towards that goal.”Bank Negara Malaysia
Companies Commission of Malaysia
22 August 2022
Bank Negara Malaysia
22 August 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
22 Aug 2022 | International Reserves of Bank Negara Malaysia as at 15 August 2022 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-15-august-2022 | https://www.bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf | null |
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International Reserves of Bank Negara Malaysia as at 15 August 2022
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76
International Reserves of Bank Negara Malaysia as at 15 August 2022
Embargo :
For immediate release
Not for publication or broadcast before
1500 on
Monday, 22 August 2022
22 Aug 2022
The international reserves of Bank Negara Malaysia amounted to USD110.9 billion as at 15 August 2022. The reserves position is sufficient to finance 5.5 months of imports of goods and services[1], and is 1.1 times total short-term external debt.
[1] Under the previous import coverage measure, reserves is sufficient to finance 6.4 months of retained imports of goods. For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27, which can be accessed at 4Q QB 2021. Related Assets
BNM Statement of Assets & Liabilities - 15 August 2022
Bank Negara Malaysia
22 August 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
Monthly Highlights
Headline inflation declined to 3.4% in March
March 2023
1
3.7 3.4
3.9 3.8
0.00
2.00
4.00
0.0
2.0
4.0
J
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2
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2
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3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation declined to 3.4% in March
(February: 3.7%) due mainly to lower inflation for
fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation moderated slightly to 3.8% during
the month (February: 3.9%), driven largely by
lower inflation for food away from home.
1
Robust growth in volume index driven by retail and motor vehicles
Index of Wholesale and Retail Trade
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded by 10.6% in February 2023
(January: 8.5%).
• The higher growth was driven mainly by retail
sales in non-specialised stores (e.g., department
stores) followed by continued strength in
purchases of motor vehicles amid the ongoing
fulfilment of backlog orders.
• On a month-on-month seasonally adjusted basis,
the index accelerated by 5.5% (January: 0.2%).
9.5 8.510.6
0
10
20
30
40
Feb-
22
Mar-
22
Apr-
22
May-
22
Jun-
22
Jul-
22
Aug-
22
Sep-
22
Oct-
22
Nov-
22
Dec-
22
Jan-
23
Feb-
23
ppt, %yoy
Motor vehicles Retail Wholesale
2.4
5.2
4.4
0
1
2
3
4
5
6
7
Mar-22 Jul-22 Nov-22 Mar-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Growth in credit to the private non-financial sector moderated
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
2.7 2.6 2.7 2.6
1.0 0.6 0.7 0.7
1.0
1.1 1.1 0.9
4.7 4.3 4.5 4.2
Dec-22 Jan-23 Feb-23 Mar-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Contribution to growth (ppt)
• Credit to the private non-financial sector grew by
4.2% as at end-March (February: 4.5%), attributed
to slower growth in credit to businesses (3.2%;
February: 3.7%).
• While growth in outstanding corporate bonds
moderated (4.4%; February : 5.5%), outstanding
business loan growth was sustained at 2.4%
(February: 2.4%). This was supported by the
continued growth in both working capital (2.2%;
February: 1.9%) and investment-related loans
(4.3%; February: 4.2%).
• Outstanding household loan growth remained
broadly stable (5.2%; February: 5.3%), supported
by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan
growth for the purchase of securities (-6.9%;
February: -3.3%).
Credit to the Private Non-Financial Sector1,2
Monthly Highlights
March 2023
Domestic financial market conditions remained orderly
Financial Market Performance in March 2023
Source: Bank Negara Malaysia, Bursa Malaysia
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
11.0
-2.1
-5.3
0.0
-2.2
1.7
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-10 -5 0 5 10 15
Mar-23
Feb-23
• In March, global financial markets were affected by
the emergence of banking sector stress in some
major economies. As spillovers were contained thus
far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds
improved.
• In line with the performance of regional currencies,
the ringgit appreciated by 1.7% against the US
dollar. Conditions in the domestic bond market
also remained stable.
• The FBM KLCI declined by 2.2% during the month.
2
Banks maintained strong liquidity and funding positions to support intermediation
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.9
157.4
0
40
80
120
160
70
75
80
85
90
95
M
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2
2
A
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M
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2
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2
J
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2
2
A
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2
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2
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2
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2
3
F
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2
3
M
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2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
increased slightly to 1.8% (February-23: 1.8%) and
1.2% (February-23: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory
reserves) continue to record a prudent level of
110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
%
1.8
1.2
1.7
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
M
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2
2
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2
M
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2
2
J
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2
3
F
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2
3
M
a
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2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
157.4% (February-23: 152.7%).
• The aggregate loan-to-fund ratio remained stable at
81.9% (February-23: 81.6%).
PRESS RELEASE
Ref. No.: 04/23/05 EMBARGO: Not for publication or
broadcast before 1500 hours on
Friday, 28 April 2023
Monthly Highlights – March 2023
Headline inflation declined to 3.4% in March
• Headline inflation declined to 3.4% in March (February: 3.7%) due mainly
to lower inflation for fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation1 moderated slightly to 3.8% during the month
(February: 3.9%), driven largely by lower inflation for food away from
home.
Robust growth in volume index driven by retail and motor vehicles
• The Index of Wholesale and Retail Trade (IOWRT) expanded by 10.6%
in February 2023 (January: 8.5%).
• The higher growth was driven mainly by retail sales in non-specialised
stores (e.g., department stores) followed by continued strength in
purchases of motor vehicles amid the ongoing fulfilment of backlog
orders.
• On a month-on-month seasonally adjusted basis, the index accelerated
by 5.5% (January: 0.2%).
1 Core inflation is computed by excluding price-volatile and price-administered items.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth in credit to the private non-financial sector2,3 moderated
• Credit to the private non-financial sector grew by 4.2% as at end-March
(February: 4.5%), attributed to slower growth in credit to businesses
(3.2%; February: 3.7%).
• While growth in outstanding corporate bonds moderated (4.4%;
February: 5.5%), outstanding business loan growth was sustained at
2.4% (February: 2.4%). This was supported by the continued growth in
both working capital (2.2%; February: 1.9%) and investment-related
loans (4.3%; February: 4.2%).
• Outstanding household loan growth remained broadly stable (5.2%;
February: 5.3%), supported by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan growth for the purchase of
securities (-6.9%; February: -3.3%).
Domestic financial market conditions remained orderly
• In March, global financial markets were affected by the emergence of
banking sector stress in some major economies. As spillovers were
contained thus far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds improved.
• In line with the performance of regional currencies, the ringgit
appreciated by 1.7% against the US dollar. Conditions in the domestic
bond market also remained stable.
• The FBM KLCI declined by 2.2% during the month.
Banks maintained strong liquidity and funding positions to support
intermediation
• Banks continued to record healthy liquidity buffers with the aggregate
Liquidity Coverage Ratio at 157.4% (February: 152.7%).
2 Comprises loans to households and non-financial corporations from the banking system and development financial
institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
3 Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced
to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
• The aggregate loan-to-fund ratio remained stable at 81.9%
(February: 81.6%).
Asset quality in the banking system remained intact
• Overall gross and net impaired loans ratios increased slightly to 1.8%
(February: 1.8%) and 1.2% (February: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory reserves) continues to
record a prudent level of 110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
Bank Negara Malaysia
28 April 2023
20230428_BNM Monthly Highlights-March_en
Slide 1
Slide 2
20230428_BNM PR_Monthly Highlights-Mar 2023_eng
| Press Release |
12 Aug 2022 | Economic and Financial Developments in Malaysia in the Second Quarter of 2022 | https://www.bnm.gov.my/-/qb22q2_en_pr | https://www.bnm.gov.my/documents/20124/7923034/qb22q2_transcript.pdf, https://www.bnm.gov.my/documents/20124/7923034/qb22q2_en_table1.pdf, https://www.bnm.gov.my/documents/20124/7923034/qb22q2_slides.pdf | null |
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Economic and Financial Developments in Malaysia in the Second Quarter of 2022
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207
Economic and Financial Developments in Malaysia in the Second Quarter of 2022
Embargo :
For immediate release
Not for publication or broadcast before
1200 on
Friday, 12 August 2022
12 Aug 2022
Higher economic growth of 8.9% in the second quarter (1Q 2022: 5.0%)
The Malaysian economy registered a stronger growth of 8.9% in the second quarter of 2022 (1Q 2022: 5.0%). While the GDP was lifted to some extent by the low base from the Full Movement Control Order (FMCO) in June 2021, growth in April and May 2022 was particularly robust. Domestic demand continued to strengthen, underpinned by the steady recovery in labour market conditions and ongoing policy support. The higher growth was also reflective of normalising economic activity as the country moved towards endemicity and reopened international borders. Exports remain supported by strong demand for E&E products. By sector, the services and manufacturing sectors continued to drive growth. On a quarter-on-quarter seasonally-adjusted basis, the economy increased by 3.5% (1Q 2022: 3.8%).
During the quarter, headline and core inflation increased to 2.8% and 2.5%, respectively (1Q 2022: 2.2% and 1.7%, respectively). The higher core inflation reflected an improvement in demand conditions amid the high-cost environment, with price increases mainly driven by food away from home and other food items.
Exchange rate developments
The ringgit depreciated by 4.6% against the US dollar in the second quarter of 2022 (YTD until 10 August 2022: -6.3%), broadly in line with the movement of regional currencies (2Q 2022: -4.7%; YTD: -5.8%). This largely reflected the continued strengthening of the US dollar following aggressive US monetary policy tightening, increased investors’ risk aversion due to the weaker global growth outlook and the military conflict in Ukraine. Nonetheless, elevated commodity prices and Malaysia’s economic recovery helped to cushion the downward impact from the external developments on the ringgit during the quarter. Going forward, while domestic financial markets will continue to be subjected to episodes of heightened volatility, spillovers to domestic financial intermediation are expected to remain broadly contained, supported by Malaysia’s healthy external position and strong banking system.
Financing conditions
Net financing to the private sector grew by 4.9% (1Q 2022: 4.5%) amid higher growth in outstanding loans (5.4%; 1Q 2022: 4.4%). Outstanding corporate bond growth moderated (3.4%; 1Q 2022: 4.6%) as growth in bond redemptions continued to outpace that of issuances. Outstanding business loan grew by 5.5% (1Q 2022: 4.3%), following strong expansion in loan disbursements for both working capital and investments. For households, outstanding loan growth increased further (5.7%; 1Q 2022: 4.8%), with higher growth recorded across all loan purposes. Loan disbursements remained robust amid strong loan demand, particularly for the purchase of cars and houses. Overall, loan repayments for both the business and household segments have been encouraging upon the lapse of repayment assistance programmes and the reopening of the economy.
The Malaysian economy will be supported by firm domestic demand
With growth in the first half of 2022 at 6.9%, the Malaysian economy is projected to expand further for the remainder of the year. Commenting on the outlook for 2022, Bank Negara Malaysia Governor Tan Sri Nor Shamsiah explained, “While external demand could face headwinds from slower global growth, the Malaysian economy will continue to be supported by firm domestic demand. Growth would also benefit from improving labour market conditions and higher tourist arrivals, as well as continued implementation of multi-year investment projects”. However, Malaysia’s growth remains susceptible to a weaker-than-expected global growth, further escalation of geopolitical conflicts and worsening supply chain disruptions.
Headline inflation is projected to trend higher in some months during the remainder of the year, due partly to the base effect from the discount on electricity prices implemented in 3Q 2021. Core inflation is expected to average higher in 2022, as demand continues to improve amid the high-cost environment. The extent of upside pressures on inflation is expected to remain partly contained by the existing price control measures, fuel subsidies and the continued spare capacity in the economy. Nevertheless, the inflation outlook continues to be contingent on upside risks steming from the strength of domestic demand, global price developments, and domestic policy measures.
See also:
Presentation Slides (PDF)
Press Conference Presentation Transcript
Press Conference Video
Table 1: GDP by Expenditure Components and Economic Activity
Publication: Quarterly Bulletin Second Quarter 2022
Bank Negara Malaysia
12 August 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
Sorotan Bulanan
Pertumbuhan pembiayaan bersih terus meningkat
Julai 2022
Perdagangan Borong dan Runcit berkembang pada bulan Jun
• Indeks Perdagangan Borong dan Runcit (Index of
Wholesale and Retail Trade, IOWRT) meningkat
sebanyak 35.8% pada bulan Jun 2022 (Mei: 14.7%).
Peningkatan yang lebih tinggi didorong terutamanya oleh
segmen kenderaan bermotor. Hal ini berdasarkan
pembelian yang dipercepat sebelum tamat tempoh
pengecualian Cukai Jualan dan Perkhidmatan pada 30
Jun serta asas yang rendah pada bulan Jun 2021 apabila
bilik pameran kenderaan ditutup sepanjang pelaksanaan
perintah kawalan pergerakan (PKP) penuh.
• Pada asas bulanan terlaras secara bermusim,
pertumbuhan terus menurun kepada -2.3% (Mei: -0.7%)
berikutan peningkatan asas bulanan terlaras secara
bermusim yang kukuh pada bulan April iaitu sebanyak
7.9%.
Indeks Perdagangan Borong dan Runcit
Sumber: Jabatan Perangkaan Malaysia
10.0
14.7
35.8
-20
-10
0
10
20
30
40
Jun-21 Ogo-21 Okt-21 Dis-21 Feb-22 Apr-22 Jun-22
Borong
Runcit
Kenderaan bermotor
Perdagangan pengedaran
Mata peratusan, % tahun ke tahun
Sumbangan kepada Pertumbuhan Pembiayaan Bersih1
dan Pertumbuhan Pinjaman Terkumpul
1 Merujuk pinjaman terkumpul sistem perbankan (tidak termasuk institusi kewangan
pembangunan (IKP)) dan bon korporat terkumpul. Data pinjaman terkumpul bagi bulan
Julai 2022 adalah berdasarkan data pinjaman/pembiayaan baharu yang mencerminkan
keperluan terkini. Angka-angka tidak semestinya terjumlah disebabkan oleh
penggenapan.
Sumber: Bank Negara Malaysia
Sumbangan kepada pertumbuhan
(mata peratusan)
• Pembiayaan bersih meningkat sebanyak 5.3% (Jun: 5.0%)
didorong oleh pertumbuhan yang lebih tinggi bagi pinjaman
terkumpul (5.9%; Jun: 5.6%) dan bon korporat (3.7%;
Jun: 3.4%).
• Pertumbuhan pinjaman isi rumah terkumpul adalah pada
6.1% apabila pertumbuhan pengeluaran pinjaman
mengatasi pertumbuhan bayaran balik pinjaman. Tujuan
aliran kredit kepada isi rumah sebahagian besarnya adalah
untuk pembelian rumah dan kereta.
• Bagi sektor perniagaan, pinjaman terkumpul meningkat
sebanyak 5.8%, didorong terutamanya oleh pemberian
pinjaman kepada PKS. Mengikut tujuan, pinjaman modal
kerja terus merupakan pendorong utama meskipun
pertumbuhan bayaran balik pinjaman mengatasi
pertumbuhan pengeluaran pinjaman. Hal ini
berkemungkinan mencerminkan bantuan bayaran balik
pinjaman yang terus berkurang.
3.6 4.0 4.2
0.9
0.9 1.0
4.5 5.0
5.3
Mei-22 Jun-22 Jul-22
Bon Korporat
Pinjaman Sistem Perbankan
Pembiayaan Bersih
Inflasi keseluruhan meningkat kepada 4.4% pada bulan Julai
• Inflasi keseluruhan meningkat kepada 4.4% pada
bulan Julai (Jun: 3.4%). Seperti yang dijangka,
peningkatan ini mencerminkan sebahagian besar
kesan asas daripada diskaun tarif elektrik yang
dilaksanakan pada suku ketiga tahun 2021 yang
menyumbang 0.5 mata asas kepada inflasi
keseluruhan. Makanan dan minuman bukan alkohol
juga memberikan tekanan selanjutnya kepada inflasi
yang meningkat sebanyak 6.9% pada bulan Julai.
• Inflasi teras juga meningkat kepada 3.4% pada bulan
Julai (Jun: 3.0%). Peningkatan mencerminkan
sebahagian besar harga yang lebih tinggi bagi
barangan budi bicara seperti makanan di luar rumah
(7.8%). Hal ini disebabkan oleh permintaan yang
bertambah baik berikutan persekitaran kos yang lebih
tinggi.
1 Pengiraan inflasi teras tidak termasuk barangan yang harganya tidak menentu dan barangan
yang harganya ditadbir. Pengiraan juga tidak termasuk anggaran kesan langsung perubahan
dasar cukai.
Sumber: Jabatan Perangkaan Malaysia dan anggaran Bank Negara Malaysia
3.4 4.4
3.0 3.4
-4.0
-2.0
0.0
2.0
4.0
6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
J
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-2
1
F
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1
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1
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1
S
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1
O
k
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1
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1
D
is
-2
1
J
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2
F
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A
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M
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2
J
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2
Makanan & minuman bukan alkohol (29.5%) Perumahan & utiliti (23.8%)
Pengangkutan (14.6%) Lain-lain (32.1%)
Inflasi keseluruhan (skala kanan) Inflasi teras¹ (skala kanan)
Sumbangan kepada inflasi
Sumbangan mata peratusan
%, tahun ke tahun
5.9
5.8
6.1
0
1
2
3
4
5
6
7
8
Jul-21 Okt-21 Jan-22 Apr-22 Jul-22
Jumlah pinjaman
Pinjaman perniagaan
Pinjaman isi rumah
Pertumbuhan
tahunan (%)
Data
baharu
Sorotan Bulanan
Julai 2022
2
Kadar hasil bon 10 tahun menurun sejajar dengan kadar hasil bon global yang lebih rendah
Prestasi Pasaran Kewangan pada Bulan Julai 2022
Sumber: Bank Negara Malaysia dan Bursa Malaysia
*Negara serantau termasuk Singapura, Thailand, Filipina, Indonesia dan Korea
• Keadaan pasaran kewangan global menjadi reda
dengan ketara pada bulan Julai. Hal ini
mencerminkan jangkaan pertumbuhan global yang
lebih perlahan. Pelarasan pasaran kewangan
domestik terus teratur dan turut disokong oleh
jumlah dagangan yang kukuh.
• Kadar hasil MGS 10 tahun menurun sebanyak 38.0
mata asas seiring dengan kadar hasil US Treasury
10 tahun (-36.4 mata asas) dan kadar hasil bon
serantau* lain (purata: -39.7 mata asas).
• FBM KLCI meningkat sebanyak 3.3% (purata
serantau*: 2.5%), disokong oleh prospek
pertumbuhan dalam negeri yang positif manakala
ringgit menjadi lemah sebanyak 1.0% berbanding
dengan dolar AS. Hal ini sejajar dengan pergerakan
mata wang (purata: -0.6%) serantau.
9.0
-8.0
-0.7
-38.0
3.3
-1.0
MGS 10 tahun
(mata asas, bulan ke bulan)
Ekuiti
(%, bulan ke bulan)
Ringgit
(%, bulan ke bulan)
-50 -40 -30 -20 -10 0 10 20
Jul-22 Jun-22
Tahap permodalan institusi perbankan terus kukuh untuk menyokong pemulihan ekonomi
• Sistem perbankan terus mencatatkan kedudukan
permodalan yang kukuh untuk menghadapi
kemungkinan tekanan dan terus menyokong aliran
kredit ke dalam ekonomi.
• Nisbah modal sistem perbankan bertambah baik
pada bulan Julai, didorong oleh pengiktirafan
keuntungan dan perolehan penilaian separuh tahun
ke atas instrument kewangan yang sedia untuk dijual
apabila kadar hasil bon menurun sedikit.
• Pada akhir bulan Julai 2022, sistem perbankan
mencatatkan lebihan penampan modal1 sebanyak
RM129.6 billion.
Kecukupan Modal Sistem Perbankan
14.6
15.2
18.3
8
10
12
14
16
18
20
J
u
l-
2
1
O
g
o
-2
1
S
e
p
-2
1
O
k
t-
2
1
N
o
v
-2
1
D
is
-2
1
J
a
n
-2
2
F
e
b
-2
2
M
a
c
-2
2
A
p
r-
2
2
M
e
i-
2
2
J
u
n
-2
2
J
u
l-
2
2
Nisbah Modal Ekuiti Biasa Kumpulan 1
Nisbah Modal Kumpulan 1
Nisbah Jumlah Modal
%
Sumber: Bank Negara Malaysia
1 Merujuk jumlah modal yang melebihi tahap pengawalseliaan
minimum, yang meliputi keperluan penampan pengekalan modal
(2.5%) dan keperluan minimum bank tertentu yang lebih tinggi
Daya tahan institusi perbankan terus disokong oleh kualiti aset yang kukuh
Kualiti Aset Sistem Perbankan
Sumber: Bank Negara Malaysia
• Nisbah pinjaman terjejas kasar dan bersih
keseluruhan meningkat sedikit masing-masing
kepada 1.85% (Jun: 1.78%) dan 1.2% (Jun: 1.1%).
• Nisbah perlindungan kerugian pinjaman (termasuk
rizab pengawalseliaan) kekal pada tahap berhemat
iaitu 112.8% daripada pinjaman terjejas, dengan
jumlah peruntukan mencakupi 1.8% daripada jumlah
pinjaman.
• Setakat akhir bulan Julai 2022, sistem perbankan
mencatatkan jumlah peruntukan dan rizab
pengawalseliaan sebanyak RM 41.1 billion.
%
1.8
1.2
1.8
0.4
0.7
1.0
1.3
1.6
1.9
2.2
J
u
l-
2
1
O
g
o
-2
1
S
e
p
-2
1
O
k
t-
2
1
N
o
v
-2
1
D
is
-2
1
J
a
n
-2
2
F
e
b
-2
2
M
a
c
-2
2
A
p
r-
2
2
M
e
i-
2
2
J
u
n
-2
2
J
u
l-
2
2
Nisbah Jumlah Peruntukan kepada Jumlah Pinjaman
Nisbah Pinjaman Terjejas Kasar
Nisbah Pinjaman Terjejas Bersih
SIARAN AKHBAR
No. Ruj.: 08/22/09 EMBARGO: Tidak boleh dicetak
atau disiarkan sebelum pukul 1500
hari Selasa, 30 Ogos 2022
Sorotan Bulanan – Julai 2022
Inflasi keseluruhan meningkat kepada 4.4% pada bulan Julai
• Inflasi keseluruhan meningkat kepada 4.4% pada bulan Julai (Jun:
3.4%). Seperti yang dijangka, peningkatan ini mencerminkan
sebahagian besar kesan asas daripada diskaun tarif elektrik yang
dilaksanakan pada suku ketiga tahun 2021 yang menyumbang 0.5 mata
asas kepada inflasi keseluruhan. Makanan dan minuman bukan alkohol
juga memberikan tekanan selanjutnya kepada inflasi yang meningkat
sebanyak 6.9% pada bulan Julai.
• Inflasi teras1 juga meningkat kepada 3.4% pada bulan Julai (Jun: 3.0%).
Peningkatan mencerminkan sebahagian besar harga yang lebih tinggi
bagi barangan budi bicara seperti makanan di luar rumah (7.8%). Hal ini
disebabkan oleh permintaan yang bertambah baik berikutan
persekitaran kos yang lebih tinggi.
Perdagangan Borong dan Runcit berkembang pada bulan Jun
• Indeks Perdagangan Borong dan Runcit (Index of Wholesale and Retail
Trade, IOWRT) meningkat sebanyak 35.8% pada bulan Jun 2022 (Mei:
14.7%). Peningkatan yang lebih tinggi didorong terutamanya oleh
1 Pengiraan inflasi teras tidak termasuk barangan yang harganya tidak menentu dan barangan yang harganya
ditadbir. Pengiraan juga tidak termasuk anggaran kesan langsung perubahan dasar cukai.
D i t e r b i t k a n o l e h :
J a b a t a n K o m u n i k a s i S t r a t e g i k , T i n g k a t 1 4 , B l o k B , B a n g u n a n B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m e l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
segmen kenderaan bermotor. Hal ini berdasarkan pembelian yang
dipercepat sebelum tamat tempoh pengecualian Cukai Jualan dan
Perkhidmatan pada 30 Jun serta asas yang rendah pada bulan Jun 2021
apabila bilik pameran kenderaan ditutup sepanjang pelaksanaan
perintah kawalan pergerakan (PKP) penuh.
• Pada asas bulanan terlaras secara bermusim, pertumbuhan terus
menurun kepada -2.3% (Mei: -0.7%) berikutan peningkatan asas
bulanan terlaras secara bermusim yang kukuh pada bulan April iaitu
sebanyak 7.9%.
Pertumbuhan pembiayaan bersih terus meningkat
• Pembiayaan bersih2 meningkat sebanyak 5.3% (Jun: 5.0%) didorong
oleh pertumbuhan yang lebih tinggi bagi pinjaman terkumpul (5.9%; Jun:
5.6%) dan bon korporat (3.7%; Jun: 3.4%).
• Pertumbuhan pinjaman isi rumah terkumpul adalah pada 6.1% apabila
pertumbuhan pengeluaran pinjaman mengatasi pertumbuhan bayaran
balik pinjaman. Tujuan aliran kredit kepada isi rumah sebahagian
besarnya adalah untuk pembelian rumah dan kereta.
• Bagi sektor perniagaan, pinjaman terkumpul meningkat sebanyak 5.8%,
didorong terutamanya oleh pemberian pinjaman kepada PKS. Mengikut
tujuan, pinjaman modal kerja terus merupakan pendorong utama
meskipun pertumbuhan bayaran balik pinjaman mengatasi pertumbuhan
pengeluaran pinjaman. Hal ini berkemungkinan mencerminkan bantuan
bayaran balik pinjaman yang terus berkurang.
Kadar hasil bon 10 tahun menurun sejajar dengan kadar hasil bon global
yang lebih rendah
• Keadaan pasaran kewangan global menjadi reda dengan ketara pada
bulan Julai. Hal ini mencerminkan jangkaan pertumbuhan global yang
2 Merujuk pinjaman terkumpul sistem perbankan (tidak termasuk institusi kewangan pembangunan (IKP)) dan bon
korporat terkumpul. Data pinjaman terkumpul bagi bulan Julai 2022 adalah berdasarkan data
pinjaman/pembiayaan baharu yang mencerminkan keperluan terkini. Angka-angka tidak semestinya terjumlah
disebabkan oleh penggenapan.
D i t e r b i t k a n o l e h :
J a b a t a n K o m u n i k a s i S t r a t e g i k , T i n g k a t 1 4 , B l o k B , B a n g u n a n B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m e l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
lebih perlahan. Pelarasan pasaran kewangan domestik terus teratur dan
turut disokong oleh jumlah dagangan yang kukuh.
• Kadar hasil MGS 10 tahun menurun sebanyak 38.0 mata asas seiring
dengan kadar hasil US Treasury 10 tahun (-36.4 mata asas) dan kadar
hasil bon serantau3 lain (purata: -39.7 mata asas).
• FBM KLCI meningkat sebanyak 3.3% (purata serantau*: 2.5%), disokong
oleh prospek pertumbuhan dalam negeri yang positif manakala ringgit
menjadi lemah sebanyak 1.0% berbanding dengan dolar AS. Hal ini
sejajar dengan pergerakan mata wang (purata: -0.6%) serantau.
Tahap permodalan institusi perbankan terus kukuh untuk menyokong
pemulihan ekonomi
• Sistem perbankan terus mencatatkan kedudukan permodalan yang
kukuh untuk menghadapi kemungkinan tekanan dan terus menyokong
aliran kredit ke dalam ekonomi.
• Nisbah modal sistem perbankan bertambah baik pada bulan Julai,
didorong oleh pengiktirafan keuntungan dan perolehan penilaian
separuh tahun ke atas instrument kewangan yang sedia untuk dijual
apabila kadar hasil bon menurun sedikit.
• Pada akhir bulan Julai 2022, sistem perbankan mencatatkan lebihan
penampan modal4 sebanyak RM129.6 billion.
Daya tahan institusi perbankan terus disokong oleh kualiti aset yang
kukuh
• Nisbah pinjaman terjejas kasar dan bersih keseluruhan meningkat sedikit
masing-masing kepada 1.85% (Jun: 1.78%) dan 1.2% (Jun: 1.1%).
• Nisbah perlindungan kerugian pinjaman (termasuk rizab
pengawalseliaan) kekal pada tahap berhemat iaitu 112.8% daripada
pinjaman terjejas, dengan jumlah peruntukan mencakupi 1.8% daripada
jumlah pinjaman.
3 Negara serantau termasuk Singapura, Thailand, Filipina, Indonesia dan Korea
4 Merujuk jumlah modal yang melebihi tahap pengawalseliaan minimum, yang meliputi keperluan penampan
pengekalan modal (2.5%) dan keperluan minimum bank tertentu yang lebih tinggi
D i t e r b i t k a n o l e h :
J a b a t a n K o m u n i k a s i S t r a t e g i k , T i n g k a t 1 4 , B l o k B , B a n g u n a n B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m e l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
• Setakat akhir bulan Julai 2022, sistem perbankan mencatatkan jumlah
peruntukan dan rizab pengawalseliaan sebanyak RM 41.1 billion.
Bank Negara Malaysia
30 Ogos 2022
20220830_BNM Monthly Highlights July 2022_BM
20220830_BNM Press Release_MSB July 2022_BM
Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services
27Quarterly Bulletin | 4Q 2021
Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to
Imports of Goods and Services
One of the indicators used by the Bank to measure international reserve adequacy is the reserve coverage
of retained imports,1 which is communicated on a fortnightly basis. As the economy grew and evolved with
higher share of the services sector, this has raised the prominence of services imports in the measure of
reserve adequacy. Given this consideration and in line with the international best practice, future fortnightly
reporting of Malaysia’s international reserves will include the indicator on reserve coverage of imports of
goods and services, effective from 22 February 2022.2
1 Defined as gross imports subtracted with re-exports. The 12-month average retained imports can be derived from the Monthly Highlight and Statistics Table
3.6.8 (Imports by End-Use; see Appendix 1).
2 For the international reserves position as at 15 February 2022.
3 Defined as imports plus exports.
4 From RM101.3 billion to RM351.3 billion, or a compound annual growth rate (CAGR) of 6.4%.
5 Based on JP Morgan’s Government Bond Index for Emerging Markets.
Services tradeC1
0
100
200
300
400
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
RM billion
Travel1
Computer and information
Transport
Manufacturing
Other business3
Other2
Perdagangan perkhidmatanR1
0
100
200
300
400
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
RM bilion
Perjalanan1
Komputer dan informasi
Pengangkutan
Pembuatan
Perniagaan Lain3
Lain-lain2
Nota: Data sebelum tahun 2005 adalah berdasarkan garis panduan dalam Edisi Kelima Manual Imbangan Pembayaran dan Kedudukan
............Pelaburan Antarabangsa (BPM5) IMF. Data bagi tahun 2005 dan selanjutnya adalah berdasarkan BPM6.
1 Termasuk perbelanjaan perjalanan bagi aktiviti pelancongan.
2 Termasuk pembinaan, caj penggunaan harta intelek, perkhidmatan persendirian, kebudayaan dan rekreasi.
3 Perkhidmatan perniagaan lain termasuk perkhidmatan penyelidikan dan pembangunan, profesional, teknikal, berkaitan perdagangan dan
...perkhidmatan perniagaan lain.
Sumber: Jabatan Perangkaan Malaysia dan Bank Negara Malaysia
Note: Data prior to 2005 are based on the guideline in the Fifth Edition of the Balance of Payments and International Investment Position
............Manual (BPM5) of the IMF. Data for 2005 and beyond are based on BPM6.
1 Includes travel spending for tourism activity.
2 Includes construction, charges for intellectual property use, personal, culture & recreational services.
3 Other business services comprise research and development, professional, technical, trade-related and other business services.
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
The Bank’s reporting of the reserve coverage of retained imports was published as early as in the 1990s. Data
on retained imports are available on monthly basis and thereby closely match the fortnightly release of the
international reserves data. However, retained imports do not include payment for services, which has grown
over the past two decades. From 1999 to 2019, services trade3 has increased by 246.9%4 (Chart 1). This was
mainly due to higher tourism activity as well as payments for foreign transport services for goods trade. In
addition, there was also an expansion in goods import, largely in support of domestic investment activities
and production of manufactured goods.
Malaysia’s performance on this indicator is in line with regional and peer5 economies. On historical basis,
reserve coverage of imports of goods and services indicator has been in the range of between 5 and 8
months since 2008 – well above the generally-accepted ‘rule of thumb’ adequacy threshold of 3-months, and
demonstrates the ability of the Malaysian economy to withstand against external shocks.
28 Quarterly Bulletin | 4Q 2021
It is also important to emphasize that the assessment of reserve adequacy should not be solely based
on the face value of these indicators. This needs to be complemented with deeper understanding about
the country’s external position, financial system and broad economic policies. In particular, international
reserves is not the only means to meet external obligations.6 Prevailing assessment indicates that the
country’s external position7 is underpinned by its strong economic fundamentals including healthy current
account surplus, large foreign currency external assets held by domestic entities8 and the flexible ringgit
exchange rate.
References
Department of Statistics, Malaysia. ‘External Sector’, Jabatan Perangkaan Malaysia, Putrajaya.
Greenspan, A., ‘Currency reserves and debt’. Remarks before the World Bank Conference on Recent Trends in
Reserves Management, Washington, DC, 29 April 1999.
International Monetary Fund, (2016). ‘Guidance Note on the Assessment of Reserve Adequacy and Related
Considerations’.
Appendix 1: Calculation of international reserves coverage of retained imports
aFor example, to calculate monthly retained imports for December 2019, the retained imports for the months of
January to December 2019 is summed up (i.e. rolling 12-months of retained imports). This number is then divided
by 12, to obtain a monthly average. The figures can be obtained from BNM’s MHS Table 3.6.8, column S.
6 Further information can be found in the box article “Malaysia’s Resilience in Managing External Debt Obligations and the Adequacy of International Reserves”
in BNM’s Annual Report 2018.
7 In addition, it has also been emphasized that Malaysia’s external debt position, including short-term external debt, remains manageable. This is supported by
the favourable currency and maturity profile on its external debt as well as domestic entities’ resilient repayment capacity. Foreign-currency external debt of
corporates are also mainly subject to prudential and hedging requirements (refer to the latest assessment on external debt developments on page 25)
8 Amounting to RM1.1 trillion as at end-2021.
GDP Q2 2022 Presentation Slides.
Sidang Akhbar
Prestasi Ekonomi Suku
12 Ogos 2022
Kedua Tahun 2022
1
7.4
5.4
4.4
4.0
3.1 2.9
1.6 0.4
8.2
5.0
3.8
5.4
3.1 3.0
3.5
4.8
PH ID SG EA TW KR US CN
2Q22 1Q22
Real GDP Growth1
Moderation in global growth in 2Q 2022 led by major economies
Note: 1) GDP for the second quarter of 2022 are advanced or preliminary estimates except for China, Singapore, Indonesia, and Philippines; 2) Inflation figures are aggregated across major countries based on their share of
global growth
Source: CEIC, National authorities, S&P Global, IMF, BNM estimates.
5.4
7.8
3.4
5.6
4.4
6.7
Jan Feb Mar Apr May Jun
Inflation2
Emerging
Economies
Global Growth Developments
• High inflation amid elevated
geopolitical tensions weighing
on growth.
• Lockdowns in China affected
growth early in the quarter,
but picked up as the economy
reopened.
• Moderation in goods trade
following shift to services as
most economies reopened.
2022
Advanced
Economies
Annual change (%)
World
2
The Malaysian economy continued to recover with growth of 8.9% in 2Q 2022
0.7
-17.1
-2.5 -3.3
-0.5
15.9
-4.5
3.6
5.0
8.9
-0.9
-15.1
18.1
-3.1
2.4
-0.8
-2.7
4.6
3.8 3.5
-25
-20
-15
-10
-5
0
5
10
15
20
25
1Q-20 2Q-20 3Q-20 4Q-20 1Q-21 2Q-21 3Q-21 4Q-21 1Q-22 2Q-22
y-o-y
q-o-q SA
Real GDP Growth
Annual Growth
2021: 3.1%
2020: -5.5%
Annual change (%)
Source: Department of Statistics, Malaysia
Factors supporting growth:
Expansion in domestic demand
Resilient exports, particularly for
E&E products
Continued recovery in the
labour market
Ongoing policy support
Monthly Real GDP Growth (%yoy)
Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22
4.4 5.2 5.3 5.6 5.0 16.5
3
Services and manufacturing sectors continued to drive growth
Source: Department of Statistics, Malaysia
3
6.6
9.2
1Q-22 2Q-22
GDP, Annual change (%)
6.5
12.0
1Q-22 2Q-22
GDP, Annual change (%)
ManufacturingServices Agriculture
Strong demand for
semiconductors and
consumer-related products
Higher consumer spending
amid transition to
endemicity, reopening of
international borders,
additional policy support
Contraction in livestock and
other agriculture production
amid rising input costs and
labour shortages
0.1
-2.4
1Q-22 2Q-22
GDP, Annual change (%)
-1.1
-0.5
1Q-22 2Q-22
GDP, Annual change (%)
-6.2
2.4
1Q-22 1Q-22
GDP, Annual change (%)
Mining Construction
Higher production in oil and
gas facilities including from
the Pegaga gas field in
Block SK320
Turnaround in activities
supported by progress in
large non-residential and
small-scale projects
4
6.7
2.6
1Q-22 2Q-22
GDP, Annual change (%)
Private Consumption
Source: Department of Statistics, Malaysia
Private Investment Public Investment Public Consumption Net exports
Stronger spending driven
by labour market
recovery and policy
measures
Improvement in
structures and continued
expansion in M&E
investments
Higher capital
expenditure by public
corporations
Contraction in supplies
and services spending
Import growth (14.0%)
outpacing export growth
(10.4%)
5
5.5
18.3
1Q-22 2Q-22
GDP, Annual change (%)
-26.5
-28.7
1Q-22 2Q-22
GDP, Annual change (%)
Further improvement in domestic demand
Updated
0.4
6.3
1Q-22 2Q-22
GDP, Annual change (%)
-0.9
3.2
1Q-22 2Q-22
GDP, Annual change (%)
3.0
40.5
-15.0
-20.1
-2.5
4.4
34.0
-12.3 -14.7
-2.6
Current
Account
Balance
Goods Services Primary
Income
Secondary
Income
1Q22
2Q22
Higher current account surplus while FDI remained encouraging
Source: Department of Statistics, Malaysia
RM billion
▪ Smaller primary income deficit due mainly to higher
income generated by Malaysian firms investing abroad
▪ Lower services deficit supported mainly by higher
travel receipts amid international border reopening
Current Account Foreign Direct Investment
RM billion
Current Account (% of GDP)
2Q-22: 1.0%
1Q-22: 0.7%
24.4
5.4
10.0 8.9
17.3
5.2
-3.2
15.3
Total Equity
Injections
Debt
Instruments
Reinvestment
of Earnings
1Q22
2Q22
▪ Continued FDI inflows despite outflows in debt
instruments
▪ FDI was mainly channelled into the manufacturing
sector and financial services sub-sector
6
Continued growth expected for the Malaysian economy underpinned by firm domestic
demand, offsetting the expected moderation in external demand
Private expenditure expected to drive growth, supported by improving labour market and recovery in tourism
4.4
-5.5
3.1
2019 2020 2021 2022f
Source: Department of Statistics, Malaysia, staff estimates
Annual change, %
Malaysia GDP
Implementation of multi-year projects
(e.g. MyDigital, ECRL, LRT3)
Continued recovery in labour market
Key factor underpinning private consumption
Higher tourist arrivals
Higher consumer confidence and lower risk aversion as travel activity
continues to normalise to pre-pandemic levels
Easing of supply chain disruptions
Receding COVID-related disruptions and slowing global trade to lower
pressures across global supply chains
Moderation in global growth
Slower growth mainly in advanced economies, particularly the US and
Euro Area
Key Factors Affecting Growth in 2H 2022 and 2023
EMR 2021:
5.3 - 6.3
2023 MY GDP Projections
Annual change, %
4.5 4.7
World Bank IMF
7
8
14.9
15.6 15.7 15.9 15.9 15.9
5.1
4.1
3.9 3.9 3.9 3.8
1.5
2
2.5
3
3.5
4
4.5
5
14
15
15
16
16
17
17
18
18
19
19
2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 Apr-22May-22Jun-22
T
h
o
u
s
a
n
d
s
Labour market indicators
Employment
(Millions of persons)
34.8
10.4
7.6
3.0 2.2 2.4
9
41
46 46 46 44
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 Apr-22 May-22 Jun-22
Jobless claims and placement rates
Updated
Source: Department of Statistics, Malaysia and the Social Security Organisation
Labour market continues to improve in tandem with stronger economic activity
Private sector wages (Nominal)
Continued expansion in employment amid low jobless claims
and relatively strong pace of hiring
Wages in the manufacturing and services sectors continued
to rise, partly supported by the minimum wage hike
Jobless claims
(thousand persons)
Placement rate
(% of retrenched workers)
Annual change (%)
Note: Private sector wages refer to wages of workers in the manufacturing and services sectors.
Source: Department of Statistics Malaysia and Bank Negara Malaysia estimates
Unemployment rate
(% of labour force)
3.4
-4.0
6.0
2.3
5.2
1.4
-6.4
0.4
-2.6
9.3
2.1
-5.6
2.4
-0.9
7.8
4.8
1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22
Services
Manufacturing
Private sector
(Total)
Real private
sector (total)
However, some segments continue to face various challenges
Source: Bank Negara Malaysia estimates based on HIES 2019, Department of Statistics, Malaysia
Lagged recovery in selected economic sectors
Value-Added by Economic Sector
1H 22 vs 1H 19 (pre-pandemic), RM billion
1 Refers to share to GDP in 2021
2 Includes employers, own account workers and unpaid family workers
23.2
21.8
7.0
-2.8 -2.9
-5.1
-7.0
Biz and
Other
Services
Mfg. Wholesale
& Retail
Trade
F&B
Accom.
Agri. Mining Construction
80% of the economy1
20%
Change in Employment
2Q 22 and 2Q 20 (crisis trough) compared to 4Q 19 (pre-pandemic), thousand persons
Women Youth and Elders
Low-Skilled Non-standard2 Workers
1
3
2
4
Certain segments have slower recovery in employment
Crisis
trough
+141.2
+305.5
-209 -161.7
Women Men
-64.1
+510.7
-160.9 -209.9
Youth and Elders Workers aged 25-
54
-109.3
+373
+183
-228.3
-201.5
+59.1
Low-Skill Mid-Skill High-Skill
+153.4
+293.4
-61
-309.8
Non-standard Standard
9
3.2
2.3
2.6
3.3
4.9
2.4
2.9
1.0
1.2
4.6
5.0
2.7
World US Euro Area China ASEAN NIEs
2022
2023
IMF Growth Forecast for Selected Countries
Annual Change, %
Malaysia’s diversified exports will cushion weaker external demand going forward
Weaker global growth outlook on account of slowdown in
major economies
However, Malaysia’s diversified exports would continue to
support export growth
Note: G3 includes the US, the euro area and Japan. Newly Industrialised Economies (NIEs) refers to Hong Kong SAR, Korea and Chinese Taipei. ASEAN excludes MY. Growth for
NIEs and ASEAN calculated based on IMF’s latest available growth forecast and PPP-share of global GDP.
Source: International Monetary Fund, Department of Statistics, Malaysia and Bank Negara Malaysia estimates
Exports by Products and Markets (2021)
% Share of Total Exports
Markets
ASEAN,
28%
PR
China,
16%
NIEs,
12%
G3,
27%
ROW,
17%
Products
E&E,
37%
Resource-based
manufactured goods,
26%
Mining,
6%
Agriculture,
8%
Non resource-based
manufactured goods,
24%
10
Updated
In particular, continued strength in E&E demand is expected to remain a key driver
of exports
Despite moderating global growth,
exports remain resilient…
…while firms’ adaptability helps to
mitigate against disruptions
Building inventory/ Buffer stocks
(Advance bookings)
Using alternative transportation mode
(Air cargo and land trucking)
Negotiating with clients to spread
orders
Diversifying supplier base
* Includes Others
Source: Department of Statistics, Malaysia
Source: BNM Industrial Insights, news flows
18.2
44.0
15.7
29.4
22.0
30.0
-10
0
10
20
30
40
50
1Q 2Q 3Q 4Q 1Q 2Q
2021 2022
E&E Non-E&E*
Commodities Gross exports (% yoy)
Annual change (%), contribution to growth (ppt)
Gross Exports
…supported by continued strength in
E&E demand going forward…
Industry Semiconductor Sales Forecasts Firms’ Proactive Measures
26.2 26.0
16.3
11.0
5.1
WSTS IC Insights
2021 2022f 2023f
Annual change (%)
Source: WSTS, IC Insights
’11 – ’19 avg.: 4.1% ’16 – ’19 avg.: 6.8%
11
Risks tilted to the downside mainly from weaker global growth and
stronger price pressures
The growth outlook however, remains subject to risks
Updated
Upside Risks Downside Risks
1. Stronger employment and income
conditions
2. Strong improvement in tourism sector
3. Additional domestic policy measures
1. Deceleration in global growth
2. Worsening supply disruptions and further
increase in global commodity prices
3. Acute labour shortages
4. Stronger cost and price pressures
weighing on household spending and
business activity
5. Disruptive financial market adjustments
12
1.1
0.9
2.2
1.9
2.3
3.8
4.0
3.3
4.6
4.7
6.3
6.1
8.0
6.2
2.2
2.5
2.8
3
3.8
5.4
5.4
5.5
5.9
6.5
7.3
8
8.7
9.2
China
Japan
Malaysia
Vietnam
Indonesia
Korea
Australia
Philippines
Singapore
Thailand
India
EU
US
UK
2Q 2022 1Q 2022
Source: Bloomberg and Department of Statistics, Malaysia
Inflation has substantially increased in many countries
Higher inflation across countries
(yoy, %)
Note: Data until June 2022
Source: World Bank
0
20
40
60
80
100
120
140
160
180
Feb-19 Jul-19 Dec-19 May-20 Oct-20 Mar-21 Aug-21 Jan-22 Jun-22
Index / USD per barrel
Brent, USD/barrel
June 2022: 120.1
World Bank Grains Price Index
June 2022: 157.9
Rising prices of key commodities
Global inflation Key commodity prices
13
The impact of exchange rate pass-through varies for
different items and households
Magnitude of exchange rate pass-through for selected
fresh food items
Source: World Bank and Bank Negara Malaysia estimates
High global commodity prices have been the main factor driving food prices, compounded
by stronger US dollar
Ringgit movements are only one of the factors
contributing to food price changes
Other factors include logistics costs, labour costs,
weather conditions etc.
1
2
Stylised illustration of wheat prices
Wheat price
(USD/metric tonne)
MYRUSD
exchange rate
Jan-22 374.2 4.19
Jun-22 459.6 4.40
A) Global wheat prices
B) Domestic wheat prices
Jan-22 price RM1,567.9
Jun-22 price
(excluding exchange rate
movements)
RM1,925.7
Jun-22 price
(including exchange rate
movements)
RM2,022.2
Impact of rising global
prices: +RM357.8
Impact of exchange rate
movements: +RM96.5
Other factors of production also contribute to rising prices,
while the impact of exchange rate movements vary across
different items
Increases in global commodity prices have been the biggest
factor underlying rising food prices
Indian mackerel
26%
Apple
8%
14
Headline and core inflation edged higher to 2.8% and 2.5% respectively during the quarter
Rising core inflation reflected improving demand conditions
amid the high cost environment More CPI items recorded month-on-month price increases
Note: Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
Headline and core inflation
Headline inflation and core inflation (yoy %)
-2.6
-1.4 -1.5
0.5
4.1
2.2
3.2
2.2
2.8
1.2
1.0 0.8 0.7 0.7 0.7 0.8 1.7
2.5
Q
2
-2
0
Q
3
-2
0
Q
4
-2
0
Q
1
-2
1
Q
2
-2
1
Q
3
-2
1
Q
4
-2
1
Q
1
-2
2
Q
2
-2
2
Headline inflation
Core inflation
Month-on-month price changes of CPI items
Unchanged
Share of CPI items (%)
21 21 14 10 13 12 9
33 40 50 63
35 31
28
46 39 36
27
52 57 63
2
0
1
1
-2
0
1
9
A
v
e
2
0
1
9
Q
2
2
0
2
1
Q
3
2
0
2
1
Q
4
2
0
2
1
Q
1
2
0
2
2
Q
2
2
0
2
2
Price
increase
Price
decline
Note: Numbers may not add up to 100 due to rounding error
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
15
Headline and core inflation are expected to average higher in 2022
2 Core inflation is expected to average higher in 2022,
as domestic demand continues to improve amid the high-
cost environment
Inflation Forecast for 2022
Average headline inflation (%)
1
Key drivers of inflation
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates.
Average core inflation (%)
Headline inflation is expected to trend higher in some
months due partly to the base effect from the discount on
electricity prices implemented in 3Q 2021
3
Upside risks to the inflation outlook stem from the
strength of domestic demand, global prices and domestic
policy measures
3.2
2.2
2.5
0.7
3.0
2.0
2021 2022f
2021 2022f
16
The MPC gradually adjusted the degree of accommodation amid positive growth prospects
Source: Bank Negara Malaysia
OPR was gradually increased by another
25 basis points to 2.25% at the July 2022
MPC meeting to reduce the degree of
monetary accommodation amid the positive
growth prospects for the Malaysian economy
The MPC will continue to assess evolving
conditions and their implications on the
overall outlook to domestic inflation and growth
Any adjustments to the monetary policy
settings would be done in a measured and
gradual manner, to support a sustainable
economic growth in an environment of price
stability
1.0
1.5
2.0
2.5
3.0
3.5
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Overnight Policy Rate, OPR
%
July 2022:
2.25%
Historic low
level of OPR
Monetary policy continues to be
accommodative
17
The OPR was adjusted amid an improving economy and demand conditions
Economy continues on a recovery path and is no longer in crisis, and the
unprecedented conditions that warranted the large monetary support have since abated
The OPR adjustments would also pre-emptively manage the risk of excessive
demand on price pressures
Ultimately, the goal of monetary policy in Malaysia is to achieve price stability and
sustainable economic growth over a longer term
The gradual adjustments in the OPR are necessary to avoid the need for stronger
measures in the future, which would be more disruptive to the economy
Domestic growth will continue to be supported by firm domestic demand, amid
better labour market conditions, recovery in tourism activity, and improved investment
activity and prospects
18
-10.4
-6.7
-5.5
-5.2
-5.2
-4.6
-3.8
-3.5
-2.7
-0.1
6.5
-15.0 -10.0 -5.0 0.0 5.0 10.0
JPY
KRW
THB
PHP
CNY
MYR
TWD
IDR
SGD
Ringgit NEER**
DXY
2Q 22 Since 1 July 22*
29.5 36.5
-26.5
52.9 58.7
-36.9
3.7
3.2
3.6
-60
0
60
120
1Q22 2Q22 Since 1 July**
Malaysia Regional* Avg Volume (RM billion)
Movement of 10-Year Sovereign Bond Yields
bps
Domestic financial market conditions continued to tighten in the second quarter
*Change in DXY, ringgit NEER, and exchange rate against the US dollar from 1 July to 10 August 2022
**Ringgit Nominal Effective Exchange Rate
***Average 1M Implied Volatility Onshore for 2Q22
Source: Bank Negara Malaysia, Reuters
US dollar continued to strengthen against ringgit and regional
currencies. Ringgit has remained broadly stable against major
trade partners.
Domestic bond yields and equity moved in line with regional
countries
19
Updated
Movement of the DXY and Exchange Rate against the US Dollar (%)
*Regional countries include Indonesia, the Philippines, PR China, Singapore, South Korea and Thailand.
**Data from 1 July to 10 August 2022
Source: Bank Negara Malaysia, Bursa Malaysia, Bloomberg
-16.4 -15.4 -14.5
-9.0 -9.0 -7.5
-5.1 -4.6 -2.3
-0.6
4.5
-25
-15
-5
5
15
U
S
K
o
re
a
P
h
ili
p
p
in
e
s
M
a
la
y
s
ia
S
in
g
a
p
o
re
T
h
a
ila
n
d
J
a
p
a
n
U
K
In
d
o
n
e
s
ia
H
K
C
h
in
a
2Q 2022 Since 1 July**
Movement of Equity Prices (% change)
Volatility***
5.3
6.6
6.7
4.3
5.0
6.7
7.5
9.3
Malaysia’s strong external position has strengthened the economy’s resilience to withstand
external shocks
Current account remained in surplus
Note: Data on current account is cumulative for the year.
Source: Bank Negara Malaysia, Department of Statistics, Malaysia
107.6
116.9
109.2
80.0
85.0
90.0
95.0
100.0
105.0
110.0
115.0
120.0
2020 2021 2H July 2022
USD billion
International Reserves
4.2
3.8
0.9
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2020 2021 1H 2022f
% of GDP
Current Account Surplus
2,060.0
933.2
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
FCY Assets FCY Liabilities
RM billion
FCY denominated external assets & liabilities
(as at 2Q 2022)
Foreign-currency (FCY) external
assets exceeded liabilities
Adequate international reserves
20
Growth in net financing underpinned by bank lending
Net financing grew by 4.9%, driven by
higher outstanding loan growth
Note: Data refer to loans from the banking system and development financial institutions (DFIs), except for business loan by purpose (i.e. working capital and investment), which only include banking system data.
* Excludes issuances by Cagamas and non-residents. ** ‘Others’ include loans for the purposes of non-residential property purchases, credit card, consumer durable goods and other purposes.
Source: Bank Negara Malaysia
Outstanding household loan growth
increased further amid higher growth in
loan disbursements and repayments
3.3
4.0
1.2
0.9
4.5
4.9
1Q 2022 2Q 2022
Outstanding corporate bonds*
Outstanding loans
Net financing
Net Financing
Annual change (%) / Cont. to growth (ppt)
Outstanding Household Loan Growth
22
Outstanding Business Loan Growth
Annual change (%) / Cont. to growth (ppt)
5.3
3.2
4.2 4.8
5.7
2Q-21 3Q-21 4Q-21 1Q-22 2Q-22
Others**
Personal use
Houses
Cars
Securities
Total
Annual change (%) / Cont. to growth (ppt)
Household Loan Disbursements and Repayments
Annual change (%)
-24.0
9.5 12.7
29.0
1.2
-4.6
3.3
13.3
3Q-21 4Q-21 1Q-22 2Q-22
Loan Disbursements
Loan Repayments
1.3
2.4
4.8 4.3
5.5
2Q-21 3Q-21 4Q-21 1Q-22 2Q-22
Working
Capital
Investment-
related
Others**
Total
Business Loan Disbursements and Repayments
Annual change (%)
32.5 31.6
19.6
26.6
27.9
25.1
20.5
23.4
3Q-21 4Q-21 1Q-22 2Q-22
Loan Disbursements
Loan Repayments
Business loan growth increased,
supported by higher growth in both
working capital and investment loans
21
MSMEs continued to access bank financing in 2Q 2022
Financing to MSMEs expanded at a faster pace of 7.5% in
2Q 2022
1 Investment-related purpose includes financing for the purchase of non-residential property, commercial vehicle, fixed assets (e.g. machinery and equipment), securities, and construction activity.
Note: Banking system and DFIs
Source: Bank Negara Malaysia
6.0
3.2
4.9
6.0
7.5
2Q21 3Q21 4Q21 1Q22 2Q22
Outstanding SME Financing
% yoy
SME Financing Disbursements by Purpose 1
Financing disbursements surpassing pre-pandemic levels, in
tandem with an increase in SMEs’ financing needs for working
capital and business expansion
RM billion
15
18
69 71
10
20
30
40
50
60
70
80
3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22
2017-19 quarterly average:
RM15 bn
2017-19 quarterly average:
RM57 bn
Investment
Working Capital
22
9.7
11.0 11.0 10.9
10.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
12.0
12.5
Jun-21 Sep-21 Dec-21 Mar-22 Jun-22
1.83
1.90
1.83
1.78
1.79
Jun-21 Sep-21 Dec-21 Mar-22 Jun-22
2010-2019 Average: 1.73%
Banks remain resilient and well-positioned to support ongoing economic recovery
Banks continue to maintain provisions
to buffer against potential credit losses
Total Provisions, as % of loans
1 Refers to the share of loans that have exhibited deterioration in credit risk, for which banks are required to set aside provisions based on lifetime expected losses
* MFRS 9 - Malaysian Financial Reporting Standard 9
Source: Bank Negara Malaysia
Credit risk remains elevated as relief
measures gradually expire
Strong capital and liquidity positions
would continue to support
intermediation needs
Gross Impaired Loans Ratio (%)
1.62
1.57
1.50
1.55
1.65
1.30
1.40
1.50
1.60
1.70
1.80
1.90
2.00
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
12.0
12.5
Jun-21 Sep-21 Dec-21 Mar-22 Jun-22
Mar-22: 18.3
Dec-21: 19.2
Sep-21: 18.3
Mar-22: 151
Dec-21: 153
Sep-21: 154
Total Capital Ratio, %
Liquidity Coverage Ratio, %
148
Jun-22
17.7
Jun-22
2018-2020 Average: 8.0%
MFRS 9* Stage 2 Loans1 Ratio (%)
2010-2019 Average: 1.90%
23
Policy priorities should now also accord a stronger focus on longer-term policies to
complement short-term measures
Attracting quality investments to create high value added activities and high-income jobs,
particularly for Malaysians
Continued upskilling to develop a high-skilled workforce to match demands of the future economy
and industry
Accelerating automation and digitalisation efforts to improve competitiveness, increase
productivity and reduce reliance on low-skilled foreign workers
Enhancing social safety nets and improving the social protection framework through savings
from a more targeted subsidy regime
Advancing the environmental, social and governance (ESG) agenda to ensure Malaysia remains
competitive globally, whilst also securing a more sustainable future
Key Structural Reforms
24
Summary
In 2Q 2022, the Malaysian economy grew by 8.9% mainly driven by consumption
activities amid the recovery in labour market conditions.
The outlook, however, is subject to risks related to weaker-than-expected global
growth, heightened geopolitical tensions, global financial market volatility and supply
chain disruptions, leading to much slower economic growth.
Growth in 2022 to be supported by strengthening domestic demand and reopening of
international borders, which more than offset moderation in external demand.
Updated
Policy support should also accord a stronger focus on longer-term priorities to
complement short-term measures
Headline and core inflation for 2022 are expected to average higher reflecting
improvement in economic activity amid higher costs.
25
End of Presentation
26
Q&A
27
Q&A
BANK NEGARA MALAYSIA 27
CENTRAL BANK or MALAYSIA
Additional Information
28
Add. Info
1
Malaysia’s GDP expanded by 8.9% in 2Q 2022
Annual Change in GDP Growth by Component
1 Numbers do not add up due to rounding and exclusion of import duties component
Source: Department of Statistics, Malaysia
Real GDP
(% YoY)
Share, %
(2021)
2021 2022
2Q 1Q 2Q
Domestic Demand
(Excluding Stocks)
92.7 12.3 4.4 13.0
Private Sector 74.4 13.0 4.4 15.4
Consumption 58.8 11.7 5.5 18.3
Investment 15.6 17.3 0.4 6.3
Public Sector 18.3 9.0 4.8 2.8
Consumption 13.8 8.2 6.7 2.6
Investment 4.5 12.0 -0.9 3.2
Net Exports of Goods and
Services
6.0 57.6 -26.5 -28.7
Exports 69.1 37.1 8.0 10.4
Imports 63.1 35.5 11.1 14.0
Change in stocks, RM bn 1.3 15.2 5.7 11.8
Real GDP 100.0 15.9 5.0 8.9
Real GDP
(% YoY)
Share1 %
(2021)
2021 2022
2Q 1Q 2Q
Services 57.0 13.4 6.5 12.0
Manufacturing 24.3 26.7 6.6 9.2
Agriculture 7.1 -1.5 0.1 -2.4
Mining and Quarrying 6.7 10.6 -1.1 -0.5
Construction 3.7 40.3 -6.2 2.4
Real GDP 100.0 15.9 5.0 8.9
29
Malaysia’s GDP expanded by 8.9% in 2Q 2022
Percentage Point Contribution to GDP Growth by Component
1 Numbers do not add up due to rounding and exclusion of import duties component
Source: Department of Statistics, Malaysia
Real GDP
(Ppt contribution, %)
Share, %
(2021)
2021 2022
2Q 1Q 2Q
Domestic Demand
(Excluding Stocks)
92.7 11.3 4.2 11.7
Private Sector 74.4 9.7 3.4 11.2
Consumption 58.8 6.7 3.3 10.1
Investment 15.6 3.0 0.1 1.1
Public Sector 18.3 1.6 0.8 0.5
Consumption 13.8 1.1 0.8 0.3
Investment 4.5 0.4 0.0 0.1
Net Exports of Goods and
Services
6.0 2.5 -1.5 -1.7
Exports 69.1 22.5 5.4 7.5
Imports 63.1 19.9 6.9 9.2
Change in Stocks 1.3 2.0 2.2 -1.0
Real GDP 100.0 15.9 5.0 8.9
Real GDP
(Ppt contribution, %)
Share1, %
(2021)
2021 2022
2Q 1Q 2Q
Services 57.0 7.8 3.7 6.8
Manufacturing 24.3 5.9 1.6 2.2
Agriculture 7.1 -0.1 0.01 -0.2
Mining and Quarrying 6.7 0.8 -0.1 0.0
Construction 3.7 1.2 -0.2 0.1
Real GDP 100.0 15.9 5.0 8.9
30
Add. Info
2
Financial account of the balance of payments continued to record net inflow
Continued net inflows in direct and other investment accounts offset net outflows in portfolio investment account
*As per the IMF’s BPM5 classifications (i.e. directional basis)
Note: Numbers may not add up due to rounding
Source: Department of Statistics, Malaysia; and Bank Negara Malaysia
RM billion
2021 2022
4Q Year 1Q 2Q 1H
Direct Investment 10.5 28.5 20.8 2.6 23.4
Direct Investment Abroad
(DIA)*
-7.9 -19.7 -3.6 -14.7 -18.3
Foreign Direct Investment
(FDI)*
18.5 48.1 24.4 17.3 41.7
Portfolio Investment 2.6 18.8 -10.1 -14.7 -24.8
Residents -6.1 -35.8 -13.9 -4.4 -18.3
Non-residents 8.7 54.6 3.8 -10.3 -6.5
Financial Derivatives -1.8 -2.3 0.2 -0.2 0.0
Other Investment -10.6 -32.0 19.6 12.5 32.1
Financial Account Balance 0.7 13.0 30.4 0.2 30.7
Continued FDI inflows amid higher
DIA outflows
Net inflows in other investment account
Net outflows in portfolio investment
Financial Account by Component
31
Add. Info
3
13.1
8.7
-5.0
Banks Corporates Fed. Gov.
Net change: +RM17.1* billion
Corporates’ external debt is mainly subject to
prudential requirements
64.8
126.5
146.5
88.5
24.8
13.1
Total: RM464.1 billion
Bonds and
notes
Loans
Other debt liabilities
Intragroup
loans
Trade
credits
NR holdings of domestic
debt securities
Subject to
prudential
requirements
On
concessionary
and flexible
terms
Backed by
export earnings
Corporate External Debt Breakdown by Instrument
(as at end-2Q 2022)
Malaysia’s external debt remains manageable
External debt amounted to 67.7% of
GDP as at end-2Q 2022 (1Q 22: 69.6%)
Banks are resilient to face potential
external shocks
* Consist of deposit & interbank placements, bonds and notes, and money
market instruments.
** Consist of short-term financial institutions’ deposits, interbank borrowings
and loans from unrelated counterparties.
146.6
76.8
FCY liquid external
assets
FCY external
debt-at-risk
Source: Ministry of Finance Malaysia, Department of Statistics, Malaysia and Bank Negara Malaysia
Changes in External Debt by Institution
(from 1Q 2022)
Banks’ FCY Liquid External Assets* and FCY
External Debt-at-Risk**
RM billionRM billion RM billion
* Inclusive of RM0.3 billion increase in BNM external debt
(allocation of SDR) due to exchange rate valuation changes
32
Add. Info
4
Adequate buffers to weather external shocks
Sustained net creditor position… … and further supported by
L
External Assets Minus External
Liabilities (2Q 21 – 2Q 22)
p Preliminary
r Revised
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
… with large net foreign-currency external
assets …
7.3
5.6 5.5
3.0
3.7
0
2
4
6
8
0
20
40
60
80
100
120
2Q21 3Q21 4Q21 1Q22 2Q22
RM billion (LHS)
% of GDP (RHS)
RM billion % of GDP
Sustained foreign income
Continued current account surplus reduces
external financing requirements
Sufficient international reserves to
facilitate international transactions
… to finance 5.4 months of imports of goods &
services and is 1.1 times total short-term
external debt as at 29 July 2022
33
Add. Info
5
2,060.0
933.2
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
FCY Assets FCY Liabilities
RM billion
FCY denominated external assets & liabilities
(as at 2Q 2022)
| Press Release |
12 Aug 2022 | BNM Reassures Nation's Payment System Remains Safe And Secure | https://www.bnm.gov.my/-/safe-payment-system | null | null |
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BNM Reassures Nation's Payment System Remains Safe And Secure
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BNM Reassures Nation's Payment System Remains Safe And Secure
Embargo :
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1115 on
Friday, 12 August 2022
12 Aug 2022
We refer to the potential data breach incident as announced by iPay88 (M) Sdn. Bhd., a company providing payment gateway services to banks and merchants. Bank Negara Malaysia (BNM) wishes to highlight that forensic investigations are still ongoing.
The breach originated from and is confined to iPay88’s payment card systems and does not involve vulnerabilities in the banks’ systems. Financial institutions in Malaysia also observe strong authentication methods for online card transactions, including prompting cardholders for additional confirmation of certain transactions considered to be more risky. This reduces the risk of fraudulent transactions occurring. For non-authenticated transactions, particularly purchases from overseas merchants, customers will not be liable for any fraudulent or unauthorised transactions that may arise from this incident.
In light of this incident, BNM has instructed banks to immediately notify affected cardholders of additional protective measures that will be taken to further protect them against risks of fraudulent or unauthorised transactions. Banks have also heightened their fraud risk management and monitoring of suspicious or fraudulent activities for affected cards.
BNM takes a serious view of any incident that can affect confidence in the payment system, and will not hesitate to take necessary supervisory or enforcement actions to ensure strong security controls are in place and maintained by financial institutions, and customers are treated fairly. Customers are advised to immediately notify their banks if they observe any irregular or unauthorised transactions on their cards.
For further enquiries or complaints, members of the public can contact BNMTELELINK at 1-300-88-5465 or to submit via https://telelink.bnm.gov.my/
Bank Negara Malaysia
12 August 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
11 Aug 2022 | The 6th Royal Award for Islamic Finance to be conferred on 4 October 2022 | https://www.bnm.gov.my/-/6th-raif-2022 | null | null |
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The 6th Royal Award for Islamic Finance to be conferred on 4 October 2022
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The 6th Royal Award for Islamic Finance to be conferred on 4 October 2022
Embargo :
For immediate release
Not for publication or broadcast before
1100 on
Thursday, 11 August 2022
11 Aug 2022
Bank Negara Malaysia (BNM) and the Securities Commission Malaysia (SC) are pleased to announce that the Royal Award for Islamic Finance 2022 will be conferred at a ceremony on 4 October 2022 in Kuala Lumpur.
The Royal Award recognises visionary individuals whose outstanding achievements and innovative ideas contribute significantly to the growth of Islamic finance, the global economy, and social progress of communities around the world. A global call for nominations was made in December 2021, following which 49 submissions were received for 37 nominees from 14 countries. These nominees include renowned Islamic finance practitioners, Shariah scholars, and academicians.
This year’s winner will be the sixth recipient of the prestigious Royal Award, which was inaugurated in 2010 as a biennial award1 in support of Malaysia as the global standard of a comprehensive and sophisticated Islamic finance marketplace.
The Royal Award winner is selected by an independent seven-member international jury headed by former Deputy Prime Minister Tun Musa Hitam. The jury comprises eminent Shariah scholars, academicians, and finance practitioners. The assessment process is based on a set of defined selection criteria, encompassing contributions towards driving policy development, developing and growing the Islamic finance market, advocating for Islamic finance, pioneering innovation, expanding the frontiers of knowledge, and exercising exceptional leadership and influence.
In addition to the Royal Award, two new award categories have been introduced this year - the Emerging Leader Prize and Impact Challenge Prize which will be presented in a separate ceremony.
The Emerging Leader Prize recognises young international talent who have made outstanding contributions in advancing innovative ideas in the field of Islamic finance. For this award, the Secretariat has received a total of 18 submissions for 14 nominees from 8 countries. The prize winner is determined by an international panel of Selection Committee, comprising esteemed academicians and industry practitioners.
Meanwhile, the Impact Challenge Prize recognises digital and innovative solutions based on Islamic finance principles or Islamic finance enablers, that seek to improve the economic and social resilience of financially impacted communities globally. This prize is a collaboration with the World Bank Group Inclusive Growth and Sustainable Finance Hub in Malaysia and the Malaysia Digital Economy Corporation.
The prize winner(s) are evaluated based on four criteria - innovation, impact, commercial viability and scalability.
The organisers have received 50 applications from 14 countries for the Impact Challenge Prize. Those who met the criteria were shortlisted to join an Accelerator Programme. At the end of the Programme, they presented their innovative solutions to a panel of judges, comprising senior representatives from BNM and SC, Islamic Development Bank, World Bank Group and the venture capital industry.
The Emerging Leader and Impact Challenge Prizes will be presented at the Global Islamic Finance Forum (GIFF) on 5 October 2022 in Kuala Lumpur.
_________
1 Due to the pandemic, the Royal Award was deferred in 2020.
Members of the Media may contact the Media Team at:
Roziah Mohd. Hanifa (roziah@bnm.gov.my), Delyana Nordin (delyanaN@seccom.com.my)
NOTE TO THE EDITOR
The Royal Award for Islamic Finance Past Recipients
Past Royal Award recipients are Tan Sri Dr. Zeti Akhtar Aziz, former Governor of Bank Negara Malaysia (2018); Professor Datuk Dr Rifaat Ahmed Abdel Karim, former CEO of the International Islamic Liquidity Management Corporation (2016); Dato’ Dr Abdul Halim Ismail, founding member of Malaysia’s first Islamic bank (2014); Mr Iqbal Khan, CEO of Fajr Capital (2012); and Shaikh Saleh Abdullah Kamel, founder of the Dallah al Baraka Group (2010). The Royal Award in 2010 also recognised the late Dr Ahmad El-Naggar who was often referred to as 'Father of Modern Islamic Banking', with a posthumous honorable mention.
About Malaysia's Islamic Finance Marketplace
Since its origin nearly 40 years ago, Islamic finance in Malaysia has evolved into a well-developed and comprehensive Islamic finance marketplace, capable of meeting diverse needs of the economy and society. The marketplace is characterised by a robust regulatory, supervisory, Shariah and legal framework, deep and progressive Islamic financial markets, diverse set of players, multi-asset commodity and exchange platforms, efficient multi-channel payment gateways to facilitate financial intermediation as well as talent base with global capabilities and connectivity for business deals anywhere in the world.
Malaysia’s Islamic finance marketplace is open to global industry players and market participants to collaborate with and mutually benefit from a highly conducive business environment of innovation, expertise and deal flow. Our marketplace is a comprehensive Islamic finance ecosystem and business environment of infrastructure, innovation, expertise and deal flow, served by the Malaysia International Islamic Financial Centre (MIFC) Community, comprising the financial institutions, professional firms, regulators and government agencies.
For more information on Malaysia’s Islamic finance marketplace, please visit www.mifc.com and follow us on Twitter (@MalaysiaIF) / LinkedIn (@Malaysia World's Islamic Finance Marketplace).
About Bank Negara Malaysia
Bank Negara Malaysia is Malaysia’s central bank. Our principal objective is to promote monetary stability and financial stability conducive to the sustainable growth of the Malaysian economy. To this end, we played a key role in developing both the conventional and Islamic financial system with the view that a well-developed financial system contributes to the country’s resilience. Over the years, we have also taken the lead in promoting Malaysia as an International Islamic Financial Center.
Log on to www.bnm.gov.my for more information.
About Securities Commission Malaysia
The Securities Commission Malaysia (SC), a statutory body reporting to the Minister of Finance, was established under the Securities Commission Act 1993. It is the sole regulatory agency for the regulation and development of capital markets. The SC has direct responsibility for supervising and monitoring the activities of market institutions, including the exchanges and clearing houses, and regulating all persons licensed under the Capital Markets and Services Act 2007. More information about the SC is available on its website at www.sc.com.my. Follow the SC on Twitter at @SecComMy for more updates.
About The World Bank Group Inclusive Growth and Sustainable Finance Hub in Malaysia
The World Bank Group Inclusive Growth and Sustainable Finance Hub in Malaysia is a partnership between Malaysia and the World Bank. The Hub works closely with counterparts in country and beyond by conducting analytical, advisory, and research work to support inclusive growth, promote sustainable finance and inclusive finance and to enhance good governance.
Log on to www.wbg.org/my or www.facebook.com/worldbankmalaysia for more information.
Bank Negara Malaysia
11 August 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
05 Aug 2022 | International Reserves of Bank Negara Malaysia as at 29 July 2022 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-29-july-2022 | https://www.bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf | null |
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International Reserves of Bank Negara Malaysia as at 29 July 2022
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International Reserves of Bank Negara Malaysia as at 29 July 2022
Embargo :
For immediate release
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1500 on
Friday, 5 August 2022
5 Aug 2022
The international reserves of Bank Negara Malaysia amounted to USD109.2 billion as at 29 July 2022. The reserves position is sufficient to finance 5.8 months of imports of goods and services[1], and is 1.1 times of the total short-term external debt.
[1] Under the previous import coverage measure, reserves is sufficient to finance 6.5 months of retained imports of goods. For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27, which can be accessed at 4Q QB 2021. Related Assets
BNM Statement of Assets & Liabilities - 29 July 2022
Bank Negara Malaysia
5 August 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
Monthly Highlights
Headline inflation declined to 3.4% in March
March 2023
1
3.7 3.4
3.9 3.8
0.00
2.00
4.00
0.0
2.0
4.0
J
a
n
-2
2
F
e
b
-2
2
M
a
r-
2
2
A
p
r-
2
2
M
a
y
-2
2
J
u
n
-2
2
J
u
l-
2
2
A
u
g
-2
2
S
e
p
-2
2
O
c
t-
2
2
N
o
v
-2
2
D
e
c
-2
2
J
a
n
-2
3
F
e
b
-2
3
M
a
r-
2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation declined to 3.4% in March
(February: 3.7%) due mainly to lower inflation for
fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation moderated slightly to 3.8% during
the month (February: 3.9%), driven largely by
lower inflation for food away from home.
1
Robust growth in volume index driven by retail and motor vehicles
Index of Wholesale and Retail Trade
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded by 10.6% in February 2023
(January: 8.5%).
• The higher growth was driven mainly by retail
sales in non-specialised stores (e.g., department
stores) followed by continued strength in
purchases of motor vehicles amid the ongoing
fulfilment of backlog orders.
• On a month-on-month seasonally adjusted basis,
the index accelerated by 5.5% (January: 0.2%).
9.5 8.510.6
0
10
20
30
40
Feb-
22
Mar-
22
Apr-
22
May-
22
Jun-
22
Jul-
22
Aug-
22
Sep-
22
Oct-
22
Nov-
22
Dec-
22
Jan-
23
Feb-
23
ppt, %yoy
Motor vehicles Retail Wholesale
2.4
5.2
4.4
0
1
2
3
4
5
6
7
Mar-22 Jul-22 Nov-22 Mar-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Growth in credit to the private non-financial sector moderated
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
2.7 2.6 2.7 2.6
1.0 0.6 0.7 0.7
1.0
1.1 1.1 0.9
4.7 4.3 4.5 4.2
Dec-22 Jan-23 Feb-23 Mar-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Contribution to growth (ppt)
• Credit to the private non-financial sector grew by
4.2% as at end-March (February: 4.5%), attributed
to slower growth in credit to businesses (3.2%;
February: 3.7%).
• While growth in outstanding corporate bonds
moderated (4.4%; February : 5.5%), outstanding
business loan growth was sustained at 2.4%
(February: 2.4%). This was supported by the
continued growth in both working capital (2.2%;
February: 1.9%) and investment-related loans
(4.3%; February: 4.2%).
• Outstanding household loan growth remained
broadly stable (5.2%; February: 5.3%), supported
by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan
growth for the purchase of securities (-6.9%;
February: -3.3%).
Credit to the Private Non-Financial Sector1,2
Monthly Highlights
March 2023
Domestic financial market conditions remained orderly
Financial Market Performance in March 2023
Source: Bank Negara Malaysia, Bursa Malaysia
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
11.0
-2.1
-5.3
0.0
-2.2
1.7
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-10 -5 0 5 10 15
Mar-23
Feb-23
• In March, global financial markets were affected by
the emergence of banking sector stress in some
major economies. As spillovers were contained thus
far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds
improved.
• In line with the performance of regional currencies,
the ringgit appreciated by 1.7% against the US
dollar. Conditions in the domestic bond market
also remained stable.
• The FBM KLCI declined by 2.2% during the month.
2
Banks maintained strong liquidity and funding positions to support intermediation
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.9
157.4
0
40
80
120
160
70
75
80
85
90
95
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
increased slightly to 1.8% (February-23: 1.8%) and
1.2% (February-23: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory
reserves) continue to record a prudent level of
110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
%
1.8
1.2
1.7
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
157.4% (February-23: 152.7%).
• The aggregate loan-to-fund ratio remained stable at
81.9% (February-23: 81.6%).
PRESS RELEASE
Ref. No.: 04/23/05 EMBARGO: Not for publication or
broadcast before 1500 hours on
Friday, 28 April 2023
Monthly Highlights – March 2023
Headline inflation declined to 3.4% in March
• Headline inflation declined to 3.4% in March (February: 3.7%) due mainly
to lower inflation for fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation1 moderated slightly to 3.8% during the month
(February: 3.9%), driven largely by lower inflation for food away from
home.
Robust growth in volume index driven by retail and motor vehicles
• The Index of Wholesale and Retail Trade (IOWRT) expanded by 10.6%
in February 2023 (January: 8.5%).
• The higher growth was driven mainly by retail sales in non-specialised
stores (e.g., department stores) followed by continued strength in
purchases of motor vehicles amid the ongoing fulfilment of backlog
orders.
• On a month-on-month seasonally adjusted basis, the index accelerated
by 5.5% (January: 0.2%).
1 Core inflation is computed by excluding price-volatile and price-administered items.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth in credit to the private non-financial sector2,3 moderated
• Credit to the private non-financial sector grew by 4.2% as at end-March
(February: 4.5%), attributed to slower growth in credit to businesses
(3.2%; February: 3.7%).
• While growth in outstanding corporate bonds moderated (4.4%;
February: 5.5%), outstanding business loan growth was sustained at
2.4% (February: 2.4%). This was supported by the continued growth in
both working capital (2.2%; February: 1.9%) and investment-related
loans (4.3%; February: 4.2%).
• Outstanding household loan growth remained broadly stable (5.2%;
February: 5.3%), supported by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan growth for the purchase of
securities (-6.9%; February: -3.3%).
Domestic financial market conditions remained orderly
• In March, global financial markets were affected by the emergence of
banking sector stress in some major economies. As spillovers were
contained thus far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds improved.
• In line with the performance of regional currencies, the ringgit
appreciated by 1.7% against the US dollar. Conditions in the domestic
bond market also remained stable.
• The FBM KLCI declined by 2.2% during the month.
Banks maintained strong liquidity and funding positions to support
intermediation
• Banks continued to record healthy liquidity buffers with the aggregate
Liquidity Coverage Ratio at 157.4% (February: 152.7%).
2 Comprises loans to households and non-financial corporations from the banking system and development financial
institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
3 Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced
to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
• The aggregate loan-to-fund ratio remained stable at 81.9%
(February: 81.6%).
Asset quality in the banking system remained intact
• Overall gross and net impaired loans ratios increased slightly to 1.8%
(February: 1.8%) and 1.2% (February: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory reserves) continues to
record a prudent level of 110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
Bank Negara Malaysia
28 April 2023
20230428_BNM Monthly Highlights-March_en
Slide 1
Slide 2
20230428_BNM PR_Monthly Highlights-Mar 2023_eng
| Press Release |
04 Aug 2022 | Consumer Credit Oversight Board Task Force Invites Feedback on Proposed Enactment of Consumer Credit Act | https://www.bnm.gov.my/-/ccobtf-invites-fdbk-cca-cp1 | null | null |
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Consumer Credit Oversight Board Task Force Invites Feedback on Proposed Enactment of Consumer Credit Act
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Consumer Credit Oversight Board Task Force Invites Feedback on Proposed Enactment of Consumer Credit Act
Embargo :
For immediate release
Not for publication or broadcast before
1240 on
Thursday, 4 August 2022
4 Aug 2022
The Government is working on the formulation of a Consumer Credit Act (CCA), with the aim of strengthening protection for credit consumers in Malaysia. The CCA seeks to provide a comprehensive framework for regulating the conduct of entities carrying out the business of providing credit or credit services to such consumers, with an immediate focus on those that are not currently subject to direct regulation by any authority [1]. This includes the regulation of new forms of credit such as “Buy Now Pay Later” providers.
The CCA will pave the way for the establishment of the Consumer Credit Oversight Board (CCOB) as an independent competent authority to oversee consumer credit providers and credit service providers.
The public consultation is the first of a two-part consultation. It provides an overview of the current landscape of the consumer credit industry in Malaysia, its challenges, and proposed reforms to better protect individuals and small businesses in their dealings with credit providers and credit service providers. The reforms will be implemented in phases under a proposed multi-year programme to deliver consistent standards of protection for credit consumers and support the orderly development of the credit industry in Malaysia.
The CCOB Task Force seeks feedback on the proposed regulatory and authorisation framework, as well as areas that will be addressed in the legislation to promote high standards of professionalism and fair conduct of credit providers and credit service providers. This will be followed by Part 2 of the consultation paper, targeted to be issued in the fourth quarter of this year, which will provide further details on authorisation, governance, and conduct requirements that will be applied to credit providers and credit service providers.
The public consultation paper is available for download from CCOB’s website [www.ccob.my]. This website serves as a one-stop reference point for all stakeholders seeking information and updates related to CCA and CCOB.
Interested parties and members of the public are invited to provide feedback and comments on the consultation paper to CCOB Task Force by Monday, 5 September 2022 by emailing to CCAConsultation@bnm.gov.my.
CONSUMER CREDIT OVERSIGHT BOARD TASK FORCE
[1] These include but are not limited to “Buy Now Pay Later” providers, leasing and factoring companies, impaired loan buyers and debt collection agencies.
ABOUT THE CONSUMER CREDIT OVERSIGHT BOARD TASK FORCE
The Consumer Credit Oversight Board Task Force (CCOB Task Force) was set up in July 2021 and led by the Ministry of Finance (MOF), Bank Negara Malaysia (BNM) and the Securities Commission Malaysia (SC) to drive the enactment of the CCA. This effort is in collaboration with the Ministry of Domestic Trade and Consumer Affairs (KPDNHEP), the Ministry of Housing and Local Government (KPKT), the Ministry of Entrepreneur and Cooperatives Development (KUSKOP) and Malaysia Co-operative Societies Commission (SKM).
For media queries, please contact the following:
Consumer Credit Oversight Board Task Force
+603 9179 2329
ccobtf@bnm.gov.myBank Negara Malaysia
4 August 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
29 Jul 2022 | Monetary and Financial Developments in June 2022 | https://www.bnm.gov.my/-/monetary-and-financial-developments-in-june-2022 | https://www.bnm.gov.my/documents/20124/7650790/i_en.pdf | null |
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Monetary and Financial Developments in June 2022
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Monetary and Financial Developments in June 2022
Embargo :
For immediate release
Not for publication or broadcast before
1500 on
Friday, 29 July 2022
29 Jul 2022
Headline inflation increased to 3.4% in June
Headline inflation increased to 3.4% (May: 2.8%), mainly reflecting the higher core inflation (3.0%; May: 2.4%). The rise was contributed mainly by higher inflation for food away from home, expenditure in restaurant and cafe, and repair and maintenance for personal transport.
The relatively sharp increase reflected higher price pressures amid the ongoing military conflict in Ukraine, adverse weather conditions in key food-exporting countries, stronger US dollar and improving domestic demand.
Nevertheless, headline inflation is projected to remain within the 2.2% to 3.2% forecast range for the year.
Robust export growth in June
Exports registered a robust growth of 38.8% (May: 30.4%) to RM146.2 billion, which is the highest level of exports on record.
This reflects continued strength across Malaysia’s export products, driven by strong global demand for manufactured exports and high commodity prices.
Moving forward, export growth is expected to remain supported by continued external demand for semiconductors, albeit at a moderating pace due to slower global growth.
Higher expansion in net financing
Net financing grew by 5.0% (May: 4.5%) driven by higher growth in outstanding loans (5.6%; May: 5.0%) while outstanding corporate bond growth remained unchanged at 3.4%.
Outstanding household loan growth increased across all loan purposes (5.9%; May: 5.0%) reflecting higher growth in loan disbursements, especially for cars and houses.
For businesses, outstanding loans grew at 5.8% (May: 5.4%), as growth in loan disbursements (23.0%; May: 20.8%) outpaced that of repayments (20.0%; May: 23.6%). By sector, the higher outstanding loan growth reflected stronger growth in wholesale and retail trade, and transport, storage and communication.
Domestic financial markets conditions tightened following the sharp rise in US interest rates
In June, global financial market conditions tightened following the 75-bps hike (largest since 1994) in the US federal funds rate, amid elevated US inflationary pressures. This had subsequently raised concerns on the US and global economic growth outlook.
Adjustments in the domestic financial markets remained orderly amid positive economic recovery prospects.
Amid foreign portfolio outflows from the domestic bond market, 10-year MGS yields rose by 9.0 bps, a smaller increase compared to regional bond yields (average: 21.5 bps).
The ringgit depreciated by 0.7% (regional average: -3.1%) in June amid broad US dollar strength, while the FBM KLCI declined by 8.0% (regional average: -7.1%).
Banks’ liquidity and funding positions remain supportive of intermediation activities
The banking system continued to record healthy liquidity positions, with the aggregate Liquidity Coverage Ratio at 148.4%.
Banks’ funding sources remained stable and supportive of credit intermediation in the economy amid sustained growth in deposits.
Loan-to-fund ratio remained stable at 81.8%.
Asset quality in the banking system remained intact
Overall gross impaired loans ratio increased slightly to 1.7% (May-22: 1.6%), but net impaired loans ratios remained broadly unchanged at 1.0%.
Banks continued to be prudent in loan provisioning to buffer against potential credit losses, with total provisions and regulatory reserves amounting to RM 41.1 billion (May-22: RM 40.7 billion).
Total provisions stood at 1.8% as a share of total banking system loans and 108.5% of impaired loans.
Monthly Highlights [PDF] Related Assets
Monthly Highlights & Statistics in June 2022
Bank Negara Malaysia
29 July 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
Monthly Highlights May 2023
Monthly Highlights
Headline inflation declined further to 2.8% in May
May 2023
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation moderated to 2.8% (April 2023:
3.3%). This decline was largely due to non-core
CPI components, particularly lower inflation for
fuel (-0.2 percentage points, ppt) and fresh food
(-0.1ppt).
• Core inflation also declined slightly to 3.5% (April
2023: 3.6%) amid lower inflation for
communication services.
3.3
2.8
3.6 3.5
0.00
2.00
4.00
0.0
2.0
4.0
J
a
n
-2
2
F
e
b
-2
2
M
a
r-
2
2
A
p
r-
2
2
M
a
y
-2
2
J
u
n
-2
2
J
u
l-
2
2
A
u
g
-2
2
S
e
p
-2
2
O
c
t-
2
2
N
o
v
-2
2
D
e
c
-2
2
J
a
n
-2
3
F
e
b
-2
3
M
a
r-
2
3
A
p
r-
2
3
M
a
y
-2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
1.6
5.1
4.6
0
1
2
3
4
5
6
7
May-22 Sep-22 Jan-23 May-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Credit to the Private Non-Financial Sector1,2
1
Growth in credit to the private non-financial sector improved in May
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
Contribution to growth (ppt)
• Credit to the private non-financial sector expanded
by 4.0% as at end-May (April 2023: 3.7%), driven
mainly by higher growth in credit to businesses
(2.8%; April 2023: 2.5%).
• Outstanding corporate bonds grew by 4.6% (April
2023: 4.4%), while outstanding business loans
expanded by 1.6% (April 2023: 1.0%). The higher
business loan growth reflected improvement in
loans for both working capital and investments to
SMEs and non-SMEs.
• In the household segment, outstanding loan
growth was sustained at 5.1% (April 2023: 5.0%),
supported by higher growth across most loan
purposes. Of note, household loan growth
continued to be driven by loans for the purchase of
houses and cars, which grew by 7.0% and 8.4%,
respectively (April 2023: 6.8% and 8.0%).
2.7 2.6 2.5 2.6
0.7 0.7 0.3 0.5
1.1 0.9
0.9 1.0
4.5 4.2
3.7 4.0
Feb-23 Mar-23 Apr-23 May-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Index of wholesale and retail trade growth moderated in April
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded more moderately by 4.7% in
April 2023 (March 2023: 9.4%). The lower growth
was due mainly to the decline in the motor vehicle
segment.
• However, the retail segment continued to record a
double-digit growth of 10.0% (March 2023:
13.8%), supported by sales in non-specialised and
other specialised stores1.
• On a month-on-month seasonally adjusted basis,
the index increased at a faster pace of 6.5%
(March 2023: -0.9%).
1 Other goods in specialised stores includes clothing, footwear,
pharmaceuticals, cosmetics, watches, jewellery and optical goods.
10.6
9.4
4.7
-2
3
8
13
18
23
28
33
Apr-22 Jun-22 Aug-22 Oct-22 Dec-22 Feb-23 Apr-23
ppt, %yoy
Motor vehicles Retail Wholesale
Index of Wholesale and Retail Trade
Monthly Highlights
2
May 2023
Domestic financial markets were largely affected by external factors
Financial Market Performance in May 2023
-18.0
-0.5
-1.1
-3.0
-2.0
-3.4
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-20 -15 -10 -5 0
May-23 Apr-23
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
1Regional countries comprise Singapore, Thailand, Philippines, Indonesia, and Korea
Source: Bank Negara Malaysia, Bursa Malaysia
• Global investors maintained a risk-off approach
throughout May, as concerns over the impact of the
US debt ceiling crisis and the weaker-than-
expected rebound in China’s economy weighed on
global financial markets.
• As a result, the ringgit depreciated against the US
dollar by 3.4% (regional1 average: -1.2%). Similarly,
the FBM KLCI declined by 2.0% (regional1 average:
-1.3%).
• Nonetheless, the 10-year MGS yields decreased
slightly by 3 basis points, supported by non-resident
inflows into the domestic bond market.
Banks maintained strong liquidity and funding positions to support intermediation
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
151.2% (April 2023: 154.3%).
• The aggregate loan-to-fund ratio remained stable at
81.8% (April 2023: 82.1%).
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.8
151.2
0
40
80
120
160
70
75
80
85
90
95
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
A
p
r
2
3
M
a
y
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
remained broadly unchanged at 1.80% (April
2023: 1.78%) and 1.10% (April 2023: 1.10%),
respectively.
• Loan loss coverage ratio (including regulatory
reserves) remained at a prudent level of 114.1%
of impaired loans, with total provisions accounting
for 1.7% of total loans.
%
1.8
1.1
1.7
0.5
1.0
1.5
2.0
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
A
p
r
2
3
M
a
y
2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
April 2023 Monthly Highlights
Slide 1
Slide 2
| Press Release |
29 Jul 2022 | Asia/Pacific Group on Money Laundering (APG) Concludes its Annual Meeting 2022 in Kuala Lumpur with Strengthened Efforts in Combating Global Financial Crimes | https://www.bnm.gov.my/-/apg-annual-meeting-2022-concluded | null | null |
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Asia/Pacific Group on Money Laundering (APG) Concludes its Annual Meeting 2022 in Kuala Lumpur with Strengthened Efforts in Combating Global Financial Crimes
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Asia/Pacific Group on Money Laundering (APG) Concludes its Annual Meeting 2022 in Kuala Lumpur with Strengthened Efforts in Combating Global Financial Crimes
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29 Jul 2022
Over 370 international delegates from around the Asia-Pacific region and the world gathered this week from 24 to 28 July 2022 to attend the hybrid annual meeting of the Asia/Pacific Group on Money Laundering (APG) in Kuala Lumpur.
The meeting was officiated by Senator Tengku Datuk Seri Utama Zafrul Tengku Abdul Aziz, Finance Minister of Malaysia. Co-chaired by Deputy Governor Marzunisham Omar of Bank Negara Malaysia and Deputy Commissioner Ian McCartney, of the Australian Federal Police, the delegates met over four days to discuss important issues relating to serious financial crime impacting the region and the world at large.
The meeting was attended by the president of the Financial Action Task Force (FATF), Mr. Raja Kumar of the Ministry of Home Affairs in Singapore, whose recent appointment last month as the FATF President will further ensure a strong regional voice in global efforts to combat money laundering and terrorist financing.
The APG is an intergovernmental organisation consisting of 41 member countries and jurisdictions in the Asia/Pacific region and was formed in 1997 in Bangkok, Thailand. Its members, including Malaysia, are firmly committed to implementing the international standards against serious financial crime that impact financial systems.
This week, the APG achieved a number of important outcomes including:
Adoption of mutual evaluation follow-up reports and typologies reports;
Important governance and organisational decisions on the future of the APG;
Review of the FATF’s strategic direction for the next round of country evaluations and how that impacts the business of the APG; and
The conduct of meetings between providers of technical assistance and many APG members to improve their legal and financial regulatory anti-money laundering systems.
This year marks an important milestone for the APG: its 25th anniversary. A number of events was held throughout the week to celebrate this occasion. Over the past 25 years, the APG has grown from strength to strength, from its 13 founding members to now the largest FATF-Style Regional Body (FSRBs) in the global AML/CFT network.
Malaysia is very pleased to have chaired the APG over the last two years and in particular during its 25th anniversary celebrations. The APG Annual Meeting this week marked the end of Malaysia’s tenure as the APG Co-Chair. During the co-chairmanship of APG, Malaysia concluded a set of priorities to support capacity building in the areas of data analytics, public-private partnership (PPP), and supervision of the Designated Non-Financial Businesses and Professions (DNFBPs).
The outcomes achieved this week will better position the APG and its member countries and jurisdictions to fight financial crime and defeat efforts by criminals and terrorists to subvert the integrity of the international financial system. The APG also welcomed Canada as the new APG Co-Chair (rotating), succeeding Malaysia.
Bank Negara Malaysia
Asia / Pacific Group on Money Laundering
Bank Negara Malaysia
29 July 2022
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29 Jul 2022 | Detailed Disclosure of International Reserves as at end-June 2022 | https://www.bnm.gov.my/-/detailed-disclosure-of-international-reserves-as-at-end-june-2022-1 | null | null |
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Detailed Disclosure of International Reserves as at end-June 2022
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Detailed Disclosure of International Reserves as at end-June 2022
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In accordance with the International Monetary Fund’s (IMF) Special Data Dissemination Standard (SDDS) format, the detailed breakdown of international reserves provides forward-looking information on the size, composition and usability of reserves and other foreign currency assets, and the expected and potential future inflows and outflows of foreign exchange of the Federal Government and Bank Negara Malaysia over the next 12-month period.
The detailed breakdown of international reserves based on the SDDS format is shown in Tables I, II, III and IV.
As shown in Table I, official reserve assets amounted to USD109,025.1 million, while other foreign currency assets amounted to USD5.9 million as at end-June 2022.
As shown in Table II, for the next 12 months, the pre-determined short-term outflows of foreign currency loans, securities and deposits, which include among others, scheduled repayment of external borrowings by the Government and the maturity of foreign currency Bank Negara Interbank Bills, amounted to USD8,146.4 million. The short forward positions amounted to USD14,001.0 million as at end-June 2022, reflecting the management of ringgit liquidity in the money market. In line with the practice adopted since April 2006, the data excludes projected foreign currency inflows arising from interest income and the drawdown of project loans. Projected foreign currency inflows amount to USD2,117.1 million in the next 12 months.
As shown in Table III, the only contingent short-term net drain on foreign currency assets are Government guarantees of foreign currency debt due within one year, amounting to USD401.6 million. There are no foreign currency loans with embedded options, no undrawn, unconditional credit lines provided by or to other central banks, international organisations, banks and other financial institutions. Bank Negara Malaysia also does not engage in foreign currency options vis-à-vis ringgit.
Overall, the detailed breakdown of international reserves under the IMF SDDS format indicates that as at end-June 2022, Malaysia’s international reserves remain usable. Related Assets
International Reserves and Foreign Currency Liquidity (30 June 2022)
Bank Negara Malaysia
29 July 2022
© Bank Negara Malaysia, 2022. All rights reserved.
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22 Jul 2022 | International Reserves of Bank Negara Malaysia as at 15 July 2022 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-15-july-2022 | null | null |
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International Reserves of Bank Negara Malaysia as at 15 July 2022
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International Reserves of Bank Negara Malaysia as at 15 July 2022
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The international reserves of Bank Negara Malaysia amounted to USD107.0 billion as at 15 July 2022. The reserves position is sufficient to finance 5.7 months of imports of goods and services[1], and is 1.1 times of the total short-term external debt.
[1] Under the previous import coverage measure, reserves is sufficient to finance 6.4 months of retained imports of goods. For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27, which can be accessed at 4Q QB 2021
Related Assets
BNM Statement of Assets & Liabilities - 15 July 2022
Bank Negara Malaysia
22 July 2022
© Bank Negara Malaysia, 2022. All rights reserved.
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22 Jul 2022 | University of Nottingham Malaysia students win Tun Ismail Ali Chair Monetary Policy Challenge 2022 | https://www.bnm.gov.my/-/tiac-mp-challenge-2022-winner | null | null |
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University of Nottingham Malaysia students win Tun Ismail Ali Chair Monetary Policy Challenge 2022
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University of Nottingham Malaysia students win Tun Ismail Ali Chair Monetary Policy Challenge 2022
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Imran Danial bin Adi Firdaus, Lee Wenn Shian and Wan Zulyahya Amri bin Shoberi, students from University of Nottingham Malaysia receiving the top prize at the Tun Ismail Ali Monetary Policy Challenge 2022 from Bank Negara Malaysia Assistant Governor Fraziali Ismail (left).
Three students from University of Nottingham Malaysia have emerged as the winning team for the Tun Ismail Ali Chair (TIAC) Monetary Policy Challenge 2022. The team consists of Imran Danial bin Adi Firdaus, Lee Wenn Shian and Wan Zulyahya Amri bin Shoberi, under the guidance of team advisor Dr. Teo Wing Leong.
The TIAC Challenge started in 2018 to promote interest in monetary and public policy as well as encourage more discourse on contemporary issues among undergraduate students. After a two-year hiatus due to the COVID-19 pandemic, the TIAC Challenge returned this year with a new focus on the formulation of monetary policy. Participants were tasked to assess the economic conditions of a fictitious economy and decide on the appropriate monetary policy action. Twenty-seven shortlisted students from 7 universities competed in the two-day challenge held at Sasana Kijang, BNM.
The team brought home a cash prize of RM5,000 as well as internship placements with BNM. Judges were impressed by the team’s in-depth assessment of the economy and the rationale underlying their policy decision.
BNM Assistant Governor Fraziali Ismail said, “The challenge this year aims to expose our undergraduates to the discussions and the deliberations that take place at BNM’s Monetary Policy Committee in setting the OPR. This is part of BNM’s efforts to raise public understanding of the role of BNM in promoting monetary stability.”
TIAC was founded in 2000, in memory of BNM’s first Malaysian Governor, the late Tun Ismail Ali. It aims to encourage research, commentary, and interaction on issues related to monetary and financial policies.
Bank Negara Malaysia
22 July 2022
© Bank Negara Malaysia, 2022. All rights reserved.
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07 Jul 2022 | International Reserves of Bank Negara Malaysia as at 30 June 2022 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-30-june-2022 | null | null |
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International Reserves of Bank Negara Malaysia as at 30 June 2022
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International Reserves of Bank Negara Malaysia as at 30 June 2022
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The international reserves of Bank Negara Malaysia amounted to USD109.0 billion as at 30 June 2022. The reserves level has taken into account the quarterly foreign exchange revaluation changes. The reserves position is sufficient to finance 5.8 months of imports of goods and services[1], and is 1.1 times total short-term external debt.
[1] Under the previous import coverage measure, reserves is sufficient to finance 6.7 months of retained imports of goods. For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27, which can be accessed at 4Q QB 2021. Related Assets
BNM Statement of Assets & Liabilities - 30 June 2022
Bank Negara Malaysia
7 July 2022
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06 Jul 2022 | Monetary Policy Statement | https://www.bnm.gov.my/-/monetary-policy-statement-06072022 | null | null |
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Monetary Policy Statement
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Monetary Policy Statement
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At its meeting today, the Monetary Policy Committee (MPC) of Bank Negara Malaysia decided to increase the Overnight Policy Rate (OPR) by 25 basis points to 2.25 percent. The ceiling and floor rates of the corridor of the OPR are correspondingly increased to 2.50 percent and 2.00 percent, respectively.
The reopening of the global economy and the improvement in labour market conditions continue to support the recovery of economic activity. However, these have been partly offset by the impact from rising cost pressures, the military conflict in Ukraine and strict containment measures in China. Inflationary pressures have continued to increase mainly due to elevated commodity prices and strong demand conditions, despite some easing in global supply chain conditions. Consequently, central banks are expected to continue adjusting their monetary policy settings, some at a faster pace, to reduce inflationary pressures. Going forward, the pace of global growth is expected to moderate, and will continue to be affected by the elevated cost pressures, conflict in Ukraine, global supply chain conditions, and financial market volatility.
For the Malaysian economy, economic activity continued to strengthen in recent months. Exports and retail spending indicators affirm the positive growth momentum, supported by the transition to endemicity. In the labour market, the unemployment rate declined further, with higher labour participation and improving income prospects. Looking ahead, while external demand is expected to moderate, weighed by headwinds to global growth, economic growth will be supported by firm domestic demand. Additionally, the reopening of international borders since 1 April 2022 would facilitate the recovery in tourism-related sectors. Investment activity and prospects continue to be supported by the realisation of multi-year projects. However, downside risks to growth continue to stem from a weaker-than-expected global growth, further escalation of geopolitical conflicts, and worsening supply chain disruptions.
Year-to-date, headline inflation has averaged 2.4%. While it is projected to remain within the 2.2% - 3.2% forecast range for the year, headline inflation may be higher in some months due mainly to the base effect from electricity prices. Underlying inflation, as measured by core inflation, is expected to average between 2.0% - 3.0% in 2022 as demand continues to improve amid the high-cost environment. Nevertheless, the extent of upward pressures on inflation will remain partly contained by existing price controls, fuel subsidies and the continued spare capacity in the economy. The inflation outlook continues to be subject to global commodity price developments, arising mainly from the ongoing military conflict in Ukraine and prolonged supply-related disruptions, as well as domestic policy measures.
Amid the positive growth prospects for the Malaysian economy, the MPC decided to further adjust the degree of monetary accommodation. This is consistent with the MPC’s view that the unprecedented conditions that necessitated a historically low OPR have continued to recede. At the current OPR level, the stance of monetary policy remains accommodative and supportive of economic growth. The MPC will continue to assess evolving conditions and their implications on the overall outlook to domestic inflation and growth. Any adjustments to the monetary policy settings going forward would be done in a measured and gradual manner, ensuring that monetary policy remains accommodative to support a sustainable economic growth in an environment of price stability.
Bank Negara Malaysia
6 July 2022
© Bank Negara Malaysia, 2022. All rights reserved.
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30 Jun 2022 | Monetary and Financial Developments in May 2022 | https://www.bnm.gov.my/-/monetary-and-financial-developments-in-may-2022 | null | null |
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Monetary and Financial Developments in May 2022
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Monetary and Financial Developments in May 2022
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Headline inflation increased to 2.8% in May
Headline inflation increased to 2.8% (April: 2.3%), reflecting the continued uptrend in core inflation in line with improvement in economic activity amid lingering cost pressures.
As expected, core inflation[1] was higher at 2.4% (April: 2.1%), due mainly to higher inflation for both food away and food at home, rental, and repair and maintenance for personal transport.
This uptick occurred amid costlier imported food inputs, mainly due to war in Ukraine and inclement weather conditions, an increase in demand during the festive season and the reopening of Malaysia's international borders.
Continued strength in manufacturing production in April 2022
Manufacturing IPI continued to expand above long-term average in
April 2022 at 6.2% (2011-2019 avg: 4.8%).
Growth was driven mainly by the E&E cluster which recorded
double-digit growth for the 8th consecutive month since Sep 2021 amid strong demand globally.
The consumer-related cluster, particularly motor vehicle production, also supported growth as producers fulfil backlogs post-FMCO.
Slight moderation in net financing growth
Net financing[2] growth moderated slightly to 4.5% (April: 4.6%), due to slower growth in outstanding corporate bonds (3.4%; April: 3.7%), while outstanding loan growth was sustained at 5.0%.
For households, outstanding loan growth was slightly higher
(5.0%; April: 4.9%). This reflected the strong growth in loan disbursements (17.8%; April: 10.8%), with continued higher growth in loan repayments observed (9.1%; April: 8.5%).
Outstanding business loans registered slower growth (5.4%; April: 5.7%), as loan repayments growth outpaced that of disbursements. Although the growth in loan disbursements moderated across most purposes, it remained elevated (20.8%; April: 37.2%; 2017-19 average: 5.0%).
Adjustments in domestic financial markets remained orderly
Global financial conditions tightened significantly due to expectations for faster and larger policy rate hikes by advanced economies, especially the US, amid higher and more prolonged inflationary pressures. Nonetheless, domestic financial market adjustments remained orderly.
Notably, the 10-year MGS yield fell by 21.0 bps during the month, supported by foreign portfolio inflows into the domestic bond market. By contrast, regional bond yields rose by 24.5 bps on average.
The ringgit depreciated marginally by 0.4% in May while the FBM KLCI declined by 1.9%, in line with regional[3] equities (between -0.2% and
-3.7%) due to investors’ risk aversion amid the lockdowns in China.
Banks remained well-capitalised to support economic recovery
Capital ratios rose marginally in May, driven by valuation gains on available-for-sale financial instruments as bond yields eased temporarily during the period.
As at end-May 2022, the banking system recorded RM121.5 billion excess capital buffers[4].
The resilience of banks continued to be underpinned by sound asset quality
Overall gross and net impaired loans ratios remained broadly stable at 1.6% and 1.0%, respectively. This reflected the marginal increase in impairments from the business and household segments, following the tapering of repayment assistance measures since Q1.
Total provisions remained at prudent level accounting for 1.8% of total banking system loans and 109.1% of impaired loans.
As of end-May 2022, total provisions and regulatory reserves stood at RM 40.7 billion (end-April: RM 40.2 billion).
________
[1] Core inflation is computed by excluding price-volatile and price-administered items. It also excludes the estimated direct impact of tax policy changes.
[2] Refers to outstanding loans of the banking system (excluding development financial institutions (DFIs)) and outstanding corporate bonds.
[3] Regional countries include Singapore, Thailand, Indonesia and Korea.
[4] Refers to total capital above the regulatory minimum, which includes the capital conservation buffer (2.5%) and bank-specific higher minimum requirements. Related Assets
Monthly Highlights & Statistics in May 2022
Bank Negara Malaysia
30 June 2022
© Bank Negara Malaysia, 2022. All rights reserved.
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30 Jun 2022 | Detailed Disclosure of International Reserves as at end-May 2022 | https://www.bnm.gov.my/-/detailed-disclosure-of-international-reserves-as-at-end-may-2022-1 | null | null |
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Detailed Disclosure of International Reserves as at end-May 2022
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Detailed Disclosure of International Reserves as at end-May 2022
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In accordance with the IMF SDDS format, the detailed breakdown of international reserves provides forward-looking information on the size, composition and usability of reserves and other foreign currency assets, and the expected and potential future inflows and outflows of foreign exchange of the Federal Government and Bank Negara Malaysia over the next 12-month period.
The detailed breakdown of international reserves based on the SDDS format is shown in Tables I, II, III and IV. As shown in Table I, official reserve assets amounted to USD112,818.3 million, while other foreign currency assets amounted to USD3.3 million as at end-May 2022.
As shown in Table II, for the next 12 months, the pre-determined short-term outflows of foreign currency loans, securities and deposits, which include among others, scheduled repayment of external borrowings by the Government and the maturity of foreign currency Bank Negara Interbank Bills, amounted to USD6,224.9 million. The short forward positions amounted to USD11,321.1 million as at end-May 2022, reflecting the management of ringgit liquidity in the money market. In line with the practice adopted since April 2006, the data excludes projected foreign currency inflows arising from interest income and the drawdown of project loans. Projected foreign currency inflows amount to USD2,203.9 million in the next 12 months.
As shown in Table III, the only contingent short-term net drain on foreign currency assets are Government guarantees of foreign currency debt due within one year, amounting to USD401.6 million. There are no foreign currency loans with embedded options, no undrawn, unconditional credit lines provided by or to other central banks, international organisations, banks and other financial institutions. Bank Negara Malaysia also does not engage in foreign currency options vis-à-vis ringgit.
Overall, the detailed breakdown of international reserves under the IMF SDDS format indicates that as at end-May 2022, Malaysia’s international reserves remain usable. Related Assets
International Reserves and Foreign Currency Liquidity (31 May 2022)
Bank Negara Malaysia
30 June 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
09 Jun 2022 | BNM steps up collaboration with banks and law enforcement agencies to combat new modus operandi by financial fraudsters | https://www.bnm.gov.my/-/combating-financial-fraud | null | null |
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BNM steps up collaboration with banks and law enforcement agencies to combat new modus operandi by financial fraudsters
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BNM steps up collaboration with banks and law enforcement agencies to combat new modus operandi by financial fraudsters
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1924 on
Thursday, 9 June 2022
9 Jun 2022
Bank Negara Malaysia (BNM) takes all forms of financial fraud seriously.
All licensed banks are required to adopt high standards of security, particularly for internet and mobile banking services. This includes routine security reviews and advisories issued by BNM to financial institutions to enhance existing controls and ensure adequate protection against latest threats, while maintaining efficient services for customers.
Fraud risk is constantly evolving, as scammers continue to devise more sophisticated means of defrauding the public. This includes new approaches of tricking bank account holders into revealing their banking details or installing malware on their devices. The financial industry and authorities therefore continue to remain vigilant against new modus operandi.
BNM has been collaborating with Polis Diraja Malaysia (PDRM), Malaysian Communications and Multimedia Commission (MCMC) and the financial industry to coordinate efforts in combating financial fraud and scam, and create greater public awareness on new fraud tactics. In addition to ensuring more effective preventive measures by financial institutions against new modus operandi, these efforts will also support the recovery of embezzled funds as well as timely and effective investigations by the relevant law enforcement agencies.
The public is advised to be extra vigilant in safeguarding their personal information and downloading files or applications from unverified sources onto mobile devices. Users of financial services also have an important role to keep themselves informed of emerging threats through advisories issued by financial institutions, BNM and other authorities, and taking precautions to protect themselves. Information on the latest threats and measures that individuals can take to protect themselves against evolving threats can be obtained from the Amaran Scam Facebook Page at https://www.facebook.com/amaranpenipuan/.
Account holders who encounter suspicious transactions involving their bank accounts should immediately:
Notify their banks;
Contact the following numbers:
The Commercial Crime Investigation Department (CCID) Scam Response Centre at 03-2610 1559/1599
BNMTELELINK at 1-300-88-5465This will facilitate immediate measures by CCID in coordination with BNM and banks to help protect affected accounts; and
Lodge a police report to facilitate investigation.
For cases of unauthorised transactions, BNM requires all licensed banks to ensure proper communication, as well as fair redress for customers who have taken necessary steps to protect themselves and have not acted fraudulently. All banks have been reminded to ensure that they provide the appropriate assistance and information to affected customers on protecting their accounts as well as the status of the banks’ investigations.
Appropriate supervisory and enforcement actions will also be taken by BNM in cases where banks have not taken adequate steps to protect their customers or failed to comply with the relevant regulations.
Bank Negara Malaysia
9 June 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
08 Jun 2022 | International Reserves of Bank Negara Malaysia as at 31 May 2022 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-31-may-2022 | null | null |
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International Reserves of Bank Negara Malaysia as at 31 May 2022
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International Reserves of Bank Negara Malaysia as at 31 May 2022
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Wednesday, 8 June 2022
8 Jun 2022
The international reserves of Bank Negara Malaysia amounted to USD112.8 billion as at 31 May 2022. The reserves position is sufficient to finance 5.7 months of imports of goods and services[1], and is 1.1 times total short-term external debt.
[1] Under the previous import coverage measure, reserves is sufficient to finance 6.8 months of retained imports of goods. For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27. Related Assets
BNM Statement of Assets & Liabilities - 31 May 2022
Bank Negara Malaysia
8 June 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
31 May 2022 | Monetary and Financial Developments in April 2022 | https://www.bnm.gov.my/-/monetary-and-financial-developments-in-april-2022 | https://www.bnm.gov.my/documents/20124/7306093/i_en.pdf | null |
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Monetary and Financial Developments in April 2022
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Monetary and Financial Developments in April 2022
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1500 on
Tuesday, 31 May 2022
31 May 2022
Headline inflation increased to 2.3% in April
Headline inflation increased to 2.3% (March: 2.2%), while core inflation was marginally higher at 2.1% (March: 2.0%).
The increase in inflation was due mainly to higher inflation for food away from home, air travel fares, and repair and maintenance for personal transport.
Continued strength in export growth
Exports grew by 20.7% (March: 25.3%), reflecting continued strength across Malaysia’s export products.
Moving forward, export performance will continue to benefit from external demand and global technology upcycle. In addition, high commodity prices and improving production will provide further impetus to exports.
Nonetheless, the trade outlook remains contingent on the global supply chain disruptions and the military conflict in Ukraine.
Sustained net financing growth in April
Net financing continued to grow at 4.6%, supported by higher growth in outstanding loans (5.0%; March: 4.6%), amid some moderation in the growth of outstanding corporate bonds (3.7%; March: 4.6%).
Outstanding household loan growth was sustained at 4.9%, reflecting steady growth across most purposes. Growth in loan disbursements during the month was slightly higher (10.8%; March: 10.2%) amid a pickup in loan repayments growth (8.5%; March: 3.2%).
For businesses, outstanding loan growth increased (5.7%; March: 4.5%), reflecting higher growth in working capital loans (8.3%; March: 6.3%) as the growth in working capital disbursements outpaced that of repayments.
Bond yields increased, driven mainly by external developments
In April, global financial conditions tightened due to expectations of faster US monetary policy normalisation and higher investor risk aversion due to the military conflict in Ukraine. Despite spillovers to the domestic financial markets, adjustments remained orderly amid healthy average trading volumes.
The 10-year MGS yields rose by 53 basis points, alongside higher bond yields globally. The FBM KLCI increased marginally by 0.8% due to improved prospects for the domestic economy as Malaysia transitioned into endemicity.
The ringgit depreciated, in line with major and regional currencies, following foreign portfolio outflows during the month, as investors re-allocated their funds into safe-haven assets such as in the US.
Banks’ liquidity and funding positions remain supportive of intermediation activities
The banking system continued to maintain healthy liquidity positions and recorded a strong Liquidity Coverage Ratio of 156.7%.
Stable funding growth, in particular of retail deposits, continue to support banks’ intermediation activities.
The aggregate Net Stable Funding Ratio (NSFR) stood at 119.0% as of March 2022.
Asset quality in the banking system remained intact
Overall gross impaired and net impaired loans ratios remained stable at 1.6% and 0.9% respectively.
Banks continue to be prudent in loan provisioning to buffer against potential credit losses, with total provisions and regulatory reserves amounting to RM 40.2 billion (March: RM 39.8 billion).
Total provisions stood at 1.8% as a share of total banking system loans and 113.4% of impaired loans.
Monthly Highlights [PDF] Related Assets
Monthly Highlights & Statistics in April 2022
Bank Negara Malaysia
31 May 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
Monthly Highlights May 2023
Monthly Highlights
Headline inflation declined further to 2.8% in May
May 2023
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation moderated to 2.8% (April 2023:
3.3%). This decline was largely due to non-core
CPI components, particularly lower inflation for
fuel (-0.2 percentage points, ppt) and fresh food
(-0.1ppt).
• Core inflation also declined slightly to 3.5% (April
2023: 3.6%) amid lower inflation for
communication services.
3.3
2.8
3.6 3.5
0.00
2.00
4.00
0.0
2.0
4.0
J
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Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
1.6
5.1
4.6
0
1
2
3
4
5
6
7
May-22 Sep-22 Jan-23 May-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Credit to the Private Non-Financial Sector1,2
1
Growth in credit to the private non-financial sector improved in May
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
Contribution to growth (ppt)
• Credit to the private non-financial sector expanded
by 4.0% as at end-May (April 2023: 3.7%), driven
mainly by higher growth in credit to businesses
(2.8%; April 2023: 2.5%).
• Outstanding corporate bonds grew by 4.6% (April
2023: 4.4%), while outstanding business loans
expanded by 1.6% (April 2023: 1.0%). The higher
business loan growth reflected improvement in
loans for both working capital and investments to
SMEs and non-SMEs.
• In the household segment, outstanding loan
growth was sustained at 5.1% (April 2023: 5.0%),
supported by higher growth across most loan
purposes. Of note, household loan growth
continued to be driven by loans for the purchase of
houses and cars, which grew by 7.0% and 8.4%,
respectively (April 2023: 6.8% and 8.0%).
2.7 2.6 2.5 2.6
0.7 0.7 0.3 0.5
1.1 0.9
0.9 1.0
4.5 4.2
3.7 4.0
Feb-23 Mar-23 Apr-23 May-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Index of wholesale and retail trade growth moderated in April
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded more moderately by 4.7% in
April 2023 (March 2023: 9.4%). The lower growth
was due mainly to the decline in the motor vehicle
segment.
• However, the retail segment continued to record a
double-digit growth of 10.0% (March 2023:
13.8%), supported by sales in non-specialised and
other specialised stores1.
• On a month-on-month seasonally adjusted basis,
the index increased at a faster pace of 6.5%
(March 2023: -0.9%).
1 Other goods in specialised stores includes clothing, footwear,
pharmaceuticals, cosmetics, watches, jewellery and optical goods.
10.6
9.4
4.7
-2
3
8
13
18
23
28
33
Apr-22 Jun-22 Aug-22 Oct-22 Dec-22 Feb-23 Apr-23
ppt, %yoy
Motor vehicles Retail Wholesale
Index of Wholesale and Retail Trade
Monthly Highlights
2
May 2023
Domestic financial markets were largely affected by external factors
Financial Market Performance in May 2023
-18.0
-0.5
-1.1
-3.0
-2.0
-3.4
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-20 -15 -10 -5 0
May-23 Apr-23
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
1Regional countries comprise Singapore, Thailand, Philippines, Indonesia, and Korea
Source: Bank Negara Malaysia, Bursa Malaysia
• Global investors maintained a risk-off approach
throughout May, as concerns over the impact of the
US debt ceiling crisis and the weaker-than-
expected rebound in China’s economy weighed on
global financial markets.
• As a result, the ringgit depreciated against the US
dollar by 3.4% (regional1 average: -1.2%). Similarly,
the FBM KLCI declined by 2.0% (regional1 average:
-1.3%).
• Nonetheless, the 10-year MGS yields decreased
slightly by 3 basis points, supported by non-resident
inflows into the domestic bond market.
Banks maintained strong liquidity and funding positions to support intermediation
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
151.2% (April 2023: 154.3%).
• The aggregate loan-to-fund ratio remained stable at
81.8% (April 2023: 82.1%).
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.8
151.2
0
40
80
120
160
70
75
80
85
90
95
M
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A
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2
3
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2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
remained broadly unchanged at 1.80% (April
2023: 1.78%) and 1.10% (April 2023: 1.10%),
respectively.
• Loan loss coverage ratio (including regulatory
reserves) remained at a prudent level of 114.1%
of impaired loans, with total provisions accounting
for 1.7% of total loans.
%
1.8
1.1
1.7
0.5
1.0
1.5
2.0
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M
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3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
April 2023 Monthly Highlights
Slide 1
Slide 2
| Press Release |
31 May 2022 | Detailed Disclosure of International Reserves as at end-April 2022 | https://www.bnm.gov.my/-/detailed-disclosure-of-international-reserves-as-at-end-april-2022-1 | null | null |
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Detailed Disclosure of International Reserves as at end-April 2022
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Detailed Disclosure of International Reserves as at end-April 2022
Embargo :
For immediate release
Not for publication or broadcast before
1200 on
Tuesday, 31 May 2022
31 May 2022
In accordance with the International Monetary Fund (IMF)’s Special Data Dissemination Standard (SDDS) format, the detailed breakdown of international reserves provides forward-looking information on the size, composition and usability of reserves and other foreign currency assets, and the expected and potential future inflows and outflows of foreign exchange of the Federal Government and Bank Negara Malaysia over the next 12-month period.
The detailed breakdown of international reserves based on the SDDS format is shown in Tables I, II, III and IV.
As shown in Table I, official reserve assets amounted to USD112,460.6 million, while other foreign currency assets amounted to USD3.5 million as at end-April 2022.
As shown in Table II, for the next 12 months, the pre-determined short-term outflows of foreign currency loans, securities and deposits, which include among others, scheduled repayment of external borrowings by the Government and the maturity of foreign currency Bank Negara Interbank Bills, amounted to USD6,294.7 million. The short forward positions amounted to USD9,081.9 million as at end-April 2022, reflecting the management of ringgit liquidity in the money market. In line with the practice adopted since April 2006, the data excludes projected foreign currency inflows arising from interest income and the drawdown of project loans. Projected foreign currency inflows amount to USD2,259.3 million in the next 12 months.
As shown in Table III, the only contingent short-term net drain on foreign currency assets is Government guarantees of foreign currency debt due within one year, amounting to USD401.6 million. There are no foreign currency loans with embedded options, no undrawn, unconditional credit lines provided by or to other central banks, international organisations, banks and other financial institutions. Bank Negara Malaysia also does not engage in foreign currency options vis-à-vis ringgit.
Overall, the detailed breakdown of international reserves under the IMF SDDS format indicates that as at end-April 2022, Malaysia’s international reserves remain usable. Related Assets
International Reserves and Foreign Currency Liquidity (30 April 2022)
Bank Negara Malaysia
31 May 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
23 May 2022 | International Reserves of Bank Negara Malaysia as at 13 May 2022 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-13-may-2022-1 | https://www.bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf | null |
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International Reserves of Bank Negara Malaysia as at 13 May 2022
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International Reserves of Bank Negara Malaysia as at 13 May 2022
Embargo :
For immediate release
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1500 on
Monday, 23 May 2022
23 May 2022
The international reserves of Bank Negara Malaysia amounted to USD111.4 billion as at 13 May 2022. The reserves position is sufficient to finance 5.6 months of imports of goods and services[1], and is 1.1 times of the total short-term external debt.
[1] Under the previous import coverage measure, reserves is sufficient to finance 6.7 months of retained imports of goods. For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27, which can be accessed at bnm.gov.my/-/quarterly-bulletin-4q-2021. Related Assets
BNM Statement of Assets & Liabilities - 13 May 2022
Bank Negara Malaysia
23 May 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
Monthly Highlights
Headline inflation declined to 3.4% in March
March 2023
1
3.7 3.4
3.9 3.8
0.00
2.00
4.00
0.0
2.0
4.0
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Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation declined to 3.4% in March
(February: 3.7%) due mainly to lower inflation for
fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation moderated slightly to 3.8% during
the month (February: 3.9%), driven largely by
lower inflation for food away from home.
1
Robust growth in volume index driven by retail and motor vehicles
Index of Wholesale and Retail Trade
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded by 10.6% in February 2023
(January: 8.5%).
• The higher growth was driven mainly by retail
sales in non-specialised stores (e.g., department
stores) followed by continued strength in
purchases of motor vehicles amid the ongoing
fulfilment of backlog orders.
• On a month-on-month seasonally adjusted basis,
the index accelerated by 5.5% (January: 0.2%).
9.5 8.510.6
0
10
20
30
40
Feb-
22
Mar-
22
Apr-
22
May-
22
Jun-
22
Jul-
22
Aug-
22
Sep-
22
Oct-
22
Nov-
22
Dec-
22
Jan-
23
Feb-
23
ppt, %yoy
Motor vehicles Retail Wholesale
2.4
5.2
4.4
0
1
2
3
4
5
6
7
Mar-22 Jul-22 Nov-22 Mar-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Growth in credit to the private non-financial sector moderated
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
2.7 2.6 2.7 2.6
1.0 0.6 0.7 0.7
1.0
1.1 1.1 0.9
4.7 4.3 4.5 4.2
Dec-22 Jan-23 Feb-23 Mar-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Contribution to growth (ppt)
• Credit to the private non-financial sector grew by
4.2% as at end-March (February: 4.5%), attributed
to slower growth in credit to businesses (3.2%;
February: 3.7%).
• While growth in outstanding corporate bonds
moderated (4.4%; February : 5.5%), outstanding
business loan growth was sustained at 2.4%
(February: 2.4%). This was supported by the
continued growth in both working capital (2.2%;
February: 1.9%) and investment-related loans
(4.3%; February: 4.2%).
• Outstanding household loan growth remained
broadly stable (5.2%; February: 5.3%), supported
by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan
growth for the purchase of securities (-6.9%;
February: -3.3%).
Credit to the Private Non-Financial Sector1,2
Monthly Highlights
March 2023
Domestic financial market conditions remained orderly
Financial Market Performance in March 2023
Source: Bank Negara Malaysia, Bursa Malaysia
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
11.0
-2.1
-5.3
0.0
-2.2
1.7
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-10 -5 0 5 10 15
Mar-23
Feb-23
• In March, global financial markets were affected by
the emergence of banking sector stress in some
major economies. As spillovers were contained thus
far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds
improved.
• In line with the performance of regional currencies,
the ringgit appreciated by 1.7% against the US
dollar. Conditions in the domestic bond market
also remained stable.
• The FBM KLCI declined by 2.2% during the month.
2
Banks maintained strong liquidity and funding positions to support intermediation
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.9
157.4
0
40
80
120
160
70
75
80
85
90
95
M
a
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2
2
A
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M
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3
M
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2
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% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
increased slightly to 1.8% (February-23: 1.8%) and
1.2% (February-23: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory
reserves) continue to record a prudent level of
110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
%
1.8
1.2
1.7
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
M
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M
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2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
157.4% (February-23: 152.7%).
• The aggregate loan-to-fund ratio remained stable at
81.9% (February-23: 81.6%).
PRESS RELEASE
Ref. No.: 04/23/05 EMBARGO: Not for publication or
broadcast before 1500 hours on
Friday, 28 April 2023
Monthly Highlights – March 2023
Headline inflation declined to 3.4% in March
• Headline inflation declined to 3.4% in March (February: 3.7%) due mainly
to lower inflation for fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation1 moderated slightly to 3.8% during the month
(February: 3.9%), driven largely by lower inflation for food away from
home.
Robust growth in volume index driven by retail and motor vehicles
• The Index of Wholesale and Retail Trade (IOWRT) expanded by 10.6%
in February 2023 (January: 8.5%).
• The higher growth was driven mainly by retail sales in non-specialised
stores (e.g., department stores) followed by continued strength in
purchases of motor vehicles amid the ongoing fulfilment of backlog
orders.
• On a month-on-month seasonally adjusted basis, the index accelerated
by 5.5% (January: 0.2%).
1 Core inflation is computed by excluding price-volatile and price-administered items.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth in credit to the private non-financial sector2,3 moderated
• Credit to the private non-financial sector grew by 4.2% as at end-March
(February: 4.5%), attributed to slower growth in credit to businesses
(3.2%; February: 3.7%).
• While growth in outstanding corporate bonds moderated (4.4%;
February: 5.5%), outstanding business loan growth was sustained at
2.4% (February: 2.4%). This was supported by the continued growth in
both working capital (2.2%; February: 1.9%) and investment-related
loans (4.3%; February: 4.2%).
• Outstanding household loan growth remained broadly stable (5.2%;
February: 5.3%), supported by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan growth for the purchase of
securities (-6.9%; February: -3.3%).
Domestic financial market conditions remained orderly
• In March, global financial markets were affected by the emergence of
banking sector stress in some major economies. As spillovers were
contained thus far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds improved.
• In line with the performance of regional currencies, the ringgit
appreciated by 1.7% against the US dollar. Conditions in the domestic
bond market also remained stable.
• The FBM KLCI declined by 2.2% during the month.
Banks maintained strong liquidity and funding positions to support
intermediation
• Banks continued to record healthy liquidity buffers with the aggregate
Liquidity Coverage Ratio at 157.4% (February: 152.7%).
2 Comprises loans to households and non-financial corporations from the banking system and development financial
institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
3 Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced
to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
• The aggregate loan-to-fund ratio remained stable at 81.9%
(February: 81.6%).
Asset quality in the banking system remained intact
• Overall gross and net impaired loans ratios increased slightly to 1.8%
(February: 1.8%) and 1.2% (February: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory reserves) continues to
record a prudent level of 110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
Bank Negara Malaysia
28 April 2023
20230428_BNM Monthly Highlights-March_en
Slide 1
Slide 2
20230428_BNM PR_Monthly Highlights-Mar 2023_eng
| Press Release |
23 May 2022 | BNM Launches LKIM's 50th Anniversary Commemorative Coins | https://www.bnm.gov.my/-/lkim-50years-coins | null | null |
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BNM Launches LKIM's 50th Anniversary Commemorative Coins
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BNM Launches LKIM's 50th Anniversary Commemorative Coins
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0900 on
Monday, 23 May 2022
23 May 2022
Bank Negara Malaysia announces today the issuance of commemorative coins in conjunction with the 50th Anniversary of Lembaga Kemajuan Ikan Malaysia (LKIM).
The coins were launched by Minister of Agriculture and Food Industries, YB Datuk Seri Dr. Ronald Kiandee in an event at Wisma LKIM on 14 April 2022.
The commemorative coins will be issued in two denominations:
1. Coloured Sterling Silver Commemorative Coin (proof)
The coin weighs 31 grams and is made of sterling silver with 92.5 purity. It has a face value of RM10 and will be sold at RM253 a piece. The mintage quantity is 1,000 pieces.
2. Nordic Gold Brilliant Uncirculated (B.U.) Commemorative Coin
This coin weighs 8.5 grams and is made of copper and several other metals. It has a face value of RM1 and will be sold at RM13.20 a piece. The mintage quantity is 10,000 pieces.
These commemorative coins are also available for sale in a Set of 2. Each Set of 2 is priced at RM308. Each set comprises one coloured sterling silver proof coin and one Nordic gold proof coin. A total of 1,000 sets will be available for purchase.
Please refer to Appendix I for the detailed specifications of these commemorative coins.
Coin design
The design of the commemorative coins is as follows:
Obverse
The text "50 TAHUN LEMBAGA KEMAJUAN IKAN MALAYSIA” is shown on the left circumference of the coins.
The image on the coins features an aerial view of a fisherman pulling his net. Filled with fresh fish from the blue sea (coloured sterling silver coins only), it symbolises his skills and experience and the bounty of Malaysia's water.
Reverse
The text "BANK NEGARA MALAYSIA”, as the issuing authority of these numismatic coins, is shown on the top circumference of the coin, with the official logo of LKIM's golden jubilee featured immediately below in the centre. The bottom segment features a 3D wave sculpture motif, symbolising the challenges and opportunities faced by the fishing industry. The text of "10 RINGGIT” and "1 RINGGIT” as the face value of the coins are shown at the bottom circumference.
Sale of commemorative coins
To provide a fair opportunity for members of the public to buy these limited‑edition coins, there will be a purchase limit of one Set of 2, one coloured sterling silver coin (proof) and up to five Nordic gold (B.U.) coins per person.
Members of the public can place their orders at duit.bnm.gov.my from 10.00 a.m., Monday, 23 May 2022 to 11.00 p.m., Friday, 3 June 2022.
Members of the public are advised to place their orders through the Bank Negara Malaysia online system and not with or through any other party or unauthorised ordering facility. All orders will be considered, and there will be no preference given to orders based on the order date and time. In the event of oversubscription, balloting will take place.
Note: All prices are inclusive of 10% Sales and Services Tax (SST).
Appendix I
Technical Specifications
Category
Metal
Alloy
Face Value (RM)
Diameter
(mm)
Weight
(g)
Mintage Quantity(pcs/ set)
Price
(RM)
Single
Coloured Sterling Silver (proof)
Ag 92.5
10
40.7
31
1,000
253
Nordic Gold (B.U.)
Cu89 Zn5 Al5 Sn1
1
30
8.5
10,000
13.20
Set of 2
Coloured Sterling Silver (proof) and
Nordic Gold (proof)
Ag 92.5 and Cu89 Zn5 Al5 Sn1
10 and 1
40.7 and
30
31 and
8.5
1,000
308
Note: Prices stated above are inclusive of 10% SST
Bank Negara Malaysia
23 May 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
13 May 2022 | Economic and Financial Developments in Malaysia in the First Quarter of 2022 | https://www.bnm.gov.my/-/qb22q1_en_pr | https://www.bnm.gov.my/documents/20124/7121127/qb22q1_slides.pdf, https://www.bnm.gov.my/documents/20124/7121127/qb22q1_en_table1.pdf | null |
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Economic and Financial Developments in Malaysia in the First Quarter of 2022
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Economic and Financial Developments in Malaysia in the First Quarter of 2022
Embargo :
For immediate release
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1200 on
Friday, 13 May 2022
13 May 2022
The Malaysian economy grew by 5.0% in the first quarter (4Q 2021: 3.6%)
The Malaysian economy registered a positive growth of 5.0% in the first quarter of 2022 (4Q 2021: 3.6%). This was mainly supported by improving domestic demand as economic activity continued to normalise with the easing of containment measures. The improvement also reflects the recovery in the job market, with the unemployment rate declining further to 4.1% (4Q 2021: 4.3%), as well as continued policy support. Strong external demand amid the continued upcycle in global technology provided further lift to growth. On the supply side, services and manufacturing sectors continued to drive economic growth, expanding by 6.5% and 6.6% respectively. On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 3.9% (4Q 2021: 4.6%).
Headline inflation moderated to 2.2% during the quarter (4Q 2021: 3.2%). This mainly reflects the smaller contribution from the dissipating base effect from lower domestic retail fuel prices last year, and the absence of the base effect from electricity tariff rebates implemented in 2020. Core inflation increased to 1.7% during the quarter (4Q 2021: 0.8%). This reflects price adjustments amid the higher costs and improving demand conditions, with price increases being more noticeable specifically for food items due to supply-related factors such as higher global commodity prices.
Exchange rate developments
The ringgit depreciated by 0.7% against the US dollar in the first quarter of 2022 (YTD as at 11 May 2022: -4.7%), broadly in line with the movement of regional currencies (1Q 2022: -0.8%; YTD: -3.4%). This was due to the broad US dollar strength, driven by higher US interest rates, global risk-off sentiment given the conflict in Ukraine and expectations of modest growth in China. High commodity prices and Malaysia's recovery prospects had also cushioned the downward pressure on the ringgit from these external factors. Going forward, while domestic financial markets are subject to periods of high volatility, spillovers to domestic financial intermediation are expected to be contained. Malaysia’s strong external position and resilient banking system enable the economy to withstand external shocks.
Financing conditions
Net financing to the private sector grew by 4.5% (4Q 2021: 4.7%) amid lower growth in outstanding corporate bonds (4.6%; 4Q 2021: 5.4%). Outstanding loan growth was sustained at 4.4%. Business loan growth moderated to 4.3% (4Q 2021: 4.8%), reflecting lower growth in outstanding working capital loans amid continued high repayments growth. Growth in working capital loan disbursements, however, remained strong during the quarter (21.2%; 4Q 2021: 32.8%) in line with the recovery in economic activity. For households, outstanding loan growth increased across most purposes (4.8%; 4Q 2021: 4.2%), with robust growth in loan disbursements (12.7%; 4Q 2021: 9.5%). This reflects the continued demand for loans among households, particularly for the purchase of houses and cars. Household resilience continues to be supported by sound debt servicing capacity and healthy financial buffers at the aggregate level, with lending underpinned by prudent underwriting standards and loan affordability assessments by banks.
The Malaysian economy is expected to improve further in 2022
Commenting on the outlook for 2022, Bank Negara Malaysia Governor Tan Sri Nor Shamsiah said, “The domestic economy is expected to improve further this year, with growth projected at 5.3% to 6.3% as announced in March 2022. This is underpinned by stronger domestic demand, continued expansion in external demand, and further improvement in the labour market. Growth would also benefit from the easing of restrictions, reopening of international borders and implementation of investment projects”. Nevertheless, risks to Malaysia’s growth momentum remain. These include a weaker-than-expected global growth, further escalation of geopolitical conflicts, worsening supply chain disruptions, adverse developments surrounding COVID-19 and heightened financial market volatility.
For 2022, in an environment of high input costs and improving demand, headline inflation is projected to average between 2.2% and 3.2%. Underlying inflation, as measured by core inflation, is also expected to trend higher during the year, averaging between 2.0 to 3.0%. Several key factors are expected to partly contain upward pressure on prices, namely the existing price control measures and the continued spare capacity in the economy. Nonetheless, the inflation outlook remains subject to commodity price developments, arising mainly from the military conflict in Ukraine and prolonged supply-related disruptions. The outlook is also contingent on domestic policy measures on administered prices.
See also:
Table 1: GDP by Expenditure Components and Economic Activity
Presentation Slides (PDF)
Press Conference Video
Publication: Quarterly Bulletin First Quarter 2022Bank Negara Malaysia
13 May 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
GDP Q1 2022 Press Conference Slides
Sidang Akhbar
Prestasi Ekonomi Suku
13 Mei 2022
Pertama Tahun 2022
1
5.0 5.0 4.8
3.6 3.4 3.1 3.1
4.7
5.0
4.0
5.5
6.1
4.2
4.9
EA ID CN US SG KR TW
1Q22 4Q21
Real GDP Growth1
Global growth moderated in 1Q 2022
2
Note: 1) GDP for the fourth quarter of 2021 are advanced or preliminary estimates except for China, and Indonesia.
Source: CEIC, National authorities, S&P Global, IMF.
56.0
46.8
Oct Nov Dec Jan Feb Mar
Composite PMI
Emerging
Economies
Global Growth Developments
• Growth recovery supported
by economic re-openings
• Global trade remained
resilient despite headwinds
from the military conflict in
Ukraine and lockdowns in
China.
• Inflation in major advanced
economies remained
elevated due to high energy
prices and re-escalation of
supply chain disruptions,
amid environment of tight
labour market.
2022
Advanced
Economies
>50 = expansionary
Annual change (%)
2021
The Malaysian economy registered a stronger growth of 5.0% in 1Q 2022
0.7
-17.1
-2.5 -3.3
-0.5
15.9
-4.5
3.6
5.0
-0.9
-15.1
18.1
-3.1
2.4
-0.8
-2.7
4.6
3.9
-25
-20
-15
-10
-5
0
5
10
15
20
25
1Q-20 2Q-20 3Q-20 4Q-20 1Q-21 2Q-21 3Q-21 4Q-21 1Q-22
y-o-y
q-o-q SA
Real GDP Growth
Annual Growth
2021: 3.1%
2020: -5.5%
Annual change (%)
Source: Department of Statistics Malaysia
Factors supporting growth:
Expansion in domestic demand
Continued growth in external demand
3
Recovery in the labour market
Continued policy support
Monthly Real GDP Growth (%yoy)
Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22
2.7 6.2 2.0 4.3 5.2 5.4
Overall expansion in activities was mainly driven by services and manufacturing sectors
Source: Department of Statistics Malaysia
3
9.1
6.6
4Q-21 1Q-22
GDP, Annual change (%)
3.2
6.5
4Q-21 1Q-22
GDP, Annual change (%)
ManufacturingServices Agriculture
Continued demand for
semiconductors and
consumer related products
such as motor vehicles
Higher leisure-related
spending and business-
related activities amid
reopening of the economy
Oil palm output disrupted by
heavy rainfall
2.8
0.2
4Q-21 1Q-22
GDP, Annual change (%)
4
-0.6
-1.1
4Q-21 1Q-22
GDP, Annual change (%)
-12.2
-6.2
4Q-21 1Q-22
GDP, Annual change (%)
Mining Construction
Continued decline in output
weighed by maintenance
closures of oil & gas
facilities
Improvement in non-
residential activities and
implementation of small
scale projects
1.6
6.7
4Q-21 1Q-22
GDP, Annual change (%)
Private Consumption
Source: Department of Statistics Malaysia
Private Investment Public Investment Public Consumption Net exports
Spending driven by
recovery in labour market
conditions
Smaller contraction in
structures and continued
robust M&E investments
Improvement in gen.
govt. fixed assets
spending
Higher growth in supplies
and services spending
Import growth (11.1%)
outpacing export growth
(8.0%)
4
3.7
5.5
4Q-21 1Q-22
GDP, Annual change (%)
0.8
-26.5
GDP, Annual change (%)
Higher consumption and investment activities
Updated
-2.8
0.4
4Q-21 1Q-22
GDP, Annual change (%)
-3.4
-0.9
4Q-21 1Q-22
GDP, Annual change (%)
5
15.3
51.8
-15.4
-19.6
-1.4
3.0
40.5
-15.0
-20.1
-2.5
Current
Account
Balance
Goods Services Primary
Income
Secondary
Income
4Q21
1Q22
Lower current account surplus while foreign direct investment improved
Source: Department of Statistics Malaysia
6
RM billion
▪ Lower goods surplus as import growth outpaced
export growth
▪ Broadly sustained primary income deficit amid
continued investment income accrued to foreign
investors in Malaysia
Current Account Foreign Direct Investment
RM billion
Current Account (% of GDP)
1Q-22: 0.7%
4Q-21: 3.6%
18.5
3.5
0.8
14.2
24.4
5.4
10.0
8.9
Total Equity
Injections
Debt
Instruments
Reinvestment
of Earnings
4Q21
1Q22
▪ Improved FDI driven by higher equity injections and
larger inflows from debt instruments
▪ FDI was mainly channelled into the manufacturing
sector and financial services subsector
Updated
Source: Department of Statistics Malaysia and the Social Security Organisation
7
Labour market improvements continued as economic activity recovers
Private sector nominal wages
Employment improved amid lower jobless claims and
relatively sustained pace of hiring
Wages in the manufacturing and services sectors continued
to grow
Jobless claims
(thousand persons) Placement rate
(% of retrenched workers)
3.4
-4.0
6.0
2.3
4.7
4.1
1.4
-6.4
0.4
-2.6
1.2
5.0
2.1
-5.6
2.4
-0.9
2.5
4.7
1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22
Manufacturing Services Private sector
Annual change (%)
Note: Private sector wages refer to wages of workers in the manufacturing and services sectors.
Source: Department of Statistics Malaysia and Bank Negara Malaysia estimates
14.88
15.57 15.69 15.73 15.77
5.1
4.1 4.2 4.1 4.1
2.5
3
3.5
4
4.5
5
14
15
15
16
16
17
17
18
18
19
2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 Jan-22 Feb-22 Mar-22
T
h
o
u
s
a
n
d
s
Labour market indicators
Employment
(Millions of persons)
Unemployment rate
(% of labour force)
34.81
10.43
4.56 2.79 3.09
9
41
34
50
44
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 Jan-22 Feb-22 Mar-22
Jobless claims and placement rates
Growth to expand further driven by higher domestic demand
Upside risks from external and domestic demand
Downside risks from COVID-19, geopolitical
conflicts and cost pressures
8
The outlook will continue to be influenced by potential risk factorsIn 2022, growth will be supported by continued expansion in global
and domestic demand
Key factors supporting growth
2022
5.3% - 6.3%
Continued expansion in domestic and
external demand
Improvement in employment
and income prospects
Targeted policy measures
Reopening of international
borders
▲ Higher-than-expected global growth from faster rollout of boosters
and anti-viral treatments, and additional policy support
▲ Stronger-than-expected improvement in tourism-related sectors amid
reopening of borders
▲ Additional domestic policy measures
▼ Further escalation of geopolitical conflicts, worsening supply
disruptions and further increase in price of commodities
▼ Heightened financial market volatility leading to tightening financial
conditions
▼ Higher-than-expected cost and price pressures weighing on business
and household sentiments, and labour shortages
▼ Emergence of severe, vaccine-resistant VOCs
▲ Better-than-expected employment and income conditions supporting
household spending
3.2
2.2
4Q 2021 1Q 2022
Fuel (ppt) Price Admin ex Fuel (ppt) Core Inflation (ppt)
Price-Volatile Items (ppt) Headline Inflation (%)
Headline inflation moderated to 2.2% as core inflation increased to 1.7% during the quarter
• Headline Inflation moderated due mainly to the dissipating
base effects
• Core inflation increased amid improving demand and the
high cost environment
• While price increases were more broad-based, CPI items
recording above average inflation2/ largely driven by supply
factors
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
1/ Core inflation is computed by excluding price-volatile and price-administered items.
2/ Above average inflation is defined as annual inflation being 1 standard deviation above its 2011-2019 average.
Headline and Core Inflation1/ and Contribution to Headline Inflation
Headline inflation (%) / Contribution to headline inflation (ppt)
1.3 1.2 1.0 0.8 0.7 0.7 0.7 0.8
1.7
Q
1
-2
0
Q
2
-2
0
Q
3
-2
0
Q
4
-2
0
Q
1
-2
1
Q
2
-2
1
Q
3
-2
1
Q
4
-2
1
Q
1
-2
2
Core inflation (%)
9
Month-on-month price changes of CPI items
Unchanged
Share of CPI items (%)
21
14 14 10 13 12
33 46 50 63
35 31
46 40 36
27
52 57
2
0
1
1
-2
0
1
9
A
v
e
Q
1
2
0
2
1
Q
2
2
0
2
1
Q
3
2
0
2
1
Q
4
2
0
2
1
Q
1
2
0
2
2
Price
increase
Price
decline
Headline inflation to average between 2.2% and 3.2% in 2022
2021 2022f
2.5
2.2
3.2
2
Core inflation is expected to average higher for the year, reflecting
the improvement in economic activity and continued cost pressures
Core inflation is expected to trend higher to average
between 2.0% and 3.0% in 2022
Inflation Forecast for 2022
Headline inflation (%)
1
Households and Analyst Inflation Expectations
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates.
The inflation outlook continues to be subject to global commodity
price developments, as well as domestic policy measures on
administered prices
Core inflation (%)
2021 2022f
0.7
2.0
3.0
2.7
2.4
2022 2023-2027
Remains close to actual
historical average over the long-
term
Households and analyst inflation expectations remain anchored
Narrower spread indicates
inflation expectations remain
anchored
Longer-term – short term spread of
household inflation expectations1/, %
Average of analyst inflation
expectations, %
0.7
0.4
Q4 2021 Q1 2022
Source: BNM Consumer Sentiment Survey and Consensus Forecasts.
1/ The spread of household inflation expectations refers to the difference between the 2-3 years ahead
household inflation expectations and 1-year ahead household inflation expectations.
10
The MPC began reducing degree of accommodation amid firmer domestic growth trajectory
Source: Bank Negara Malaysia
1.0
1.5
2.0
2.5
3.0
3.5
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Overnight Policy Rate (OPR)
%
May 22:
2.00%
11
OPR increased by 25 basis points to
2.00% at the May 2022 MPC meeting
Firmer domestic growth underscored
decision to begin reducing the degree of
monetary accommodation
This will be done in a measured and
gradual manner, ensuring that monetary
policy remains accommodative to support a
sustainable economic growth in an
environment of price stability
Movement of the US Dollar Index and Exchange Rate against the US Dollar (%)
Bond yields increased while domestic equity market declined
marginally, mainly reflecting external developments
The ringgit depreciated amid a broad US dollar strength,
reflecting higher US interest rates and increased investor risk
aversion
Note: YTD data as at 11 May 2022
Source: Bursa Malaysia, Bloomberg, Insides
10-year
bond yields
(YTD
change, bps)
Equity
(YTD, %
change)
10-Year Sovereign Bond Yields and Equity Prices
Note: YTD data as at 11 May 2022
Source: Bank Negara Malaysia, Bloomberg
Domestic financial market conditions tightened amid higher bond yields while the equity
market declined marginally
* The US Dollar Index (or DXY) is an index of the value of the US dollar relative to a basket of foreign
currencies, namely EUR (57.6%), JPY (13.6%), GBP (11.9%), CAD (9.1%), SEK (4.2%), and CHF
(3.6%).
-17.4 -16.0 -15.3
-12.9
-9.0
-6.8
-2.7
-0.7 -0.5
3.3 3.6
U
S
C
h
in
a
H
K
K
o
re
a
J
a
p
a
n
P
h
ili
p
p
in
e
s
T
h
a
ila
n
d
M
a
la
y
s
ia
U
K
S
in
g
a
p
o
re
In
d
o
n
e
s
ia
87.7
114.1
141.1
180.9
UK Singapore US Australia
-11.7
-8.6
-6.9
-6.7
-6.5
-5.1
-4.7
-4.0
-3.6
-2.7
-2.4
-1.8
8.5
-15.0 -10.0 -5.0 0.0 5.0 10.0
JPY
GBP
EUR
KRW
TWD
CNY
MYR
AUD
THB
SGD
PHP
IDR
US Dollar Index*
% change
102.4
129.6
138.9
Indonesia Philippines Thailand
Countries which have raised
interest rates
Countries which have not
raised interest rates
84.0
Malaysia
12
154.2
157.2
155.6
160.1
162.0
145
147
149
151
153
155
157
159
161
163
1Q 21 2Q 21 3Q 21 4Q 21 1Q 22
Total Liquidity in the System
RM billion
Malaysia's strong external position and sufficient liquidity have strengthened the economy’s
resilience to withstand external shocks
Malaysia’s healthy external position ensures limited spillovers to the domestic economy
Note: Data on current account is cumulative for the year, net IIP as at end of year, reserves as at 15 Apr 2022
Source: Bank Negara Malaysia, Department of Statistics Malaysia
Domestic liquidity conditions remain
supportive of economic recovery
2020 - 2021 average: 151.6103.6
114.4
100.0
102.0
104.0
106.0
108.0
110.0
112.0
114.0
116.0
2019 Current
USD billion
International Reserves
52.9
53.5
52.2
52.4
52.6
52.8
53.0
53.2
53.4
53.6
2019 2021
RM billion
Current Account Surplus
-38.8
91.0
-60.0
-40.0
-20.0
0.0
20.0
40.0
60.0
80.0
100.0
2019 2021
RM billion
Net International Investment
Position
13
Net financing remained supportive of economic activity
Net financing grew by 4.5% amid lower
outstanding corporate bond growth and
sustained outstanding loan growth
Working capital loans continued to support
business loan growth, with some further
increase in investment loans
Note: Data refer to loans from the banking system and development financial institutions (DFIs), except for business loan by purpose (i.e. working capital and investment), which only include banking system data. Numbers
may not add up due to rounding.
* Excludes issuances by Cagamas and non-residents. ** ‘Others’ include loans for the purposes of non-residential property purchases, credit card, consumer durable goods and other purposes.
Source: Bank Negara Malaysia
Household loan growth increased with
higher growth recorded across most loan
purposes
3.3 3.3
1.4 1.2
4.7
4.5
4Q 2021 1Q 2022
Outstanding corporate bonds*
Outstanding loans
Net financing
Net Financing
Annual change (%) / Cont. to growth (ppt)
Outstanding Household Loan
22
4.8
4.3
7.4
6.3
1.4 1.6
1Q-21 2Q-21 3Q-21 4Q-21 1Q-22
Outstanding Business Loan Growth
Annual change (%)
Working
Capital
6.0
5.3
3.2
4.2 4.8
1Q-21 2Q-21 3Q-21 4Q-21 1Q-22
Others**
Personal use
Houses
Cars
Securities
Total
Business Loan Disbursement and Repayment
Annual change (%) / Cont. to growth (ppt)
Overall
business
32.5 31.6
19.6
27.9
25.1
20.5
3Q-21 4Q-21 1Q-22
Loan Disbursement
Loan Repayment
Household Loan Disbursement and Repayment
Annual change (%)
14
Investment
-24.0
9.5
12.7
1.2
-4.6
3.3
3Q-21 4Q-21 1Q-22
Loan Disbursement
Loan Repayment
Annual change (%)
0
10
20
30
40
50
60
4Q21 1Q22 2017-19 quarterly average
MSMEs continued to access bank financing in 1Q 2022
Financing to MSMEs expanded at a
faster annual pace of 6.0%
Strong momentum in disbursements
and repayments
*Excludes mining and quarrying sector (0.4% of total MSME establishments in 2021 and 0.001% of quarterly SME financing disbursements on average)
Note: Banking system and DFIs
Source: Bank Negara Malaysia and Department of Statistics, Malaysia
Forthcoming disbursements broad-
based across major SME sectors
79
8584 88
20
30
40
50
60
70
80
90
100
1Q21 2Q21 3Q21 4Q21 1Q22
Repayments Disbursements
Outstanding SME Financing
% yoy
SME Financing Disbursements & Repayments
RM bn
SME Financing Disbursements by Sector*
RM bn
2017-19 quarterly average:
Disbursement: RM75 bn
Repayment: RM74 bn
0
2
4
6
8
10
12
8.0%83.8% 5.8% 1.9%
Share of MSME establishments in 2021
10.0
6.0
3.2
4.9
6.0
1Q21 2Q21 3Q21 4Q21 1Q22
15
1.77
1.83
1.90
1.83
1.78
Mar-21 Jun-21 Sep-21 Dec-21 Mar-22
2015-2019 Average: 1.36%
132 129
138 138
133
Mar-21 Jun-21 Sep-21 Dec-21 Mar-22
2015-2019 Average: 113%
Banks remain resilient and well-positioned to support ongoing economic recovery
…banks continue to maintain high
provision levels to absorb potential credit
losses
Total Provisions, as % of loans
Loan Loss Coverage Ratio2, %
1 Refers to the share of loans that have exhibited deterioration in credit risk, for which banks are required to set aside provisions based on lifetime expected losses
2 Including regulatory reserves
* MFRS 9 - Malaysian Financial Reporting Standard 9
Source: Bank Negara Malaysia
While credit risk levels remain
elevated…
Healthy capital and liquidity buffers against
shocks and to support intermediation needs
MFRS 9* Stage 2 Loans Ratio1 (%)
9.9
9.8
11.1 11.0
10.9
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
Mar-21 Jun-21 Sep-21 Dec-21 Mar-22
2020 Average: 8.4%
Dec-21: 19.2
Sep-21: 18.3
Jun-21: 18.6
Dec-21: 154
Sep-21: 154
Jun-21: 149
Total Capital Ratio, %
Liquidity Coverage Ratio, %
151
Mar-22
18.2
Mar-22
16
Summary
In 1Q 2022, the Malaysian economy grew by 5.0% mainly driven by consumption
activities amid the recovery in labour market conditions.
The outlook, however, is subject to risks related to emergence of severe VOCs,
heightened geopolitical tensions, global financial market volatility and supply chain
disruptions, leading to much slower economic growth.
Growth in 2022 to be supported by strengthening domestic demand amid sustained
export growth, and reopening of international borders.
Updated
17
Targeted policy measures and assistance continue to provide support to vulnerable
businesses and households.
Headline inflation to average between 2.2% and 3.2% in 2022, while core inflation to
trend higher as economic activity gathered pace amid the environment of high costs.
Additional Information
20
Malaysia’s GDP expanded by 5.0% in 1Q 2022
Annual Change in GDP Growth by Component
1 Numbers do not add up due to rounding and exclusion of import duties component
Source: Department of Statistics Malaysia
21
Real GDP
(% YoY)
Share, %
(2021)
2021 2022
1Q 4Q 1Q
Domestic Demand
(Excluding Stocks)
92.7 -1.0 1.9 4.4
Private Sector 74.4 -0.9 2.5 4.4
Consumption 58.8 -1.5 3.7 5.5
Investment 15.6 1.3 -2.8 0.4
Public Sector 18.3 -1.7 0.1 4.8
Consumption 13.8 5.6 1.6 6.7
Investment 4.5 -18.5 -3.4 -0.9
Net Exports of Goods and
Services
6.0 6.6 0.8 -26.5
Exports 69.1 11.7 13.0 8.0
Imports 63.1 12.2 14.5 11.1
Change in stocks, RM bn 1.3 -1.9 3.8 5.8
Real GDP 100.0 -0.5 3.6 5.0
Real GDP
(% YoY)
Share1 %
(2021)
2021 2022
1Q 4Q 1Q
Services 57.0 -2.3 3.2 6.5
Manufacturing 24.3 6.7 9.1 6.6
Agriculture 7.1 0.1 2.8 0.2
Mining and Quarrying 6.7 -4.4 -0.6 -1.1
Construction 3.7 -10.4 -12.2 -6.2
Real GDP 100.0 -0.5 3.6 5.0
Malaysia’s GDP expanded by 5.0% in 1Q 2022
Percentage Point Contribution to GDP Growth by Component
1 Numbers do not add up due to rounding and exclusion of import duties component
Source: Department of Statistics Malaysia
22
Real GDP
(Ppt contribution, %)
Share, %
(2021)
2021 2022
1Q 4Q 1Q
Domestic Demand
(Excluding Stocks)
92.7 -1.0 1.8 4.2
Private Sector 74.4 -0.7 1.8 3.4
Consumption 58.8 -0.9 2.1 3.4
Investment 15.6 0.2 -0.4 0.1
Public Sector 18.3 -0.3 0.0 0.8
Consumption 13.8 0.7 0.3 0.8
Investment 4.5 -0.9 -0.2 0.0
Net Exports of Goods and
Services
6.0 0.3 0.1 -1.5
Exports 69.1 7.1 8.2 5.4
Imports 63.1 6.7 8.2 6.9
Change in Stocks 1.3 0.2 1.8 2.2
Real GDP 100.0 -0.5 3.6 5.0
Real GDP
(Ppt contribution, %)
Share1, %
(2021)
2021 2022
1Q 4Q 1Q
Services 57.0 -1.3 1.9 3.7
Manufacturing 24.3 1.5 2.1 1.6
Agriculture 7.1 0.01 0.2 0.01
Mining and Quarrying 6.7 -0.3 -0.04 -0.1
Construction 3.7 -0.5 -0.5 -0.2
Real GDP 100.0 -0.5 3.6 5.0
23
Financial account recorded significantly higher net inflow
Sizeable net inflows in direct and other investment accounts more than offset net outflows in portfolio investment account
*As per the IMF’s BPM5 classifications (i.e. directional basis)
Note: Numbers may not add up due to rounding
Source: Department of Statistics Malaysia; and Bank Negara Malaysia
RM billion
2021 2022
3Q 4Q Year 1Q
Direct Investment 8.0 10.5 28.5 20.8
Direct Investment Abroad (DIA)* -1.5 -7.9 -19.7 -3.6
Foreign Direct Investment (FDI)* 9.5 18.5 48.1 24.4
Portfolio Investment -3.7 2.6 18.8 -10.1
Residents -4.9 -6.1 -35.8 -13.9
Non-residents 1.2 8.7 54.6 3.8
Financial Derivatives 0.7 -1.8 -2.3 0.2
Other Investment -5.2 -10.6 -32.0 19.6
Financial Account Balance -0.2 0.7 13.0 30.4
Higher FDI inflows amid lower
DIA outflows
Net inflows in other investment account
Net outflows in portfolio investment
Financial Account by Component
Corporates’ external debt is mainly subject to
prudential requirements
65.0
128.2
142.3
81.1
25.2
13.6
Total: RM455.4 billion
Bonds and
notes
Loans
Other debt liabilities
Intragroup
loans
Trade
credits
NR holdings of domestic
debt securities
Subject to
prudential
requirements
On
concessionary
and flexible
terms
Backed by
export earnings
Corporate External Debt Breakdown by Instrument
(as at end-1Q 2022)
Malaysia’s external debt remains manageable
External debt amounted to 69.6% of
GDP as at end-1Q 2022 (4Q 21: 70.0%)
Banks are resilient to face potential
external shocks
24
* Consist of deposit & interbank placements, bonds and notes, and money
market instruments.
** Consist of short-term financial institutions’ deposits, interbank borrowings
and loans from unrelated counterparties.
148.4
61.1
FCY liquid external
assets
FCY external
debt-at-risk
Source: Ministry of Finance Malaysia, Department of Statistics Malaysia and Bank Negara Malaysia
Changes in External Debt by Institution
(from 4Q 2021)
Banks’ FCY Liquid External Assets* and FCY
External Debt-at-Risk**
21.8
4.0
3.4
Banks Corporates Fed. Gov.
Net change: +RM29.2 billion
RM billionRM billion RM billion
Adequate buffers to weather external shocks
Sustained net creditor
position…
… and further supported by
L
External Assets Minus External
Liabilities (1Q 21 – 1Q 22)
p Preliminary
r Revised
Source: Department of Statistics Malaysia and Bank Negara Malaysia
… with large net foreign-currency
external assets …
External Assets and Liabilities in Ringgit Versus
Foreign-Currency Denomination (1Q 2022)
6.7
7.3
5.6 5.5
3.0
0
2
4
6
8
0
20
40
60
80
100
120
1Q21 2Q21 3Q21 4Q21 1Q22
RM billion (LHS)
% of GDP (RHS)
RM billion % of GDP
0
500
1,000
1,500
2,000
2,500
Assets Liabilities
Ringgit Foreign currency
RM billion
Sustained foreign income
Continued current account surplus reduces
external financing requirements
Sufficient international reserves to
facilitate international transactions
… to finance 5.7 months of imports of goods &
services and is 1.1 times total short-term
external debt as at 29 April 2022
25
GDP Q2 2022 Presentation Slides.
Sidang Akhbar
Prestasi Ekonomi Suku
12 Ogos 2022
Kedua Tahun 2022
1
7.4
5.4
4.4
4.0
3.1 2.9
1.6 0.4
8.2
5.0
3.8
5.4
3.1 3.0
3.5
4.8
PH ID SG EA TW KR US CN
2Q22 1Q22
Real GDP Growth1
Moderation in global growth in 2Q 2022 led by major economies
Note: 1) GDP for the second quarter of 2022 are advanced or preliminary estimates except for China, Singapore, Indonesia, and Philippines; 2) Inflation figures are aggregated across major countries based on their share of
global growth
Source: CEIC, National authorities, S&P Global, IMF, BNM estimates.
5.4
7.8
3.4
5.6
4.4
6.7
Jan Feb Mar Apr May Jun
Inflation2
Emerging
Economies
Global Growth Developments
• High inflation amid elevated
geopolitical tensions weighing
on growth.
• Lockdowns in China affected
growth early in the quarter,
but picked up as the economy
reopened.
• Moderation in goods trade
following shift to services as
most economies reopened.
2022
Advanced
Economies
Annual change (%)
World
2
The Malaysian economy continued to recover with growth of 8.9% in 2Q 2022
0.7
-17.1
-2.5 -3.3
-0.5
15.9
-4.5
3.6
5.0
8.9
-0.9
-15.1
18.1
-3.1
2.4
-0.8
-2.7
4.6
3.8 3.5
-25
-20
-15
-10
-5
0
5
10
15
20
25
1Q-20 2Q-20 3Q-20 4Q-20 1Q-21 2Q-21 3Q-21 4Q-21 1Q-22 2Q-22
y-o-y
q-o-q SA
Real GDP Growth
Annual Growth
2021: 3.1%
2020: -5.5%
Annual change (%)
Source: Department of Statistics, Malaysia
Factors supporting growth:
Expansion in domestic demand
Resilient exports, particularly for
E&E products
Continued recovery in the
labour market
Ongoing policy support
Monthly Real GDP Growth (%yoy)
Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22
4.4 5.2 5.3 5.6 5.0 16.5
3
Services and manufacturing sectors continued to drive growth
Source: Department of Statistics, Malaysia
3
6.6
9.2
1Q-22 2Q-22
GDP, Annual change (%)
6.5
12.0
1Q-22 2Q-22
GDP, Annual change (%)
ManufacturingServices Agriculture
Strong demand for
semiconductors and
consumer-related products
Higher consumer spending
amid transition to
endemicity, reopening of
international borders,
additional policy support
Contraction in livestock and
other agriculture production
amid rising input costs and
labour shortages
0.1
-2.4
1Q-22 2Q-22
GDP, Annual change (%)
-1.1
-0.5
1Q-22 2Q-22
GDP, Annual change (%)
-6.2
2.4
1Q-22 1Q-22
GDP, Annual change (%)
Mining Construction
Higher production in oil and
gas facilities including from
the Pegaga gas field in
Block SK320
Turnaround in activities
supported by progress in
large non-residential and
small-scale projects
4
6.7
2.6
1Q-22 2Q-22
GDP, Annual change (%)
Private Consumption
Source: Department of Statistics, Malaysia
Private Investment Public Investment Public Consumption Net exports
Stronger spending driven
by labour market
recovery and policy
measures
Improvement in
structures and continued
expansion in M&E
investments
Higher capital
expenditure by public
corporations
Contraction in supplies
and services spending
Import growth (14.0%)
outpacing export growth
(10.4%)
5
5.5
18.3
1Q-22 2Q-22
GDP, Annual change (%)
-26.5
-28.7
1Q-22 2Q-22
GDP, Annual change (%)
Further improvement in domestic demand
Updated
0.4
6.3
1Q-22 2Q-22
GDP, Annual change (%)
-0.9
3.2
1Q-22 2Q-22
GDP, Annual change (%)
3.0
40.5
-15.0
-20.1
-2.5
4.4
34.0
-12.3 -14.7
-2.6
Current
Account
Balance
Goods Services Primary
Income
Secondary
Income
1Q22
2Q22
Higher current account surplus while FDI remained encouraging
Source: Department of Statistics, Malaysia
RM billion
▪ Smaller primary income deficit due mainly to higher
income generated by Malaysian firms investing abroad
▪ Lower services deficit supported mainly by higher
travel receipts amid international border reopening
Current Account Foreign Direct Investment
RM billion
Current Account (% of GDP)
2Q-22: 1.0%
1Q-22: 0.7%
24.4
5.4
10.0 8.9
17.3
5.2
-3.2
15.3
Total Equity
Injections
Debt
Instruments
Reinvestment
of Earnings
1Q22
2Q22
▪ Continued FDI inflows despite outflows in debt
instruments
▪ FDI was mainly channelled into the manufacturing
sector and financial services sub-sector
6
Continued growth expected for the Malaysian economy underpinned by firm domestic
demand, offsetting the expected moderation in external demand
Private expenditure expected to drive growth, supported by improving labour market and recovery in tourism
4.4
-5.5
3.1
2019 2020 2021 2022f
Source: Department of Statistics, Malaysia, staff estimates
Annual change, %
Malaysia GDP
Implementation of multi-year projects
(e.g. MyDigital, ECRL, LRT3)
Continued recovery in labour market
Key factor underpinning private consumption
Higher tourist arrivals
Higher consumer confidence and lower risk aversion as travel activity
continues to normalise to pre-pandemic levels
Easing of supply chain disruptions
Receding COVID-related disruptions and slowing global trade to lower
pressures across global supply chains
Moderation in global growth
Slower growth mainly in advanced economies, particularly the US and
Euro Area
Key Factors Affecting Growth in 2H 2022 and 2023
EMR 2021:
5.3 - 6.3
2023 MY GDP Projections
Annual change, %
4.5 4.7
World Bank IMF
7
8
14.9
15.6 15.7 15.9 15.9 15.9
5.1
4.1
3.9 3.9 3.9 3.8
1.5
2
2.5
3
3.5
4
4.5
5
14
15
15
16
16
17
17
18
18
19
19
2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 Apr-22May-22Jun-22
T
h
o
u
s
a
n
d
s
Labour market indicators
Employment
(Millions of persons)
34.8
10.4
7.6
3.0 2.2 2.4
9
41
46 46 46 44
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 Apr-22 May-22 Jun-22
Jobless claims and placement rates
Updated
Source: Department of Statistics, Malaysia and the Social Security Organisation
Labour market continues to improve in tandem with stronger economic activity
Private sector wages (Nominal)
Continued expansion in employment amid low jobless claims
and relatively strong pace of hiring
Wages in the manufacturing and services sectors continued
to rise, partly supported by the minimum wage hike
Jobless claims
(thousand persons)
Placement rate
(% of retrenched workers)
Annual change (%)
Note: Private sector wages refer to wages of workers in the manufacturing and services sectors.
Source: Department of Statistics Malaysia and Bank Negara Malaysia estimates
Unemployment rate
(% of labour force)
3.4
-4.0
6.0
2.3
5.2
1.4
-6.4
0.4
-2.6
9.3
2.1
-5.6
2.4
-0.9
7.8
4.8
1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22
Services
Manufacturing
Private sector
(Total)
Real private
sector (total)
However, some segments continue to face various challenges
Source: Bank Negara Malaysia estimates based on HIES 2019, Department of Statistics, Malaysia
Lagged recovery in selected economic sectors
Value-Added by Economic Sector
1H 22 vs 1H 19 (pre-pandemic), RM billion
1 Refers to share to GDP in 2021
2 Includes employers, own account workers and unpaid family workers
23.2
21.8
7.0
-2.8 -2.9
-5.1
-7.0
Biz and
Other
Services
Mfg. Wholesale
& Retail
Trade
F&B
Accom.
Agri. Mining Construction
80% of the economy1
20%
Change in Employment
2Q 22 and 2Q 20 (crisis trough) compared to 4Q 19 (pre-pandemic), thousand persons
Women Youth and Elders
Low-Skilled Non-standard2 Workers
1
3
2
4
Certain segments have slower recovery in employment
Crisis
trough
+141.2
+305.5
-209 -161.7
Women Men
-64.1
+510.7
-160.9 -209.9
Youth and Elders Workers aged 25-
54
-109.3
+373
+183
-228.3
-201.5
+59.1
Low-Skill Mid-Skill High-Skill
+153.4
+293.4
-61
-309.8
Non-standard Standard
9
3.2
2.3
2.6
3.3
4.9
2.4
2.9
1.0
1.2
4.6
5.0
2.7
World US Euro Area China ASEAN NIEs
2022
2023
IMF Growth Forecast for Selected Countries
Annual Change, %
Malaysia’s diversified exports will cushion weaker external demand going forward
Weaker global growth outlook on account of slowdown in
major economies
However, Malaysia’s diversified exports would continue to
support export growth
Note: G3 includes the US, the euro area and Japan. Newly Industrialised Economies (NIEs) refers to Hong Kong SAR, Korea and Chinese Taipei. ASEAN excludes MY. Growth for
NIEs and ASEAN calculated based on IMF’s latest available growth forecast and PPP-share of global GDP.
Source: International Monetary Fund, Department of Statistics, Malaysia and Bank Negara Malaysia estimates
Exports by Products and Markets (2021)
% Share of Total Exports
Markets
ASEAN,
28%
PR
China,
16%
NIEs,
12%
G3,
27%
ROW,
17%
Products
E&E,
37%
Resource-based
manufactured goods,
26%
Mining,
6%
Agriculture,
8%
Non resource-based
manufactured goods,
24%
10
Updated
In particular, continued strength in E&E demand is expected to remain a key driver
of exports
Despite moderating global growth,
exports remain resilient…
…while firms’ adaptability helps to
mitigate against disruptions
Building inventory/ Buffer stocks
(Advance bookings)
Using alternative transportation mode
(Air cargo and land trucking)
Negotiating with clients to spread
orders
Diversifying supplier base
* Includes Others
Source: Department of Statistics, Malaysia
Source: BNM Industrial Insights, news flows
18.2
44.0
15.7
29.4
22.0
30.0
-10
0
10
20
30
40
50
1Q 2Q 3Q 4Q 1Q 2Q
2021 2022
E&E Non-E&E*
Commodities Gross exports (% yoy)
Annual change (%), contribution to growth (ppt)
Gross Exports
…supported by continued strength in
E&E demand going forward…
Industry Semiconductor Sales Forecasts Firms’ Proactive Measures
26.2 26.0
16.3
11.0
5.1
WSTS IC Insights
2021 2022f 2023f
Annual change (%)
Source: WSTS, IC Insights
’11 – ’19 avg.: 4.1% ’16 – ’19 avg.: 6.8%
11
Risks tilted to the downside mainly from weaker global growth and
stronger price pressures
The growth outlook however, remains subject to risks
Updated
Upside Risks Downside Risks
1. Stronger employment and income
conditions
2. Strong improvement in tourism sector
3. Additional domestic policy measures
1. Deceleration in global growth
2. Worsening supply disruptions and further
increase in global commodity prices
3. Acute labour shortages
4. Stronger cost and price pressures
weighing on household spending and
business activity
5. Disruptive financial market adjustments
12
1.1
0.9
2.2
1.9
2.3
3.8
4.0
3.3
4.6
4.7
6.3
6.1
8.0
6.2
2.2
2.5
2.8
3
3.8
5.4
5.4
5.5
5.9
6.5
7.3
8
8.7
9.2
China
Japan
Malaysia
Vietnam
Indonesia
Korea
Australia
Philippines
Singapore
Thailand
India
EU
US
UK
2Q 2022 1Q 2022
Source: Bloomberg and Department of Statistics, Malaysia
Inflation has substantially increased in many countries
Higher inflation across countries
(yoy, %)
Note: Data until June 2022
Source: World Bank
0
20
40
60
80
100
120
140
160
180
Feb-19 Jul-19 Dec-19 May-20 Oct-20 Mar-21 Aug-21 Jan-22 Jun-22
Index / USD per barrel
Brent, USD/barrel
June 2022: 120.1
World Bank Grains Price Index
June 2022: 157.9
Rising prices of key commodities
Global inflation Key commodity prices
13
The impact of exchange rate pass-through varies for
different items and households
Magnitude of exchange rate pass-through for selected
fresh food items
Source: World Bank and Bank Negara Malaysia estimates
High global commodity prices have been the main factor driving food prices, compounded
by stronger US dollar
Ringgit movements are only one of the factors
contributing to food price changes
Other factors include logistics costs, labour costs,
weather conditions etc.
1
2
Stylised illustration of wheat prices
Wheat price
(USD/metric tonne)
MYRUSD
exchange rate
Jan-22 374.2 4.19
Jun-22 459.6 4.40
A) Global wheat prices
B) Domestic wheat prices
Jan-22 price RM1,567.9
Jun-22 price
(excluding exchange rate
movements)
RM1,925.7
Jun-22 price
(including exchange rate
movements)
RM2,022.2
Impact of rising global
prices: +RM357.8
Impact of exchange rate
movements: +RM96.5
Other factors of production also contribute to rising prices,
while the impact of exchange rate movements vary across
different items
Increases in global commodity prices have been the biggest
factor underlying rising food prices
Indian mackerel
26%
Apple
8%
14
Headline and core inflation edged higher to 2.8% and 2.5% respectively during the quarter
Rising core inflation reflected improving demand conditions
amid the high cost environment More CPI items recorded month-on-month price increases
Note: Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
Headline and core inflation
Headline inflation and core inflation (yoy %)
-2.6
-1.4 -1.5
0.5
4.1
2.2
3.2
2.2
2.8
1.2
1.0 0.8 0.7 0.7 0.7 0.8 1.7
2.5
Q
2
-2
0
Q
3
-2
0
Q
4
-2
0
Q
1
-2
1
Q
2
-2
1
Q
3
-2
1
Q
4
-2
1
Q
1
-2
2
Q
2
-2
2
Headline inflation
Core inflation
Month-on-month price changes of CPI items
Unchanged
Share of CPI items (%)
21 21 14 10 13 12 9
33 40 50 63
35 31
28
46 39 36
27
52 57 63
2
0
1
1
-2
0
1
9
A
v
e
2
0
1
9
Q
2
2
0
2
1
Q
3
2
0
2
1
Q
4
2
0
2
1
Q
1
2
0
2
2
Q
2
2
0
2
2
Price
increase
Price
decline
Note: Numbers may not add up to 100 due to rounding error
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
15
Headline and core inflation are expected to average higher in 2022
2 Core inflation is expected to average higher in 2022,
as domestic demand continues to improve amid the high-
cost environment
Inflation Forecast for 2022
Average headline inflation (%)
1
Key drivers of inflation
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates.
Average core inflation (%)
Headline inflation is expected to trend higher in some
months due partly to the base effect from the discount on
electricity prices implemented in 3Q 2021
3
Upside risks to the inflation outlook stem from the
strength of domestic demand, global prices and domestic
policy measures
3.2
2.2
2.5
0.7
3.0
2.0
2021 2022f
2021 2022f
16
The MPC gradually adjusted the degree of accommodation amid positive growth prospects
Source: Bank Negara Malaysia
OPR was gradually increased by another
25 basis points to 2.25% at the July 2022
MPC meeting to reduce the degree of
monetary accommodation amid the positive
growth prospects for the Malaysian economy
The MPC will continue to assess evolving
conditions and their implications on the
overall outlook to domestic inflation and growth
Any adjustments to the monetary policy
settings would be done in a measured and
gradual manner, to support a sustainable
economic growth in an environment of price
stability
1.0
1.5
2.0
2.5
3.0
3.5
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Overnight Policy Rate, OPR
%
July 2022:
2.25%
Historic low
level of OPR
Monetary policy continues to be
accommodative
17
The OPR was adjusted amid an improving economy and demand conditions
Economy continues on a recovery path and is no longer in crisis, and the
unprecedented conditions that warranted the large monetary support have since abated
The OPR adjustments would also pre-emptively manage the risk of excessive
demand on price pressures
Ultimately, the goal of monetary policy in Malaysia is to achieve price stability and
sustainable economic growth over a longer term
The gradual adjustments in the OPR are necessary to avoid the need for stronger
measures in the future, which would be more disruptive to the economy
Domestic growth will continue to be supported by firm domestic demand, amid
better labour market conditions, recovery in tourism activity, and improved investment
activity and prospects
18
-10.4
-6.7
-5.5
-5.2
-5.2
-4.6
-3.8
-3.5
-2.7
-0.1
6.5
-15.0 -10.0 -5.0 0.0 5.0 10.0
JPY
KRW
THB
PHP
CNY
MYR
TWD
IDR
SGD
Ringgit NEER**
DXY
2Q 22 Since 1 July 22*
29.5 36.5
-26.5
52.9 58.7
-36.9
3.7
3.2
3.6
-60
0
60
120
1Q22 2Q22 Since 1 July**
Malaysia Regional* Avg Volume (RM billion)
Movement of 10-Year Sovereign Bond Yields
bps
Domestic financial market conditions continued to tighten in the second quarter
*Change in DXY, ringgit NEER, and exchange rate against the US dollar from 1 July to 10 August 2022
**Ringgit Nominal Effective Exchange Rate
***Average 1M Implied Volatility Onshore for 2Q22
Source: Bank Negara Malaysia, Reuters
US dollar continued to strengthen against ringgit and regional
currencies. Ringgit has remained broadly stable against major
trade partners.
Domestic bond yields and equity moved in line with regional
countries
19
Updated
Movement of the DXY and Exchange Rate against the US Dollar (%)
*Regional countries include Indonesia, the Philippines, PR China, Singapore, South Korea and Thailand.
**Data from 1 July to 10 August 2022
Source: Bank Negara Malaysia, Bursa Malaysia, Bloomberg
-16.4 -15.4 -14.5
-9.0 -9.0 -7.5
-5.1 -4.6 -2.3
-0.6
4.5
-25
-15
-5
5
15
U
S
K
o
re
a
P
h
ili
p
p
in
e
s
M
a
la
y
s
ia
S
in
g
a
p
o
re
T
h
a
ila
n
d
J
a
p
a
n
U
K
In
d
o
n
e
s
ia
H
K
C
h
in
a
2Q 2022 Since 1 July**
Movement of Equity Prices (% change)
Volatility***
5.3
6.6
6.7
4.3
5.0
6.7
7.5
9.3
Malaysia’s strong external position has strengthened the economy’s resilience to withstand
external shocks
Current account remained in surplus
Note: Data on current account is cumulative for the year.
Source: Bank Negara Malaysia, Department of Statistics, Malaysia
107.6
116.9
109.2
80.0
85.0
90.0
95.0
100.0
105.0
110.0
115.0
120.0
2020 2021 2H July 2022
USD billion
International Reserves
4.2
3.8
0.9
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2020 2021 1H 2022f
% of GDP
Current Account Surplus
2,060.0
933.2
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
FCY Assets FCY Liabilities
RM billion
FCY denominated external assets & liabilities
(as at 2Q 2022)
Foreign-currency (FCY) external
assets exceeded liabilities
Adequate international reserves
20
Growth in net financing underpinned by bank lending
Net financing grew by 4.9%, driven by
higher outstanding loan growth
Note: Data refer to loans from the banking system and development financial institutions (DFIs), except for business loan by purpose (i.e. working capital and investment), which only include banking system data.
* Excludes issuances by Cagamas and non-residents. ** ‘Others’ include loans for the purposes of non-residential property purchases, credit card, consumer durable goods and other purposes.
Source: Bank Negara Malaysia
Outstanding household loan growth
increased further amid higher growth in
loan disbursements and repayments
3.3
4.0
1.2
0.9
4.5
4.9
1Q 2022 2Q 2022
Outstanding corporate bonds*
Outstanding loans
Net financing
Net Financing
Annual change (%) / Cont. to growth (ppt)
Outstanding Household Loan Growth
22
Outstanding Business Loan Growth
Annual change (%) / Cont. to growth (ppt)
5.3
3.2
4.2 4.8
5.7
2Q-21 3Q-21 4Q-21 1Q-22 2Q-22
Others**
Personal use
Houses
Cars
Securities
Total
Annual change (%) / Cont. to growth (ppt)
Household Loan Disbursements and Repayments
Annual change (%)
-24.0
9.5 12.7
29.0
1.2
-4.6
3.3
13.3
3Q-21 4Q-21 1Q-22 2Q-22
Loan Disbursements
Loan Repayments
1.3
2.4
4.8 4.3
5.5
2Q-21 3Q-21 4Q-21 1Q-22 2Q-22
Working
Capital
Investment-
related
Others**
Total
Business Loan Disbursements and Repayments
Annual change (%)
32.5 31.6
19.6
26.6
27.9
25.1
20.5
23.4
3Q-21 4Q-21 1Q-22 2Q-22
Loan Disbursements
Loan Repayments
Business loan growth increased,
supported by higher growth in both
working capital and investment loans
21
MSMEs continued to access bank financing in 2Q 2022
Financing to MSMEs expanded at a faster pace of 7.5% in
2Q 2022
1 Investment-related purpose includes financing for the purchase of non-residential property, commercial vehicle, fixed assets (e.g. machinery and equipment), securities, and construction activity.
Note: Banking system and DFIs
Source: Bank Negara Malaysia
6.0
3.2
4.9
6.0
7.5
2Q21 3Q21 4Q21 1Q22 2Q22
Outstanding SME Financing
% yoy
SME Financing Disbursements by Purpose 1
Financing disbursements surpassing pre-pandemic levels, in
tandem with an increase in SMEs’ financing needs for working
capital and business expansion
RM billion
15
18
69 71
10
20
30
40
50
60
70
80
3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22
2017-19 quarterly average:
RM15 bn
2017-19 quarterly average:
RM57 bn
Investment
Working Capital
22
9.7
11.0 11.0 10.9
10.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
12.0
12.5
Jun-21 Sep-21 Dec-21 Mar-22 Jun-22
1.83
1.90
1.83
1.78
1.79
Jun-21 Sep-21 Dec-21 Mar-22 Jun-22
2010-2019 Average: 1.73%
Banks remain resilient and well-positioned to support ongoing economic recovery
Banks continue to maintain provisions
to buffer against potential credit losses
Total Provisions, as % of loans
1 Refers to the share of loans that have exhibited deterioration in credit risk, for which banks are required to set aside provisions based on lifetime expected losses
* MFRS 9 - Malaysian Financial Reporting Standard 9
Source: Bank Negara Malaysia
Credit risk remains elevated as relief
measures gradually expire
Strong capital and liquidity positions
would continue to support
intermediation needs
Gross Impaired Loans Ratio (%)
1.62
1.57
1.50
1.55
1.65
1.30
1.40
1.50
1.60
1.70
1.80
1.90
2.00
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
12.0
12.5
Jun-21 Sep-21 Dec-21 Mar-22 Jun-22
Mar-22: 18.3
Dec-21: 19.2
Sep-21: 18.3
Mar-22: 151
Dec-21: 153
Sep-21: 154
Total Capital Ratio, %
Liquidity Coverage Ratio, %
148
Jun-22
17.7
Jun-22
2018-2020 Average: 8.0%
MFRS 9* Stage 2 Loans1 Ratio (%)
2010-2019 Average: 1.90%
23
Policy priorities should now also accord a stronger focus on longer-term policies to
complement short-term measures
Attracting quality investments to create high value added activities and high-income jobs,
particularly for Malaysians
Continued upskilling to develop a high-skilled workforce to match demands of the future economy
and industry
Accelerating automation and digitalisation efforts to improve competitiveness, increase
productivity and reduce reliance on low-skilled foreign workers
Enhancing social safety nets and improving the social protection framework through savings
from a more targeted subsidy regime
Advancing the environmental, social and governance (ESG) agenda to ensure Malaysia remains
competitive globally, whilst also securing a more sustainable future
Key Structural Reforms
24
Summary
In 2Q 2022, the Malaysian economy grew by 8.9% mainly driven by consumption
activities amid the recovery in labour market conditions.
The outlook, however, is subject to risks related to weaker-than-expected global
growth, heightened geopolitical tensions, global financial market volatility and supply
chain disruptions, leading to much slower economic growth.
Growth in 2022 to be supported by strengthening domestic demand and reopening of
international borders, which more than offset moderation in external demand.
Updated
Policy support should also accord a stronger focus on longer-term priorities to
complement short-term measures
Headline and core inflation for 2022 are expected to average higher reflecting
improvement in economic activity amid higher costs.
25
End of Presentation
26
Q&A
27
Q&A
BANK NEGARA MALAYSIA 27
CENTRAL BANK or MALAYSIA
Additional Information
28
Add. Info
1
Malaysia’s GDP expanded by 8.9% in 2Q 2022
Annual Change in GDP Growth by Component
1 Numbers do not add up due to rounding and exclusion of import duties component
Source: Department of Statistics, Malaysia
Real GDP
(% YoY)
Share, %
(2021)
2021 2022
2Q 1Q 2Q
Domestic Demand
(Excluding Stocks)
92.7 12.3 4.4 13.0
Private Sector 74.4 13.0 4.4 15.4
Consumption 58.8 11.7 5.5 18.3
Investment 15.6 17.3 0.4 6.3
Public Sector 18.3 9.0 4.8 2.8
Consumption 13.8 8.2 6.7 2.6
Investment 4.5 12.0 -0.9 3.2
Net Exports of Goods and
Services
6.0 57.6 -26.5 -28.7
Exports 69.1 37.1 8.0 10.4
Imports 63.1 35.5 11.1 14.0
Change in stocks, RM bn 1.3 15.2 5.7 11.8
Real GDP 100.0 15.9 5.0 8.9
Real GDP
(% YoY)
Share1 %
(2021)
2021 2022
2Q 1Q 2Q
Services 57.0 13.4 6.5 12.0
Manufacturing 24.3 26.7 6.6 9.2
Agriculture 7.1 -1.5 0.1 -2.4
Mining and Quarrying 6.7 10.6 -1.1 -0.5
Construction 3.7 40.3 -6.2 2.4
Real GDP 100.0 15.9 5.0 8.9
29
Malaysia’s GDP expanded by 8.9% in 2Q 2022
Percentage Point Contribution to GDP Growth by Component
1 Numbers do not add up due to rounding and exclusion of import duties component
Source: Department of Statistics, Malaysia
Real GDP
(Ppt contribution, %)
Share, %
(2021)
2021 2022
2Q 1Q 2Q
Domestic Demand
(Excluding Stocks)
92.7 11.3 4.2 11.7
Private Sector 74.4 9.7 3.4 11.2
Consumption 58.8 6.7 3.3 10.1
Investment 15.6 3.0 0.1 1.1
Public Sector 18.3 1.6 0.8 0.5
Consumption 13.8 1.1 0.8 0.3
Investment 4.5 0.4 0.0 0.1
Net Exports of Goods and
Services
6.0 2.5 -1.5 -1.7
Exports 69.1 22.5 5.4 7.5
Imports 63.1 19.9 6.9 9.2
Change in Stocks 1.3 2.0 2.2 -1.0
Real GDP 100.0 15.9 5.0 8.9
Real GDP
(Ppt contribution, %)
Share1, %
(2021)
2021 2022
2Q 1Q 2Q
Services 57.0 7.8 3.7 6.8
Manufacturing 24.3 5.9 1.6 2.2
Agriculture 7.1 -0.1 0.01 -0.2
Mining and Quarrying 6.7 0.8 -0.1 0.0
Construction 3.7 1.2 -0.2 0.1
Real GDP 100.0 15.9 5.0 8.9
30
Add. Info
2
Financial account of the balance of payments continued to record net inflow
Continued net inflows in direct and other investment accounts offset net outflows in portfolio investment account
*As per the IMF’s BPM5 classifications (i.e. directional basis)
Note: Numbers may not add up due to rounding
Source: Department of Statistics, Malaysia; and Bank Negara Malaysia
RM billion
2021 2022
4Q Year 1Q 2Q 1H
Direct Investment 10.5 28.5 20.8 2.6 23.4
Direct Investment Abroad
(DIA)*
-7.9 -19.7 -3.6 -14.7 -18.3
Foreign Direct Investment
(FDI)*
18.5 48.1 24.4 17.3 41.7
Portfolio Investment 2.6 18.8 -10.1 -14.7 -24.8
Residents -6.1 -35.8 -13.9 -4.4 -18.3
Non-residents 8.7 54.6 3.8 -10.3 -6.5
Financial Derivatives -1.8 -2.3 0.2 -0.2 0.0
Other Investment -10.6 -32.0 19.6 12.5 32.1
Financial Account Balance 0.7 13.0 30.4 0.2 30.7
Continued FDI inflows amid higher
DIA outflows
Net inflows in other investment account
Net outflows in portfolio investment
Financial Account by Component
31
Add. Info
3
13.1
8.7
-5.0
Banks Corporates Fed. Gov.
Net change: +RM17.1* billion
Corporates’ external debt is mainly subject to
prudential requirements
64.8
126.5
146.5
88.5
24.8
13.1
Total: RM464.1 billion
Bonds and
notes
Loans
Other debt liabilities
Intragroup
loans
Trade
credits
NR holdings of domestic
debt securities
Subject to
prudential
requirements
On
concessionary
and flexible
terms
Backed by
export earnings
Corporate External Debt Breakdown by Instrument
(as at end-2Q 2022)
Malaysia’s external debt remains manageable
External debt amounted to 67.7% of
GDP as at end-2Q 2022 (1Q 22: 69.6%)
Banks are resilient to face potential
external shocks
* Consist of deposit & interbank placements, bonds and notes, and money
market instruments.
** Consist of short-term financial institutions’ deposits, interbank borrowings
and loans from unrelated counterparties.
146.6
76.8
FCY liquid external
assets
FCY external
debt-at-risk
Source: Ministry of Finance Malaysia, Department of Statistics, Malaysia and Bank Negara Malaysia
Changes in External Debt by Institution
(from 1Q 2022)
Banks’ FCY Liquid External Assets* and FCY
External Debt-at-Risk**
RM billionRM billion RM billion
* Inclusive of RM0.3 billion increase in BNM external debt
(allocation of SDR) due to exchange rate valuation changes
32
Add. Info
4
Adequate buffers to weather external shocks
Sustained net creditor position… … and further supported by
L
External Assets Minus External
Liabilities (2Q 21 – 2Q 22)
p Preliminary
r Revised
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
… with large net foreign-currency external
assets …
7.3
5.6 5.5
3.0
3.7
0
2
4
6
8
0
20
40
60
80
100
120
2Q21 3Q21 4Q21 1Q22 2Q22
RM billion (LHS)
% of GDP (RHS)
RM billion % of GDP
Sustained foreign income
Continued current account surplus reduces
external financing requirements
Sufficient international reserves to
facilitate international transactions
… to finance 5.4 months of imports of goods &
services and is 1.1 times total short-term
external debt as at 29 July 2022
33
Add. Info
5
2,060.0
933.2
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
FCY Assets FCY Liabilities
RM billion
FCY denominated external assets & liabilities
(as at 2Q 2022)
| Press Release |
11 May 2022 | International Reserves of Bank Negara Malaysia as at 29 April 2022 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-29-april-2022 | https://www.bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf | null |
Reading:
International Reserves of Bank Negara Malaysia as at 29 April 2022
Share:
480
International Reserves of Bank Negara Malaysia as at 29 April 2022
Embargo :
For immediate release
Not for publication or broadcast before
1500 on
Wednesday, 11 May 2022
11 May 2022
The international reserves of Bank Negara Malaysia amounted to USD112.5 billion as at 29 April 2022. The reserves position is sufficient to finance 5.9 months of imports of goods and services[1], and is 1.2 times of the total short-term external debt.
[1] Under the previous import coverage measure, reserves is sufficient to finance 6.9 months of retained imports of goods. For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27, which can be accessed at Quarterly Bulletin 4Q 2021. Related Assets
BNM Statement of Assets & Liabilities - 29 April 2022
Bank Negara Malaysia
11 May 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
Monthly Highlights
Headline inflation declined to 3.4% in March
March 2023
1
3.7 3.4
3.9 3.8
0.00
2.00
4.00
0.0
2.0
4.0
J
a
n
-2
2
F
e
b
-2
2
M
a
r-
2
2
A
p
r-
2
2
M
a
y
-2
2
J
u
n
-2
2
J
u
l-
2
2
A
u
g
-2
2
S
e
p
-2
2
O
c
t-
2
2
N
o
v
-2
2
D
e
c
-2
2
J
a
n
-2
3
F
e
b
-2
3
M
a
r-
2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation declined to 3.4% in March
(February: 3.7%) due mainly to lower inflation for
fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation moderated slightly to 3.8% during
the month (February: 3.9%), driven largely by
lower inflation for food away from home.
1
Robust growth in volume index driven by retail and motor vehicles
Index of Wholesale and Retail Trade
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded by 10.6% in February 2023
(January: 8.5%).
• The higher growth was driven mainly by retail
sales in non-specialised stores (e.g., department
stores) followed by continued strength in
purchases of motor vehicles amid the ongoing
fulfilment of backlog orders.
• On a month-on-month seasonally adjusted basis,
the index accelerated by 5.5% (January: 0.2%).
9.5 8.510.6
0
10
20
30
40
Feb-
22
Mar-
22
Apr-
22
May-
22
Jun-
22
Jul-
22
Aug-
22
Sep-
22
Oct-
22
Nov-
22
Dec-
22
Jan-
23
Feb-
23
ppt, %yoy
Motor vehicles Retail Wholesale
2.4
5.2
4.4
0
1
2
3
4
5
6
7
Mar-22 Jul-22 Nov-22 Mar-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Growth in credit to the private non-financial sector moderated
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
2.7 2.6 2.7 2.6
1.0 0.6 0.7 0.7
1.0
1.1 1.1 0.9
4.7 4.3 4.5 4.2
Dec-22 Jan-23 Feb-23 Mar-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Contribution to growth (ppt)
• Credit to the private non-financial sector grew by
4.2% as at end-March (February: 4.5%), attributed
to slower growth in credit to businesses (3.2%;
February: 3.7%).
• While growth in outstanding corporate bonds
moderated (4.4%; February : 5.5%), outstanding
business loan growth was sustained at 2.4%
(February: 2.4%). This was supported by the
continued growth in both working capital (2.2%;
February: 1.9%) and investment-related loans
(4.3%; February: 4.2%).
• Outstanding household loan growth remained
broadly stable (5.2%; February: 5.3%), supported
by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan
growth for the purchase of securities (-6.9%;
February: -3.3%).
Credit to the Private Non-Financial Sector1,2
Monthly Highlights
March 2023
Domestic financial market conditions remained orderly
Financial Market Performance in March 2023
Source: Bank Negara Malaysia, Bursa Malaysia
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
11.0
-2.1
-5.3
0.0
-2.2
1.7
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-10 -5 0 5 10 15
Mar-23
Feb-23
• In March, global financial markets were affected by
the emergence of banking sector stress in some
major economies. As spillovers were contained thus
far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds
improved.
• In line with the performance of regional currencies,
the ringgit appreciated by 1.7% against the US
dollar. Conditions in the domestic bond market
also remained stable.
• The FBM KLCI declined by 2.2% during the month.
2
Banks maintained strong liquidity and funding positions to support intermediation
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.9
157.4
0
40
80
120
160
70
75
80
85
90
95
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
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t
2
2
N
o
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2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
increased slightly to 1.8% (February-23: 1.8%) and
1.2% (February-23: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory
reserves) continue to record a prudent level of
110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
%
1.8
1.2
1.7
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
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p
2
2
O
c
t
2
2
N
o
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2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
157.4% (February-23: 152.7%).
• The aggregate loan-to-fund ratio remained stable at
81.9% (February-23: 81.6%).
PRESS RELEASE
Ref. No.: 04/23/05 EMBARGO: Not for publication or
broadcast before 1500 hours on
Friday, 28 April 2023
Monthly Highlights – March 2023
Headline inflation declined to 3.4% in March
• Headline inflation declined to 3.4% in March (February: 3.7%) due mainly
to lower inflation for fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation1 moderated slightly to 3.8% during the month
(February: 3.9%), driven largely by lower inflation for food away from
home.
Robust growth in volume index driven by retail and motor vehicles
• The Index of Wholesale and Retail Trade (IOWRT) expanded by 10.6%
in February 2023 (January: 8.5%).
• The higher growth was driven mainly by retail sales in non-specialised
stores (e.g., department stores) followed by continued strength in
purchases of motor vehicles amid the ongoing fulfilment of backlog
orders.
• On a month-on-month seasonally adjusted basis, the index accelerated
by 5.5% (January: 0.2%).
1 Core inflation is computed by excluding price-volatile and price-administered items.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth in credit to the private non-financial sector2,3 moderated
• Credit to the private non-financial sector grew by 4.2% as at end-March
(February: 4.5%), attributed to slower growth in credit to businesses
(3.2%; February: 3.7%).
• While growth in outstanding corporate bonds moderated (4.4%;
February: 5.5%), outstanding business loan growth was sustained at
2.4% (February: 2.4%). This was supported by the continued growth in
both working capital (2.2%; February: 1.9%) and investment-related
loans (4.3%; February: 4.2%).
• Outstanding household loan growth remained broadly stable (5.2%;
February: 5.3%), supported by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan growth for the purchase of
securities (-6.9%; February: -3.3%).
Domestic financial market conditions remained orderly
• In March, global financial markets were affected by the emergence of
banking sector stress in some major economies. As spillovers were
contained thus far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds improved.
• In line with the performance of regional currencies, the ringgit
appreciated by 1.7% against the US dollar. Conditions in the domestic
bond market also remained stable.
• The FBM KLCI declined by 2.2% during the month.
Banks maintained strong liquidity and funding positions to support
intermediation
• Banks continued to record healthy liquidity buffers with the aggregate
Liquidity Coverage Ratio at 157.4% (February: 152.7%).
2 Comprises loans to households and non-financial corporations from the banking system and development financial
institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
3 Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced
to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
• The aggregate loan-to-fund ratio remained stable at 81.9%
(February: 81.6%).
Asset quality in the banking system remained intact
• Overall gross and net impaired loans ratios increased slightly to 1.8%
(February: 1.8%) and 1.2% (February: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory reserves) continues to
record a prudent level of 110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
Bank Negara Malaysia
28 April 2023
20230428_BNM Monthly Highlights-March_en
Slide 1
Slide 2
20230428_BNM PR_Monthly Highlights-Mar 2023_eng
| Press Release |
11 May 2022 | Monetary Policy Statement | https://www.bnm.gov.my/-/monetary-policy-statement-11052022 | null | null |
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Monetary Policy Statement
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Monetary Policy Statement
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1500 on
Wednesday, 11 May 2022
11 May 2022
At its meeting today, the Monetary Policy Committee (MPC) of Bank Negara Malaysia decided to increase the Overnight Policy Rate (OPR) by 25 basis points to 2.00 percent. The ceiling and floor rates of the corridor of the OPR are correspondingly increased to 2.25 percent and 1.75 percent, respectively.
The sustained reopening of the global economy and the improvement in labour market conditions continue to support the recovery of economic activity. These have partly cushioned the impact of the military conflict in Ukraine and the strict containment measures in China. Inflationary pressures have increased sharply due to a rise in commodity prices, strained supply chains and strong demand conditions, particularly in the US. Consequently, several central banks are expected to adjust their monetary policy settings at a faster pace to reduce inflationary pressures. The global growth outlook will continue to be affected by the developments surrounding the conflict in Ukraine, COVID-19, global supply chain conditions, commodity price shocks, and financial market volatility.
For the Malaysian economy, latest indicators show that growth is on a firmer footing, driven by strengthening domestic demand amid sustained export growth. The labour market is further lifted by a lower unemployment rate, higher labour participation and better income prospects. The transition to endemicity on 1 April 2022 would strengthen economic activity, in line with further easing of restrictions and the reopening of international borders. Investment activity and prospects have also improved, underpinned by the realisation of multi-year projects and positive growth outlook. However, risks to growth remain, which include a weaker-than-expected global growth, further escalation of geopolitical conflicts, worsening supply chain disruptions, and adverse developments surrounding COVID-19.
Headline inflation is projected to average between 2.2% - 3.2% in 2022. Given the improvement in economic activity amid lingering cost pressures, underlying inflation, as measured by core inflation, is expected to trend higher to average between 2.0% - 3.0% in 2022. Nevertheless, upward pressure on prices would be partly contained by existing price controls and the continued spare capacity in the economy. The inflation outlook continues to be subject to global commodity price developments, arising mainly from the ongoing military conflict in Ukraine and prolonged supply-related disruptions, as well as domestic policy measures on administered prices.
Over the course of the COVID-19 crisis, the OPR was reduced by a cumulative 125 basis points to a historic low of 1.75% to provide support to the economy. The unprecedented conditions that necessitated such actions have since abated. With the domestic growth on a firmer footing, the MPC decided to begin reducing the degree of monetary accommodation. This will be done in a measured and gradual manner, ensuring that monetary policy remains accommodative to support a sustainable economic growth in an environment of price stability.
Bank Negara Malaysia
11 May 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
29 Apr 2022 | Five successful applicants for the digital bank licences | https://www.bnm.gov.my/-/digital-bank-5-licences | null | null |
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Five successful applicants for the digital bank licences
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Five successful applicants for the digital bank licences
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29 Apr 2022
Bank Negara Malaysia (BNM) wishes to announce the five successful applicants for the digital bank licences as approved by the Minister of Finance Malaysia.
A. The following applicants are to be licensed under the Financial Services Act 2013 (FSA):
a consortium of Boost Holdings Sdn. Bhd. and RHB Bank Berhad;
a consortium led by GXS Bank Pte. Ltd. and Kuok Brothers Sdn. Bhd; and
a consortium led by Sea Limited and YTL Digital Capital Sdn Bhd.
B. The following applicants are to be licensed under the Islamic Financial Services Act 2013 (IFSA):
a consortium of AEON Financial Service Co., Ltd., AEON Credit Service (M) Berhad and MoneyLion Inc.; and
a consortium led by KAF Investment Bank Sdn. Bhd.
Three out of the five consortiums are majority-owned by Malaysians namely Boost Holdings and RHB Bank Berhad, Sea Limited and YTL Digital Capital Sdn. Bhd. and KAF Investment Bank Sdn. Bhd.
All 29 applications received were thoroughly assessed pursuant to section 10 (1) of FSA, and IFSA[1], which require BNM to consider all the factors in Schedule 5 of the Acts and other relevant policy requirements. The assessment criteria cover the character and integrity of applicants, nature and sufficiency of financial resources, soundness and feasibility of business and technology plans as well as ability to meaningfully address financial inclusion gaps. Applications were assessed on their individual merits, as well as relative to other applications based on consistent evaluations of each assessment criteria. This horizontal review is based on the assessment criteria applied across all applicants to determine the relative strength of each application and identify successful applicants.
Throughout the assessment process, BNM instituted strict governance and evaluation procedures to ensure robust, objective and consistent assessments across all 29 applications received. Four levels of assessment were carried out, supported by a cross-functional technical team, a review team and internal independent observers from BNM’s risk and legal departments. The final recommendations to the Minister were deliberated and endorsed by BNM’s Management Committee.
Bank Negara Malaysia Governor Tan Sri Nor Shamsiah said, “Digital banks are expected to further advance financial inclusion. By adopting digital technology more widely for everyday transactions, we can significantly increase opportunities for our society to participate in the economy - by overcoming geographical barriers, reducing transaction costs and promoting better financial management.”
“Digital banks can help individuals and businesses gain better access to more personalised solutions backed by data analytics. As businesses move online, digital banking also provides a safer and a more convenient way to transact,” she added.
Following this announcement, the successful applicants will undergo a period of operational readiness that will be validated by BNM through an audit before they can commence operations. This process may take between 12 to 24 months.
In line with the 5 strategic thrusts stated in the Financial Sector Blueprint 2022-2026, BNM will continue to work with the financial and fintech industries and relevant stakeholders to continuously enhance access to financial services throughout the country and across all segments of society.
[1] FSA and IFSA: Section 10. (1) In assessing an application duly made under section 9 to carry on any licensed business, BNM shall have regard to all the factors set out in part 1 and Part 2 of Schedule 5 and such other matters that BNM considers relevant.
Bank Negara Malaysia
29 April 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
29 Apr 2022 | Monetary and Financial Developments in March 2022 | https://www.bnm.gov.my/-/monetary-and-financial-developments-in-march-2022 | https://www.bnm.gov.my/documents/20124/6982294/i_en.pdf | null |
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Monetary and Financial Developments in March 2022
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Monetary and Financial Developments in March 2022
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1500 on
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29 Apr 2022
Headline inflation remained stable at 2.2% in March
Headline inflation was unchanged at 2.2% (February: 2.2%), mainly reflecting lower fuel inflation which was offset by higher core inflation.
Core inflation[1] was higher at 2.0% (February: 1.8%), due to higher inflation in food away from home, jewellery, and other services for personal transport equipment.
Wholesale and Retail Trade expanded in February
The Index of Wholesale and Retail Trade (IOWRT) grew by 3.8% in February 2022 (January: 3.4%). The higher growth was driven mainly by the retail segment. Improvement in retail was broad based across most components, with the exception of retail sale of information & communication equipment (-3.2%; January: -0.8%).
On a month-on-month seasonally adjusted basis, growth accelerated to 4.9% (January: 1.3%). This was amid reopening of the economy and better labour market conditions, which had provided support to household spending.
Net financing[2] growth moderated slightly in March
Net financing grew by 4.6%, amid lower growth in outstanding corporate bonds (4.6%; February: 5.0%).
Growth in outstanding household loans was stronger at 4.9% (February: 4.7%), reflecting growth across all purposes, as loan disbursements growth picked up (10.2%; February: 3.1%).
For businesses, outstanding loan growth was lower (4.5%; February: 5.5%) amid lower growth in working capital financing. Nonetheless, growth in working capital loan disbursements remained strong (12.4%; February: 19.8%; 2017-19 average: 4.8%), despite some base effects from higher disbursements in March 2021.
Domestic financial markets driven by tighter global financial conditions and geopolitical developments
In March, global financial market sentiments were affected by faster-than-anticipated monetary policy normalisation path by the US Federal Reserve and the conflict in Ukraine. The corresponding broad US dollar strength during the month also resulted in a marginal depreciation of the ringgit.
Domestic financial market conditions tightened, following the increase in 10-year MGS yields by 20.6 basis points, and the decline in the FBM KLCI by 1.3%.
Despite the weaker financial market performance, adjustments remained orderly amid sufficient trading liquidity.
Banking system remains well-positioned to support economic recovery
Banks maintained strong capitalisation levels, with excess capital buffers[3] of RM125.5 billion as at March 2022.
Capital ratios declined marginally, mainly driven by valuation adjustments on available-for-sale financial instruments amidst rising bond yields.
The resilience of banks continued to be underpinned by sound asset quality
Overall gross and net impaired loans ratios remained broadly stable at 1.5% and 0.9%, respectively.
Banks’ provisioning levels remained high, as banks continue to be prudent, with loan loss coverage ratio (including regulatory reserves) of 133% (2020-2021 average: 129%).
Total provisions eased marginally to 1.8% as a share of total banking system loans (February: 1.9%).
[1] Core inflation is computed by excluding price-volatile and price-administered items. It also excludes the estimated direct impact of tax policy changes.
[2] Refers to outstanding loans of the banking system (excluding development financial institutions (DFIs)) and outstanding corporate bonds.
[3] Refers to total capital above the regulatory minimum, which includes the capital conservation buffer (2.5%) and bank-specific higher minimum requirements
See also: Monthly Highlights [PDF] Related Assets
Monthly Highlights & Statistics in March 2022
Bank Negara Malaysia
29 April 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
Monthly Highlights May 2023
Monthly Highlights
Headline inflation declined further to 2.8% in May
May 2023
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation moderated to 2.8% (April 2023:
3.3%). This decline was largely due to non-core
CPI components, particularly lower inflation for
fuel (-0.2 percentage points, ppt) and fresh food
(-0.1ppt).
• Core inflation also declined slightly to 3.5% (April
2023: 3.6%) amid lower inflation for
communication services.
3.3
2.8
3.6 3.5
0.00
2.00
4.00
0.0
2.0
4.0
J
a
n
-2
2
F
e
b
-2
2
M
a
r-
2
2
A
p
r-
2
2
M
a
y
-2
2
J
u
n
-2
2
J
u
l-
2
2
A
u
g
-2
2
S
e
p
-2
2
O
c
t-
2
2
N
o
v
-2
2
D
e
c
-2
2
J
a
n
-2
3
F
e
b
-2
3
M
a
r-
2
3
A
p
r-
2
3
M
a
y
-2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
1.6
5.1
4.6
0
1
2
3
4
5
6
7
May-22 Sep-22 Jan-23 May-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Credit to the Private Non-Financial Sector1,2
1
Growth in credit to the private non-financial sector improved in May
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
Contribution to growth (ppt)
• Credit to the private non-financial sector expanded
by 4.0% as at end-May (April 2023: 3.7%), driven
mainly by higher growth in credit to businesses
(2.8%; April 2023: 2.5%).
• Outstanding corporate bonds grew by 4.6% (April
2023: 4.4%), while outstanding business loans
expanded by 1.6% (April 2023: 1.0%). The higher
business loan growth reflected improvement in
loans for both working capital and investments to
SMEs and non-SMEs.
• In the household segment, outstanding loan
growth was sustained at 5.1% (April 2023: 5.0%),
supported by higher growth across most loan
purposes. Of note, household loan growth
continued to be driven by loans for the purchase of
houses and cars, which grew by 7.0% and 8.4%,
respectively (April 2023: 6.8% and 8.0%).
2.7 2.6 2.5 2.6
0.7 0.7 0.3 0.5
1.1 0.9
0.9 1.0
4.5 4.2
3.7 4.0
Feb-23 Mar-23 Apr-23 May-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Index of wholesale and retail trade growth moderated in April
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded more moderately by 4.7% in
April 2023 (March 2023: 9.4%). The lower growth
was due mainly to the decline in the motor vehicle
segment.
• However, the retail segment continued to record a
double-digit growth of 10.0% (March 2023:
13.8%), supported by sales in non-specialised and
other specialised stores1.
• On a month-on-month seasonally adjusted basis,
the index increased at a faster pace of 6.5%
(March 2023: -0.9%).
1 Other goods in specialised stores includes clothing, footwear,
pharmaceuticals, cosmetics, watches, jewellery and optical goods.
10.6
9.4
4.7
-2
3
8
13
18
23
28
33
Apr-22 Jun-22 Aug-22 Oct-22 Dec-22 Feb-23 Apr-23
ppt, %yoy
Motor vehicles Retail Wholesale
Index of Wholesale and Retail Trade
Monthly Highlights
2
May 2023
Domestic financial markets were largely affected by external factors
Financial Market Performance in May 2023
-18.0
-0.5
-1.1
-3.0
-2.0
-3.4
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-20 -15 -10 -5 0
May-23 Apr-23
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
1Regional countries comprise Singapore, Thailand, Philippines, Indonesia, and Korea
Source: Bank Negara Malaysia, Bursa Malaysia
• Global investors maintained a risk-off approach
throughout May, as concerns over the impact of the
US debt ceiling crisis and the weaker-than-
expected rebound in China’s economy weighed on
global financial markets.
• As a result, the ringgit depreciated against the US
dollar by 3.4% (regional1 average: -1.2%). Similarly,
the FBM KLCI declined by 2.0% (regional1 average:
-1.3%).
• Nonetheless, the 10-year MGS yields decreased
slightly by 3 basis points, supported by non-resident
inflows into the domestic bond market.
Banks maintained strong liquidity and funding positions to support intermediation
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
151.2% (April 2023: 154.3%).
• The aggregate loan-to-fund ratio remained stable at
81.8% (April 2023: 82.1%).
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.8
151.2
0
40
80
120
160
70
75
80
85
90
95
M
a
y
2
2
J
u
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2
2
J
u
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2
2
A
u
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2
2
S
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p
2
2
O
c
t
2
2
N
o
v
2
2
D
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c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
A
p
r
2
3
M
a
y
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
remained broadly unchanged at 1.80% (April
2023: 1.78%) and 1.10% (April 2023: 1.10%),
respectively.
• Loan loss coverage ratio (including regulatory
reserves) remained at a prudent level of 114.1%
of impaired loans, with total provisions accounting
for 1.7% of total loans.
%
1.8
1.1
1.7
0.5
1.0
1.5
2.0
M
a
y
2
2
J
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2
2
J
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2
2
A
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2
2
S
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2
2
O
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t
2
2
N
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2
2
D
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2
2
J
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2
3
F
e
b
2
3
M
a
r
2
3
A
p
r
2
3
M
a
y
2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
April 2023 Monthly Highlights
Slide 1
Slide 2
| Press Release |
29 Apr 2022 | Detailed Disclosure of International Reserves as at end-March 2022 | https://www.bnm.gov.my/-/detailed-disclosure-of-international-reserves-as-at-end-march-2022-1 | null | null |
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Detailed Disclosure of International Reserves as at end-March 2022
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Detailed Disclosure of International Reserves as at end-March 2022
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In accordance with the International Monetary Fund (IMF)'s Special Data Dissemination Standard (SDDS) format, the detailed breakdown of international reserves provides forward-looking information on the size, composition and usability of reserves and other foreign currency assets, and the expected and potential future inflows and outflows of foreign exchange of the Federal Government and Bank Negara Malaysia over the next 12-month period.
The detailed breakdown of international reserves based on the SDDS format is shown in Tables I, II, III and IV.
As shown in Table I, official reserve assets amounted to USD115,591.3 million, while other foreign currency assets amounted to USD33.6 million as at end-March 2022.
As shown in Table II, for the next 12 months, the pre-determined short-term outflows of foreign currency loans, securities and deposits, which include among others, scheduled repayment of external borrowings by the Government and the maturity of foreign currency Bank Negara Interbank Bills, amounted to USD5,703.8 million. The short forward positions amounted to USD8,988.9 million while long forward positions amounted to USD30 million as at end-March 2022, reflecting the management of ringgit liquidity in the money market. In line with the practice adopted since April 2006, the data excludes projected foreign currency inflows arising from interest income and the drawdown of project loans. Projected foreign currency inflows amount to USD2,286.7 million in the next 12 months.
As shown in Table III, the only contingent short-term net drain on foreign currency assets are Government guarantees of foreign currency debt due within one year, amounting to USD401.6 million. There are no foreign currency loans with embedded options, no undrawn, unconditional credit lines provided by or to other central banks, international organisations, banks and other financial institutions. Bank Negara Malaysia also does not engage in foreign currency options vis-à-vis ringgit.
Overall, the detailed breakdown of international reserves under the IMF SDDS format indicates that as at end-March 2022, Malaysia’s international reserves remain usable. Related Assets
International Reserves and Foreign Currency Liquidity (31 March 2022)
Bank Negara Malaysia
29 April 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
27 Apr 2022 | Joint Statement by BNM and Securities Commission Malaysia: Accelerating the Financial Sector's Response to Climate Risk | https://www.bnm.gov.my/-/jc3-7th-meeting | https://www.bnm.gov.my/documents/20124/3770663/jc3_can_cgm_report_2022.pdf, https://www.bnm.gov.my/documents/20124/3770663/jc3_report_sustainable_finance.pdf | null |
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Joint Statement by BNM and Securities Commission Malaysia: Accelerating the Financial Sector's Response to Climate Risk
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Joint Statement by BNM and Securities Commission Malaysia: Accelerating the Financial Sector's Response to Climate Risk
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1806 on
Wednesday, 27 April 2022
27 Apr 2022
The Joint Committee on Climate Change (JC3) held its seventh meeting on 26 April 2022. Discussions centred on the progress of action plans and priorities for 2022, and effects of recent global developments on transition efforts and policy responses of countries. JC3 members noted that these developments could heighten the prospects of delaying the progress of transition efforts, and underscore the need for the financial sector to strengthen its response to climate change.
Key updates on the work of sub-committees[1] established under JC3 include:
Contributed to the exposure draft by Bank Negara Malaysia on Climate Risk Management and Scenario Analysis which was issued in December 2021. The exposure draft sets out regulatory expectations on the management of climate-related risks by banks, insurers and takaful operators. This will complement the implementation of the Climate Change and Principle-based Taxonomy (CCPT) by financial institutions as well as plans underway by Bank Negara Malaysia to conduct climate-related stress tests for the financial sector in 2024. The exposure draft is expected to be finalised in the second half of 2022.
Issued the Task Force on Climate-related Financial Disclosures (TCFD) Application Guide for Malaysian Financial Institutions in March 2022 for public consultation. The Guide outlines key recommendations and provides guidance to assist financial institutions in preparing for the climate-related disclosures.
Commenced work to develop a Climate Disclosure Guide for Malaysian Businesses. This Guide aims to improve the quality of and access to information on business resilience to climate related risks, in turn promoting financial flows to mitigation and adaptation actions, including among small and medium-sized enterprises (SMEs). Members also agreed to identify cross cutting and strategic issues stemming from the exposure draft issued by the International Sustainability Standards Board (ISSB) on Sustainability Disclosure Standards and consider providing a collective response, particularly from the perspective of a developing economy, to the ISSB.
Completed the first series of specialised level training programmes for the financial sector -- covering the implementation and application of the CCPT, scenario analysis and stress testing. The next series will focus on governance and reporting, with accompanying workshops on data applications and the implementation of TCFD.
Further progressed work on the development of a data catalogue for reference by the financial sector. The catalogue will identify and map available climate data sources to support the critical data needs for identified use cases that include investment and lending decisions, macroeconomic modelling, stress testing, scenario analysis and product development.
Published the Report on the Sustainable Finance Landscape in Malaysia capturing key insights from the extensive outreach programmes and a survey on sustainability practices among financial institutions in Malaysia undertaken by JC3 in 2021. The Report, released today, assesses the current state of sustainability practices and product offerings within the financial sector, and highlights the opportunities and challenges for the financial industry to meaningfully support the climate transition.
According to Datuk Zainal Izlan Zainal Abidin, Deputy Chief Executive, Securities Commission Malaysia and Co-Chair of JC3, "Financial institutions are initiating steps to embed climate risk in their strategy and risk management framework, and are making considerable progress in committing to Net Zero targets. There is also an increasing supply of green financial and investment products in the market. In driving the sustainability agenda, the top three challenges identified in the Report are poor data quality and availability, lack of incentives, and low awareness of green finance solutions in the market. Cohesive efforts are required in addressing these challenges to accelerate the pace of transition and support an orderly transition to Net Zero.”
Further commenting on the progress of other initiatives by the JC3, Jessica Chew, Deputy Governor, Bank Negara Malaysia and Co-Chair of JC3, said “The issuance of the draft Application Guide and work on the data catalogue are timely as financial institutions are preparing for mandatory TCFD-aligned climate-related financial risk disclosures in 2024. We expect financial institutions to adopt the stretch recommendations set out in the Application Guide to encourage positive cascading effects on economic activities that interact with the financial sector. Given the significant financial impact of climate-related risks, this will also improve market transparency on how financial institutions integrate climate risk considerations into business decisions and risk management”.
JC3 members also discussed the CEO Action Network (CAN) – Climate Governance Malaysia (CGM) Report on Exploring a Low Emissions Pathway for Malaysia, and considered further ways in which the financial sector can contribute to support a low emissions pathway for Malaysia, while noting that broader legislative and structural imperatives remain critical.
JC3 members welcomed plans by the Value-based Intermediation Community of Practitioners (VBI COP) to deliver the third cohort of VBIAF[2] sectoral guides which will focus on the mining and quarrying, agriculture, transportation and storage, and waste management sectors. This complements the sectoral guides on six sectors/activities[3] already issued thus far. JC3 will continue to actively promote alignment between the VBIAF and the CCPT.
At this meeting, JC3 members also welcomed the participation of two new members from the capital market[4] and three new observers[5] in the committee.
Bank Negara Malaysia
Securities Commission Malaysia
27 April 2022
[1] Risk Management; Governance and Disclosure; Product and Innovation; Engagement and Capacity Building; and Bridging Data Gaps
[2] Value-based Intermediation Financing and Investment Impact Assessment Framework
[3] Palm oil, renewable energy, energy efficiency, oil & gas, manufacturing, construction & infrastructure
[4] Kenanga Investors Berhad and UOB Asset Management (Malaysia) Berhad
[5] Life Insurance Association of Malaysia, Employees Provident Fund, Khazanah Nasional Berhad
About the JC3
The JC3 is a platform established in September 2019 to pursue collaborative actions for building climate resilience within the Malaysia financial sector. The JC3 is co-chaired by Jessica Chew Cheng Lian, Deputy Governor Bank Negara Malaysia and Datuk Zainal Izlan Zainal Abidin, Deputy Chief Executive Securities Commission Malaysia with members comprising senior officials from Bursa Malaysia and 21 financial industry players as well as relevant experts. The JC3’s initiatives and priorities are undertaken by its five sub-committees, namely Risk Management; Governance and Disclosure; Product and Innovation; Engagement and Capacity Building; and Bridging Data Gaps.
Members: Allianz General Insurance Company (Malaysia) Berhad, AmBank (M) Berhad, Bank Islam Malaysia Berhad, Bank Pembangunan Malaysia Berhad, Bank Pertanian Malaysia Berhad (Agrobank), BIMB Investment Management Berhad, BNP Paribas Asset Management Sdn. Bhd., Bursa Malaysia Berhad, CIMB Bank, Etiqa Family Takaful Berhad, HSBC Amanah Malaysia Berhad, Kenanga Investors Berhad, Maybank Berhad, MIDF Amanah Investment Bank Berhad, MSIG Insurance (Malaysia) Berhad, RHB Islamic Bank Berhad, RHB Islamic International Asset Management Bhd., Standard Chartered Bank Malaysia Berhad, Swiss Re Asia Pte. Ltd. (Swiss Retakaful), Syarikat Takaful Malaysia Am Berhad, UOB Asset Management (Malaysia) Berhad and Zurich General Insurance Malaysia Berhad.
Bank Negara Malaysia
27 April 2022
© Bank Negara Malaysia, 2022. All rights reserved.
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Peluasan Ukuran Liputan Rizab Bagi Import – daripada Import Tertangguh kepada Import Barangan dan Perkhidmatan
27Buletin Suku Tahunan | S4 2021 27
Peluasan Ukuran Liputan Rizab Bagi Import – daripada Import Tertangguh kepada
Import Barangan dan Perkhidmatan
Salah satu penunjuk yang digunakan oleh Bank untuk mengukur kecukupan rizab antarabangsa ialah liputan
rizab bagi import tertangguh,1 yang disiarkan setiap dua minggu. Apabila ekonomi berkembang dengan bahagian
sektor perkhidmatan yang lebih besar, keadaan ini telah meningkatkan kepentingan import perkhidmatan
dalam pengukuran kecukupan rizab. Dengan mengambil kira perkara ini dan selaras dengan amalan terbaik
antarabangsa, laporan rizab antarabangsa Malaysia secara dwimingguan pada masa hadapan akan merangkumi
penunjuk tentang liputan rizab bagi import barangan dan perkhidmatan, berkuat kuasa mulai 22 Februari 2022.2
1 Ditakrifkan sebagai import kasar ditolak dengan eksport semula. Import tertangguh purata 12 bulan boleh didapati daripada Sorotan Bulanan dan Statistik,
Jadual 3.6.8 (Import oleh Pengguna Akhir; lihat Lampiran 1).
2 Bagi kedudukan rizab antarabangsa pada 15 Februari 2022.
3 Ditakrifkan sebagai import ditambah dengan eksport.
4 Daripada RM101.3 bilion kepada RM351.3 bilion, atau kadar pertumbuhan tahunan terkompaun (compound annual growth rate, CAGR) sebanyak 6.4%.
Services tradeC1
0
100
200
300
400
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
RM billion
Travel1
Computer and information
Transport
Manufacturing
Other business3
Other2
Perdagangan perkhidmatanR1
0
100
200
300
400
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
RM bilion
Perjalanan1
Komputer dan informasi
Pengangkutan
Pembuatan
Perniagaan Lain3
Lain-lain2
Nota: Data sebelum tahun 2005 adalah berdasarkan garis panduan dalam Edisi Kelima Manual Imbangan Pembayaran dan Kedudukan
............Pelaburan Antarabangsa (BPM5) IMF. Data bagi tahun 2005 dan selanjutnya adalah berdasarkan BPM6.
1 Termasuk perbelanjaan perjalanan bagi aktiviti pelancongan.
2 Termasuk pembinaan, caj penggunaan harta intelek, perkhidmatan persendirian, kebudayaan dan rekreasi.
3 Perkhidmatan perniagaan lain termasuk perkhidmatan penyelidikan dan pembangunan, profesional, teknikal, berkaitan perdagangan dan
...perkhidmatan perniagaan lain.
Sumber: Jabatan Perangkaan Malaysia dan Bank Negara Malaysia
Note: Data prior to 2005 are based on the guideline in the Fifth Edition of the Balance of Payments and International Investment Position
............Manual (BPM5) of the IMF. Data for 2005 and beyond are based on BPM6.
1 Includes travel spending for tourism activity.
2 Includes construction, charges for intellectual property use, personal, culture & recreational services.
3 Other business services comprise research and development, professional, technical, trade-related and other business services.
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
Pelaporan Bank berhubung dengan liputan rizab bagi import tertangguh telah diterbitkan seawal tahun 1990-an.
Data bagi import tertangguh tersedia setiap bulan dan oleh itu sangat sepadan dengan siaran kedudukan
rizab antarabangsa setiap dua minggu. Walau bagaimanapun, import tertangguh tidak merangkumi bayaran
untuk perkhidmatan, yang telah berkembang sepanjang dua dekad yang lalu. Dari tahun 1999 hingga 2019,
perdagangan perkhidmatan3 telah meningkat sebanyak 246.9%4 (Rajah 1). Hal ini disebabkan terutamanya
oleh aktiviti pelancongan yang lebih tinggi serta pembayaran untuk perkhidmatan pengangkutan asing bagi
perdagangan barangan. Selain itu, import barangan juga berkembang, sebahagian besarnya bagi menyokong
aktiviti pelaburan dalam negeri dan pengeluaran barangan perkilangan.
28 Buletin Suku Tahunan | S4 202128
Prestasi Malaysia berhubung dengan penunjuk ini selaras dengan ekonomi serantau dan ekonomi yang
setara.5 Data sebelum ini menunjukkan liputan rizab bagi import barangan dan perkhidmatan berada dalam
julat antara lima hingga lapan bulan sejak tahun 2008. Paras ini jauh melebihi nilai ambang yang diterima
pakai secara meluas iaitu tiga bulan. Hal ini menunjukkan keupayaan ekonomi Malaysia untuk bertahan
daripada kejutan luaran.
Penting juga untuk ditekankan bahawa penilaian kecukupan rizab tidak seharusnya berdasarkan semata-
mata nilai muka penunjuk-penunjuk ini. Penilaian ini perlu dilengkapi dengan pemahaman yang mendalam
mengenai kedudukan luaran, sistem kewangan dan dasar ekonomi negara secara am. Khususnya, rizab
antarabangsa bukan sahaja cara untuk memenuhi obligasi luaran.6 Penilaian semasa menunjukkan
kedudukan luaran negara7 disokong oleh asas-asas ekonomi yang utuh termasuk lebihan akaun semasa
yang kukuh, aset luaran mata wang asing yang besar yang dipegang oleh entiti dalam negeri8 dan kadar
pertukaran ringgit yang fleksibel.
Rujukan
Department of Statistics, Malaysia. ‘External Sector’, Jabatan Perangkaan Malaysia, Putrajaya.
Greenspan, A., ‘Currency reserves and debt’. Remarks before the World Bank Conference on Recent Trends in
Reserves Management, Washington, DC, 29 April 1999.
International Monetary Fund, (2016). ‘Guidance Note on the Assessment of Reserve Adequacy and Related
Considerations’.
Lampiran 1: Pengiraan liputan rizab antarabangsa bagi import tertangguh
aSebagai contoh, untuk mengira import tertangguh setiap bulan bagi bulan Disember 2019, import tertangguh
bagi bulan Januari hingga Disember 2019 dicampurkan (iaitu import tertangguh bagi 12 bulan secara berturut-
turut). Jumlah ini kemudiannya dibahagikan dengan 12, bagi mendapatkan purata bulanan. Angka-angka
boleh didapati daripada Jadual 3.6.8, kolum S MHS yang dikeluarkan oleh BNM.
5 Berdasarkan JP Morgan’s Government Bond Index for Emerging Markets.
6 Maklumat lanjut boleh didapati dalam rencana “Daya Tahan Malaysia dalam Mengurus Obligasi Hutang Luar Negeri dan Kecukupan Rizab Antarabangsa” dalam
Laporan Tahunan BNM 2018.
7 Selain itu, turut diberikan penekanan ialah kedudukan hutang luar negeri Malaysia, termasuk hutang luar negeri jangka pendek, yang kekal terurus. Hal ini
disokong oleh profil mata wang dan tempoh matang yang bersesuaian terhadap hutang luar negeri serta daya tahan keupayaan bayaran balik pinjaman oleh
entiti dalam negeri. Hutang luar negeri dalam mata wang asing oleh syarikat-syarikat juga sebahagian besarnya tertakluk pada keperluan berhemat dan lindung
nilai (rujuk penilaian terkini tentang perkembangan hutang luar negeri di halaman [xx])
8 Berjumlah RM1.1 trilion pada akhir tahun 2021.
PowerPoint Presentation
Joint Committee on Climate
Change (JC3) Report on the
Sustainable Finance
Landscape in Malaysia
An assessment of sustainability
practices and product offerings in
the financial sector
April 2022
1. Preamble 03
2. Results at a glance 05
3. Strategy and commitment 06
4. Governance and risk management 12
5. Green products and solutions 16
6. Climate disclosures 25
7. The way forward 28
8. Appendices 32
Contents
Preamble
Sustainability and climate change are important issues that financial institutions should
consider given the significant risks they posed to the financial system. Given the huge
contribution of the financial sector to the economy, the financial institutions play an
important role in supporting Malaysia’s commitment to the United Nations' (UN) 17
Sustainable Development Goals (SDGs) and the Paris Agreement, including Malaysia’s
aspiration to achieve net zero greenhouse gas emission by 2050, as announced at the
2021 United Nations Climate Change Conference (COP26).
At the regional level, several ASEAN countries have made national decarbonisation
commitments at COP26 in line with the Paris Agreement aspiration. While the majority
have pledged to reduce emission levels by 2030, only six out of ten ASEAN countries have
committed to net zero with Malaysia being one of them1. In taking the climate agenda
forward for Malaysia, the 12th Malaysia Plan outlines the nation’s path towards net zero
emission by committing to a carbon neutral target by 2050 and the phasing out of coal
power generation.
The financial sector in Malaysia is guided by the respective blueprints and masterplans
released by the regulators, including in addressing sustainability and climate issues. In
September 2021, the Securities Commission Malaysia (SC) launched the Capital Market
Masterplan 3 (CMP3) which serves as a strategic framework for the capital market to
continue to support the economy as we transition into an inclusive and sustainable country.
More recently, Bank Negara Malaysia (BNM) launched the Financial Sector Blueprint 2022-
2026 with the primary objective of facilitating an orderly transition of the banking system
into a greener economy.
As part of an initiative to support this agenda, the Joint Committee on Climate Change
(JC3) launched a survey in November 2021 involving the financial institutions in Malaysia
to understand and assess the current state of sustainability practices and readiness within
the financial sector.
It focuses on four key aspects of sustainability practices:
● Sustainability commitment and strategy
● Governance and risk management
● Green products and solutions
● Climate disclosures
The report sets out the results of this survey and observations on the common issues within
the industry. Based on the survey results, Malaysian financial institutions have
demonstrated commitments on sustainability and climate issues. There have also been
concerted efforts to embed climate risk as part of the risk management framework and
governance oversight. There are also opportunities to accelerate the readiness of the
Malaysian financial sector in furthering the sustainability and climate agenda further.
A great deal remains to be done; however, we hope that this report will provide some
insights on the common issues to be addressed in the industry, and the next steps forward
for the Malaysian financial sector.
1 ASEAN Taxonomy for Sustainable Finance, November 2021,
https://asean.org/wp-content/uploads/2021/11/ASEAN-Taxonomy.pdf
3
Survey overview
The JC3 launched a survey in November 2021 to understand and assess the current
state of sustainability practices and readiness within the financial sector.The survey
instrument was developed and designed by JC3.
The survey gathered feedback from JC3 members comprising the banking, insurance
and asset management sectors. The results of the survey were then compiled and
analysed for the purpose of this report.
Number of financial institutions
invited to participate Number of respondents*
Survey questions categorisations Breakdown of respondents*
35 24
11 Banks
5 Insurance
companies
7 Asset
management
firms
1 Others
4
Section A: Strategy and Commitments
Section B: Governance, Risk and Reporting
Section C: Asset and Liabilities
Section D: Products and solutions
Section E: Client Base
Section F: Shareholder and Investor Engagement
Section G: Critical Success Factors and
Challenges
*Note: The larger financial institutions responded
to the JC3 survey at the Group level.
Results at a glance
92%
of respondents have a sustainability strategy in place, however only 42% have
made commitments on net zero
73%
of banking respondents have made some commitments to ban or phase out
financing of coal related activities
83%
of respondents have a sustainability framework in their organisation, however
only 46% have reflected climate risk in their risk appetite statement
Strategy
Commitment
Governance
88%
of respondents offer sustainability products to their customers, and 92% plan to
increase the number of sustainability products in the future
21%
of respondents have a third party verification process on their sustainability
reports
95%
of respondents cited data quality or availability as one of the key challenges in
driving the sustainability agenda
Reporting
Challenges
Products
5
Strategy and
Commitment
1
Malaysian financial sector’s
sustainability journey
Most financial institutions say
they have strategies and
governance structures in place
to embark on the sustainability
journey towards greener
finance. Only a minority of the
respondents state that they are
still working towards putting a
sustainability strategy in place.
As sustainability became more
imperative in recent years,
more organisations and their
stakeholders recognised
sustainability as a strategic
priority to capture business
opportunities and address risks.
Survey responses on
sustainability oversight as part
of the governance structure
suggest that many banks are
incorporating global
sustainability frameworks and
policies such as the Value-
based Intermediation (VBI)
principles, UN SDGs and
Principles for Responsible
Investment (PRI), among
others with boards leading and
working together with the senior
management team in setting
the right strategies, targets and
frameworks.
Has your organisation made any sustainability
commitments as part of the strategy?
Survey responses show that, based on the various
sustainability frameworks, 79% of the respondents are
aligned to the SDGs, 33% are aligned to the Principles for
Responsible Investment (PRI) and 21% are aligned to the
Principles for Responsible Banking (PRB).
91%
100%
Insurance companies
86%
Banks
Asset management companies
100%
91%
Do you have any sustainability frameworks in your
organisation?
91%
60%
86%
Banks
Insurance companies
Asset management companies
60%
91%
7
The financial sector is progressively making
commitment towards net zero.
Based on the survey result, about 42% of the survey
respondents in the financial sector have made
commitments towards net zero targets. This appears to be
ahead of other Malaysian companies based on a recent
study2 conducted which showed that only around 18% of
Malaysian companies, across all industries, have made net
zero commitments.
It is important for organisations to set net zero targets, to
ensure accountability and commitment to facilitate
decarbonisation of the economy. Financial institutions
should also adapt their business model and strategy
accordingly as more and more stakeholders expects
commitment on sustainability and climate.
Please refer to the appendix on Box Articles A and B on
the approach of Standard Chartered and Zurich on
transition to low carbon economy.
Commitment to net zero
92% of respondents have
a sustainability strategy in
place, however only 42%
of respondents have made
commitments on net zero.
2 PwC 25th Annual CEO Global Survey 2022
https://www.pwc.com/gx/en/ceo-agenda/ceosurvey/2022.html
8
42% 58%
of FIs have made
commitments on net
zero
of FIs have not made commitments
on net zero
Has your organisation made any commitments
towards net zero target?
Stance on coal financing
The financial sector is committing to reduce coal
financing.
A collective response to address this issue has now
become crucial. The financial sector, which is a key
enabler of the economy plays an important role to ensure
that the initiatives towards sustainability are achieved
successfully.
Our survey results show that 30% of the organisations
from the banking sector have set plans in motion and
commit to reduce coal financing. Most of the targets set
are to cease coal-fired power plants and coal financing in
the coming years and many have started to phase out new
coal-related activities in the last year.
On the other hand, insurance companies are planning to
increase their green exposures by introducing new green
products in their portfolio offerings although the majority
are yet to set specific targets.
While this is a start towards the journey, there is still a
pressing need for these organisations to prioritise their
focus to ensure they are able to achieve these targets by
the set timeframe.
“...Carbon emission
intensity from the power
sector is set to decline
by 45% in 2030 and a
further 60% in 2035,
compared to the 2005
level, in line with
Malaysia’s Nationally
Determined
Contributions targets
under the Paris Climate
Agreement.3”
3 MIDA, 2021, Malaysia aims 31% RE capacity by 2025
9
- Minister of Energy and Natural
Resources
https://www.mida.gov.my/mida-news/malaysia-aims-31-re-capacity-by-2025/
Challenges in sustainable finance
Survey respondents cited poor data quality or availability, inadequate financial incentives and
low awareness of green finance in the market as some of the top challenges faced in their
efforts towards a sustainable finance market.
Challenges:
“Difficulty in deriving to optimal risk-reward profile as unlike interest rate & credit risk, there
is no benchmark yet to measure environmental, social and governance (ESG) premium”
Success factor:
“Supply availability of ESG bonds/sukuks in the primary and secondary market”
- Local insurance provider
Challenges:
“Readiness of external fund manager in terms of skill &
consistent methodology (amongst others) in identifying
and evaluating sustainable / green securities, consistent
with the industry”
Success factor:
“we think better coordination and stronger policy
integration will help address the conflicts among the
various interests and priorities in the public and private
sectors.“
- Local asset manager “
10
Challenges:
“Low awareness among SMEs, the Environmental
and Social Risk Assessment (ESRA) checklist is
technical in nature and medium-sized companies
may not have access to subject matter expertise”
Success factor:
“Collaborative efforts with regulators and industry
partners is essential to give impetus for the
development of feasible industry standards and
practices.”
- Local banking institution
The sustainable finance market in Malaysia has seen remarkable growth. While there are a
number of ongoing sustainable finance initiatives, there are also various challenges that could
prevent the efficient scale-up of this sustainable finance market.
“
Out of these challenges,
67% of the respondents
indicated that there are
insufficient
green/sustainable finance
products on offer.
How to resolve the challenges?
Pushing the ESG agenda forward
Our survey reinforces the view that the strategy
and implementation plan within the financial
sector is still at an early stage of development.
Given the challenges faced, particularly in relation
to the top three challenges on poor data quality or
availability, inadequate financial incentives and
inadequate awareness of green finance in the
market, which are among the common problems
most organisations encounter, there needs to be
tailored and targeted approaches in resolving
these issues.
Survey results show that the banking sector is
moving towards sustainability-centric initiatives,
and making higher commitments towards
financing green and environmentally sustainable
activities. The banking sector is also putting more
focus on introducing new green/sustainable
products and offerings to customers by increasing
public awareness and encouraging them to take
on such products.
Working together with the authorities and
regulators, the financial sector can make greater
progress in its contribution for a net zero future.
Please refer to the appendix on Box Articles C
and D on how BIMB Investment Management
Berhad and BNP Paribas Asset Management Sdn
Bhd are supporting the ESG agenda and the
transition towards a low carbon economy.
Next steps:
‘Implement Exclusion list and Environmental,
Social and Governance Risk Assessment
(ESG) and set ESG-related Annual KPI”
Success factor:
“Embedding ESG considerations into our
strategies, business, operations and decision
making”
- Local financial institution
Next steps:
“Cascading of this information to fund
managers so ESG would be one of the factors
under consideration.”
Success factor:
“Available ESG bonds/sukuks meet the
appetite i.e. credit rating, maturity, valuation,
liquidity”
- Local insurance provider
Next steps:
“Establish policy that is in line with our Group
and parent company”
Success factor:
“Upskilling & Grooming in the Workforce -
Upskilling to develop the skill of our staff and
grooming them with the right knowledge and
upskill their level of skills offering proper
training to bring the best out of them.”
- Local asset manager
Please describe what are the
necessary steps for your
organisation to establish these
commitments and targets,
including key success factors and
challenges.
“
“
11
Governance
and Risk
Management
2
Driving forces for change
Most organisations are
making progress in
establishing a
governance structure
and oversight over
their sustainability
strategy.
It is important for the
Board to set the tone
from the top in
spearheading the
sustainability efforts and
vision for the
organisation.
Climate change risks continue to receive
increased focus from investors,
regulators, media and non-government
organisations.
A total of 71% of respondents from our survey
reported that climate risk has been
incorporated into their risk management
framework. A further 25% of the respondents
are currently at the pilot stage of establishing
the process and framework while the rest
have not started to integrate climate risk into
their risk management framework (4%).
While it is imperative that organisations have
an established framework with a defined
structure, it is also important that the
governance structure is clear on the roles and
responsibilities of the Board in making sure
the organisation has an articulated strategic
response to make an informed business
decision.
92%
of respondents have reflected
sustainability roles and
responsibilities in their
governance structure
Banking
Insurance
Asset Management
Has climate risk (e.g. physical,
transitional and other related risks)
been considered into your risk
management framework?
82%
80%
43%
13
The banking sector is
relatively ahead of the
insurance and asset
management sector with
73% of respondents saying
that they have reflected
climate risk consideration
into their risk appetite
statement and risk
consideration process.
Embedding climate risk into
sustainability framework
83%
of respondents have a
sustainability framework
in their organisation,
however only 46%
have reflected climate
risk in their risk appetite
statement.
Embedding climate risk into its counterparty
ratings continues to be a challenge for many
financial institutions.
The top sustainability issues faced today are
largely environmental in nature due to the impact
of climate change and regulatory requirements.
COP26 emphasises on climate risk being the
greatest risk faced by humankind and the urgent
need to tackle climate change together.
Most respondents say that they are in the process
of integrating climate risk into their risk
management process including the identification
of clients’ portfolio that are more susceptible to
climate risk.
46% 54%
have a risk appetite statement that
makes reference to climate risk
of FIs do not make reference
to climate risk in the
organisation’s risk appetite
statement
Does your risk appetite statement make any
reference to climate risk?
100%
40%
Insurance
57%
14%
Asset
Management
Banking
100%
73%
While all banks have a risk
appetite statement, only 73%
say that they make reference
to climate risk.
While all insurance companies
have a risk appetite statement, only
40% say that they make reference
to climate risk.
Only 57% of asset management
companies say they have a risk appetite
statement and 14% say that they make
reference to climate risk.
Have a risk appetite statement Climate risk is mentioned in the risk appetite
statement
14
There should be more focus on embedding climate
risk into risk appetite statements
It is important that the Board stays updated with current
regulatory requirements and evolving risks vis-à-vis
climate-related aspects. This is critical to ensure that the
Board is able to drive the strategic vision in managing
the organisation's climate risk.
Another approach financial institutions can take is by
clearly addressing climate-related risks within their risk
appetite statement and develop relevant risk metrics to
manage climate-related risks. Currently, over half (54%)
of our survey respondents have not embedded climate
risk into their risk appetite statement.
When such targets are set, it will help the organisation to
direct its focus to consider embedding climate change
risks across the organisation, and think about ways to
mitigate them in the long term. This would support the
organisation’s vision in building resilience towards
climate-related risk issues.
This is aligned with BNM’s Exposure Draft on Climate
Risk Management and Scenario Analysis which sets out
the proposed requirements and guidelines on climate risk
management and scenario analysis for financial
institutions. The exposure draft complements the Climate
Change and Principle-based Taxonomy (CCPT), Value-
based Intermediation Financing and Investment Impact
Assessment Framework (VBIAF), as well as the VBIAF
Sectoral Guides.
Risk management is critical in
business resilience
4 BNM, 2021, Climate Risk Management and Scenario Analysis - Exposure Draft 15
Green
Products and
Solutions
3
● Green bonds - Funding projects with positive environmental or climate
impact
● Climate bonds - Financing projects needed to address climate issues
● Transition bonds - Funding decarbonisation strategies
● Low carbon ETFs - Instruments that invest into companies that meet
low carbon emission criteria
● Private equity infrastructure fund - Unlisted, closed-end funds
investing in renewable infrastructure projects
● Alternative financing - Alternative fundraising via equity crowdfunding
(ECF) and peer-to-peer (P2P) financing
Expanding green finance
Green finance covers a broad range of products and services, which can
be divided into banking, insurance products and asset management
segments. The 'green' aspect in green products relates to investment or
underlying assets that are environment-friendly, such as clean renewable
energy projects or products that are designed to encourage or reward
activities that manage environmental risks.
To deepen the green finance market, the financial sector needs to focus
on developing innovative financial instruments that will mobilise capital and
investments into sustainable projects and activities.
Green products
and services
Examples of products that have been observed in the global market:
● Microfinance - Financing instrument targeted at low income population
● Green loans - Lending to encourage market development in climate
aligned sectors
● Green mortgages - Encouraging homeowners to purchase new energy
efficient homes such as those with solar panel
● Green vehicle financing - Incentivise demand for green cars with low
greenhouse gas (GHG) intensity and high fuel efficiency ratings
● Sustainability linked solutions - Incentivise positive change by offering
access to preferential interest rates based on sustainability performance
including ESG-linked Revolving Credit Facility (RCF) and ESG-linked
Supply Chain
● Green motor insurance - Insurance incentives offered on motor
vehicles that help reduce greenhouse gases emissions
● Green housing insurance - Facilitate use of renewable materials or
energies in homes or buildings
● Green insurance for business - Insurance incentives for businesses
that use alternative materials or energy i.e. Pay as You Drive to track
miles driven in your car, installing “green” building systems and materials
and coverage for “green” certified rebuilding
● Green technology - Insurance to provide risk protection for new green
technology such as solar, wind-turbine, energy efficiency technology to
help mitigate the risks associated with newly emerging technologies
Banks
Capital
Markets
Insurers
17
Tapping into the local green
finance market
Survey results indicate a growing trend of green products in Malaysia
91% of the banking sector have at least one or more green product / service offering.
Green financing is among the most commonly offered products. 80% of insurance
companies have some form of sustainability based insurance products while 71% of
asset managers offer ESG related funds.
Banking sector
Insurance sector
Asset management sector
18
Please refer to the appendix on Box Articles A, B, E, F
and G on how Standard Chartered, Zurich, CIMB, HLB
and RHB offer financial solutions in the market for climate-
friendly activities.
Key initiatives and incentives to drive
sustainability in Malaysia
E
Environment, minimising
the impact of an
organisation to nature
S
Social, contributions by an
organisation to promote
fairness in society
G
Governance, processes
for decision making,
reporting and ethical
behaviour
19
Initiatives to reduce carbon dioxide (CO2) or other GHG
emissions including:
● Green incentives and funding/matching grants for activities
to reduce CO2/GHG emissions (e.g. RM12 million matching
grant for research to enhance Light Emitting Diodes (LED)
and electric vehicles (EV).
● RM1 billion fund to support small and medium-sized
enterprises (SMEs) in reducing their carbon footprint
● Setting up of Bursa Malaysia’s Voluntary Carbon Market
(VCM) platform to support trading of carbon credits to help
manage organisations’ carbon footprint
Contributions to promote trust, welfare and equality in society,
product safety and data privacy and security. For example:
● Funding/matching grants (e.g. RM1.1 billion fund for
training/upskilling, RM6.6 billion to implement various
Technical and Vocational Education and Training initiatives)
● RM7,000 tax relief for professional courses including ESG-
related programmes
Focuses on quality and scope of reporting and accountability.
This includes tax transparency, for example:
● Management of fiscal affairs by the authorities (proposed
Fiscal Responsibility Act, Tax expenditure statement),
● Tax compliance certificates
A number of initiatives were announced by the government in the Malaysian Budget 2022.
The following are some of the key initiatives in relation to the E, S and G dimensions of
sustainability.
20
The Malaysian financial industry has demonstrated commitment
towards national sustainability and climate change agenda
through the mobilisation of financing for projects and activities that
are aligned with environmental, social and sustainability
objectives.
In the sukuk and bond market, issuances of green and
sustainability sukuk under the national Sustainable and
Responsible Investment (SRI) Sukuk Framework, are gaining
traction since the issuance of the world’s first green sukuk for the
financing of a renewable energy project in 2017.
The SRI Sukuk Framework was introduced in 2014 to facilitate the
financing of sustainable and responsible investment initiatives in
Malaysia. As at 31 December 2021, a total of RM8.3 billion of
SRI Sukuk have been cumulatively issued to fund a wide range of
green, social and sustainability projects, which include quality
education, affordable housing, green building and affordable and
clean energy.
Out of the total issuances of RM8.3 billion, 72% (RM6.0 billion) were dually recognised under both the
SRI Sukuk Framework and the ASEAN Green and Sustainability Bond Standards. In addition, RM1.6
billion of RM-denominated issuances have been issued cumulatively under the ASEAN Green and
Sustainability Bond Standards in Malaysia .
The issuers of these sukuk and bonds were guided and supported by Malaysian financial institutions
that served as the Principal Advisers for these issuances.
Expanding product offerings for
sustainable development
21
Footnote:
1. The ASEAN Green Bond Standards were launched in 2017, followed by the ASEAN Social Bond Standards and ASEAN
Sustainability Bond Standards in 2018.
2. Introduced by the Securities Commission Malaysia to strengthen Malaysia’s leadership position in the SRI fund market in the
region, particularly in integrating the commonalities between ICM and SRI into investment products and solutions.
In 2021, Malaysia’s first sovereign sustainability sukuk amounting to USD1.3 billion was issued in
alignment with the ASEAN Sustainability Bond Standards. This issuance is also recognised as the
world’s first US dollar sustainability sukuk issued by a sovereign, where proceeds are being used
for eligible social and green projects aligned to the SDGs. Such offering provides a strong signal of
the Malaysian government’s commitment towards the sustainability agenda.
As at 31 December 2021, the total issuances of bonds and sukuk labelled under the ASEAN
Green, Social and Sustainability Bond Standards amounted to USD20.9 billion since the release of
these standards, of which 18% came from Malaysia. This includes CIMB Bank Berhad’s issuance
of its USD680 million SDG Bond that was aligned with the ASEAN Sustainability Bond Standards.
Within the fund management space, there has been steady growth of SRI funds since the Guidelines
on SRI Funds were introduced in 2017. As at 31 December 2021, there were 34 SRI funds offered in
Malaysia, which comprised 22 unit trust funds and 12 wholesale funds with a total net asset value
(NAV) of RM5.07 billion, thereby offering investment options that are aligned with environmental, social
and sustainability objectives to individual and institutional investors. Out of these SRI funds offered, 16
are also Shariah-compliant. The Malaysian fund management industry has also leveraged on the SC’s
Waqf-Featured Fund Framework (framework) to provide the public access to Islamic funds that
allocate whole or part of the funds’ returns towards socially impactful activities via waqf arrangement.
To date, four Waqf-featured funds have been issued since the launch of the framework in November
2020.
To further grow this segment and attract more investors, fund managers need to introduce more
innovative SRI fund products, including funds that focus on key investment themes such as climate
change, social inclusion, etc.
While there has been encouraging growth in the introduction of green and sustainability sukuk and
bonds and qualified SRI funds, the Malaysian financial industry has to continuously enhance its
capabilities to meet the needs of the market for sustainable investment products and innovative
product structures that can support Malaysia’s transition to a low-carbon economy.
Expanding product offerings for
sustainable development (cont’d)
SRI Sukuk and
Bond Grant Scheme
To incentivise and encourage more issuers to finance green, social and sustainability projects
through sukuk issued under the SC’s SRI Sukuk Framework or bonds issued in Malaysia under
the ASEAN Green, Social and Sustainability Bond Standards.
OBJECTIVE
ELIGIBILITY FOR ISSUANCES THAT QUALIFY FOR THE
SRI SUKUK AND BOND GRANT SCHEME
● Green SRI sukuk
issuances made under
the SC’s SRI Sukuk
Framework from July
2017 onwards
● Social sustainability or
other SRI sukuk
issuances made under
the SC’s SRI Sukuk
Framework from 25
August 2020 onwards
● Bond issuances made under the
ASEAN Green Bond Standards,
ASEAN Social Bond Standards
or ASEAN Sustainability Bond
Standards from 29 October
2020 onwards
www.sc.com.my | www.capitalmarketsmalaysia.com
APPLICATION PERIOD FOR THE SRI SUKUK AND
BOND GRANT SCHEME
From January 2021 until fully utilised
CLAIM CLAIM AMOUNT TAX INCENTIVE
Issuer can claim for
the Grant based on an
issue or programme
90% of the actual
external review cost
subject to a maximum
of RM300,000
Income tax exemption for the
recipient of the SRI Sukuk and
Bond Grant Scheme from Year
of Assessment (YA) 2021 until
YA 2025
22
SRI - Sustainable and Responsible Investment
Securities Commission Malaysia (SC) has established the SRI Sukuk and Bond Grant Scheme
to encourage and grow the SRI sukuk and bond segment further.
http://www.sc.com.my
Bank Negara Malaysia (BNM) has established a Low Carbon Transition Facility RM2 billion as
part of a joint effort with participating financial institutions to support and encourage SMEs
to adopt sustainable practices for business resilience. This initiative is in line with Malaysia’s
national target to achieve a net-zero emission by 2050.
23
BNM’s Fund for SMEs:
Low Carbon Transition
Facility (LCTF)
BNM’s Low Carbon Transition Facility is established to support SMEs in adopting sustainable
and low carbon practices.
The type of businesses suitable to apply for this facility
The Low Carbon Transition Facility is open for SMEs in all sectors that are committed to
transform their business operations towards low carbon operations. This includes improving
energy efficiency, increasing the use of sustainable material for production and obtaining
sustainability certification.
All applications should be made directly with the participating financials to reduce risk of financial scams. No third
party agents are being employed by participating financial institutions for the purpose of this facility.
Objective Encourage and support SMEs to adopt sustainable practices for
business resilience
Special feature Participating financial institutions to provide financing on a matching
basis
Size RM2 billion
[RM1 billion at location from Bank Negara Malaysia + RM1 billion from
participating financial institutions (matching basis)]
Eligibility Criteria SMEs in all sectors
Purpose of financing To fund capital expenditure or working capital to initiate or facilitate the
transition to low carbon and sustainable operations
Tenure Up to 10 years
Financing size per SME Maximum RM10 million
Financing rate to SMEs Maximum financing rate of 5.0% p.a., inclusive of guarantee fee (if any)
Guarantee Guarantee schemes by Credit Guarantee Corporation Malaysia Berhad
(CGC) / Syarikat Jaminan Pembiayaan Perniagaan Berhad (SJPP)
Availability 3 February 2022 until fully utilisation
Low Carbon Transition Facility (LCTF)
For more
information
Contact the participating financial institutions’
customer service centre
Log on to participating financial institutions’
website
bnm.gov.my/sme-financing
An initiative by: Credit Guarantee Providers:
Financing size per
SME
Maximum
RM10 million
Financing Rate to
SMEs
Maximum
financing rate of
5% p.a.
Inclusive of
guarantee fee
(if any)
Tenure
Up to
10 years
5 BCG, 2021, Securing Our Future: Net Zero Pathways for Malaysia
Financial institutions are
starting to think about the
business opportunities created
by climate change.
Most of the respondents from the
survey have undertaken initial
analysis to understand the impact
of climate change on their
business lines, products and
portfolios.
A total of 92% of respondents are
considering how climate change
could create opportunities and are
currently planning to increase the
number of green or sustainable
products and solutions in the
coming future with strategic
considerations and new
opportunities to engage with
clients on climate-related issues.
Sustainable marketplace
is growing
88%
of the respondents say
that they are currently
offering green or
sustainable products
and / or solutions.
Towards greener financing
From the survey results, many respondents say their
customers express interest in green products and
services. Indeed, some studies have suggested that
between RM300 to RM500 billion worth of
investments are needed until 2050 to achieve
Malaysia’s net zero target5.
Even though 88% of respondents say that they are
currently offering green or sustainable products and
solutions, 67% indicated that there is a challenge in
terms of the breadth of green/sustainable financial
products on offer.
Based on discussions and feedback from the JC3
members, one of the key challenges faced by
financial institutions is insufficient overall awareness
of green products, financial incentives and talents.
Please refer to Section 5 on the potential steps that
could be taken as a way forward.
Additionally, please also refer to the appendix for the
Box Article H on how Swiss Re conducts knowledge
sharing sessions for its Malaysian clients on
sustainability topics and the transition towards
innovative green products.
24
Climate
Disclosures
4
Increasing adoption of sustainability
reporting frameworks
79% say they
have either fully or
partially adopted at least
one sustainability
reporting framework
Global Reporting Initiative
(GRI)
Task Force on Climate-
Related Financial
Disclosures (TCFD)
Climate Change and
Principle-based Taxonomy
(CCPT)
Integrated Reporting
37%29% 13% 21%
eeeeeeeeee17% 21% 50%
32%13% 13% 42%
41%21% 13% 25%
Adoption of frameworks by the FIs
Fully
adopted
Partially
adopted
Plan to
adopt No plans to adopt
91% of banks say that they have
fully or partially adopted at least
one sustainability reporting
framework
Banking
82% of banks say that they plan to
adopt at least another framework, in
addition to their existing sustainability
reporting frameworks
71% of asset managers that they
have fully or partially adopted at
least one sustainability reporting
framework
Asset
Management
29% of asset managers say that
they plan to adopt at least another
framework, in addition to their existing
sustainability reporting frameworks
60% of insurers say that they
have fully or partially adopted at
least one sustainability reporting
framework
Insurance
80% of insurers say that they plan to
adopt at least another framework, in
addition to their existing sustainability
reporting frameworks
26
12%
Sustainability report helps stakeholders better understand
the impact of business decisions made and the actions
taken towards a sustainable business practice.
Our survey shows that 29% of respondents have adopted
the Global Reporting Initiative (GRI) framework, while there
is a potential growth on the adoption of Task Force on
Climate-Related Financial Disclosures (TCFD) with 50% of
respondents saying that they have plans to adopt TCFD in
the coming future.
Disclosures on sustainability
reporting
Our survey suggests that interactions with
customers help to highlight areas that most
respondents need to pay attention to.
Only 50% of the respondents said that they have
established a methodology to identify customers who
are more susceptible to climate change. It is observed
that the bigger financial institutions have already started
evaluating and engaging with clients on climate-related
issues, including their approach to manage climate
change risks.
When asked if the financial institutions have third
party verification on their sustainability reporting
process, only 21% stated that they have conducted
independent assurance assessment.
Investors and stakeholders would have more
confidence in the information reported when it has been
independently assured. Third party verification provides
a reasonable assurance level for the stakeholders as
assurers have experience in conducting the work using
a recognised assurance standard. This allows the
stakeholders to find value in the assurance reports and
find out if there is something they need to be aware of.
Most institutions have a sustainability
strategy and framework in place. Majority
are in the budding stage of sustainability
reporting. However, only 21% state that
they have third party verification on their
sustainability reporting process.
Independent
assurance on
sustainability reports
promotes the integrity
and credibility of
disclosures in order to
build trust among
stakeholders and
investors while
providing
transparency.
Financial institutions
should think about
disclosures in a holistic
manner, to help address
challenges and refine the
processes for data
gathering while
enhancing climate
metrics to establish a
more comprehensive
framework over time.
27%
20%
17%
27
The way
forward
5
Next steps forward
29
There has been a lot of encouraging progress in the sustainability journey in the Malaysian
financial sector so far. This also comes with a set of challenges on its own and there is still
much that can be done as part of the transition to a greener economy. The following sets
out some of the thematic initiatives that financial institutions can consider when furthering
this agenda.
Strengthen governance and risk management framework over climate
risk
The survey results indicated that 92% of the respondents have reflected sustainability
roles and responsibilities in their governance structure. Governance framework is
important to enable effective oversight into climate risk and sustainability issues by the
Board and senior management. As such, there is increasing need and proposition for the
establishment of a dedicated sustainability function within the financial institutions, and
designating the relevant ESG roles.
From the survey results, we noted that 29% of respondents have not yet considered
climate risk as part of their risk management framework while more than half of the
respondents (54%) have not yet embedded climate risk considerations into their risk
appetite statement. This is an area of importance as financial institutions need to assess
climate risk on their business strategy and adapt accordingly within this new paradigm. In
addition, the industry can also benefit from further applications of risk management tools
such as stress testing and scenario analysis (refer to JC3 Application and Reference
Guides on Climate Risk Management and Scenario Analysis) to facilitate further analysis
and insights into this area.
Embed strategy and commitments
Even though the majority of survey respondents indicated that they have a sustainability
strategy (92%) and framework (83%) in place, however, more than half of the
respondents (58%) have not yet made any commitment towards the net zero target. This
commitment is important if we want to decarbonise the economy and move towards net
zero. Given the key role of the financial sector in our economy, it is more important than
ever for the industry to take a lead on this issue and set the right tone in the economy. In
addition, sustainability issues is not just about responding to risks, but also about
recognising the opportunity that it presents and adapting to this new paradigm. As such it
is important for the financial institutions to set and announce respective climate targets, in
line with Malaysia’s commitment to achieve net zero GHG emission by 2050, as well as
to continue aligning its strategy towards this agenda.
Next steps forward (cont’d)
30
Widen the range of innovative products
From the survey results about 67% of respondents agreed that there is currently inadequate
number of green/sustainable financial products in the local market. It is important to increase
the breadth of green products to cater to market demands from customers and investors.
Moving forward, there needs to be further investments, including in new technologies,
development of sustainable investment methodologies and skill sets, to enhance internal
capabilities and readiness of the financial institutions to offer innovative products into the
market. In addition, financial institutions should consider and explore collaboration with
multilateral development banks/agencies in providing blended financing for green projects.
Furthermore, the industry is encouraged to engage and understand the financing needs of
corporates and SMEs to enable them to offer suitable financing spectrum, including for
sustainable supply chain financing and alternative financing.
Stronger disclosure framework and verification
Reporting framework is an important component of the sustainability agenda, and many
stakeholders are demanding for more robust, transparent and quality disclosures. From our
survey results, there is still a proportion of the survey respondents which have not yet
adopted a sustainability disclosure framework as part of their reporting process. For those
who have, only 21% have conducted third party verification on their disclosures. Financial
institutions play an important role to ensure robustness and reliability of data reported in
sustainability disclosures. Meanwhile, the industry should accelerate the adoption of TCFD-
aligned climate-related financial risk disclosures (refer to JC3 TCFD Application Guide for
Malaysian Financial Institutions), which will not only provide greater transparency on how
climate risk considerations are integrated into business decisions and risk management of
financial institutions, but will also help drive action towards more effective risk mitigation and
better adaptation to climate change.
Capacity building and awareness
Many of the initiatives and steps discussed above are reliant on a good support system
within the financial institution. There is a high importance of having the right set of talents
with aligned goals in order to assist the financial institution in realising its strategic
objectives. Given that the overall Malaysian economy is relatively new to ESG, there may be
a shortage of talent in the short term. As such, investment in people should be an important
part of the financial institution’s agenda to continuously build and groom talent internally. A
structured and phased development plan for an identified pool of talent would play an
important role in supporting the financial institution throughout its sustainability journey. The
financial sector should also work on enhancing sustainability capabilities to develop ESG
specialist talent for the industry.
Acknowledgement
31
This report was prepared by the JC3 Sub-
Committee 3: Product and Innovation (SC3), which
is chaired by Securities Commission Malaysia.
The JC3 SC3 would like to acknowledge the efforts of the
following members and observers of JC3 who contributed
to the development of the JC3 report:
1. Bank Negara Malaysia
2. BIMB Investment Management Berhad
3. BNP Paribas Asset Management Malaysia Sdn Bhd
4. CIMB Islamic Bank Berhad
5. Hong Leong Bank Berhad
6. Malayan Banking Berhad
7. Principal Asset Management Berhad
8. PwC Malaysia
9. RAM Sustainability Sdn Bhd
10. RHB Investment Bank Berhad
11. Singular Asset Management Berhad
12. Standard Chartered Bank Malaysia Berhad
13. Swiss Re Retakaful
14. Zurich Malaysia
31
Appendices
6
Box A: Enabling the net zero Transition through Sustainable
Trade Finance
Standard Chartered has had a long commitment to Sustainable Finance. We have the
financial expertise, governance frameworks, innovative thinking, technology and
geographical reach to get capital from where it exists to the markets where it matters the
most. We continue to be an early leader in sustainable finance focused on emerging
markets, from launching the world’s first Sustainable Deposit to introducing
comprehensive Sustainable Trade proposition.
At Standard Chartered, our vision is to be the world’s most sustainable and responsible
bank. We are committed to sustainable social and economic development in our
business, operations and communities. Thus, in an effort to meaningfully support clients
with their sustainability journey, we set out to understand what a truly sustainable supply
chain is.
Through the launch of Standard Chartered’s Sustainable Trade Finance proposition,
which included our lens on what sustainable trade is, we aim to help our clients deliver
on their own sustainability goals and drive changes to their supply chains, which in turn
enhance our clients’ brand recognition and reputation in relation to sustainability. By
applying our sustainability lens to the entire suite of trade finance products, we are able
to support:
● Sustainable goods: Working with customers and partners to finance underlying
goods that meet agreed sustainability standards.
● Sustainable suppliers: Supporting trade for suppliers who meet acceptable
thresholds against ESG ratings or metrics such as gender equality, responsible
sourcing criteria and water use.
● Sustainable end-use: Focusing on trade financing in sustainable industries
including renewable energy, energy efficiency, the blue economy, sustainable
infrastructure, water management and clean transportation.
● Transition industries: Helping industries transition and reduce their carbon footprint
by offering trade financing that recognises efforts to help reduce emissions.
As part of our proposition, we established definitions on sustainable financing of working
capital products, across documentary trade as well as open account, to supply chain
financing solutions in support and incentivise clients’ journey to sustainability. In
furthering our mandate to drive financing towards sustainable development outcomes
and be the leading Sustainable Trade Bank in our footprint, we have and will be working
closely with our clients on transaction and transition advisory while providing thought
leadership for the industry.
To meet the goals of the Paris Agreement – perhaps the greatest challenge faced by our
planet – and reduce carbon emissions to net zero by 2050, collaboration is crucial. We
cannot combat the worst effects of climate change without policymakers, financial
institutions and companies working together. Nowhere is this more true than for
multinational companies (MNCs) and their suppliers.
33
Box A: Enabling the net zero Transition through Sustainable
Trade Finance (cont’d)
Our research report, Carbon Dated, reveals that almost three-quarters of MNC carbon
emissions are generated in their supply chains. As MNCs start to transition to net zero,
it’s therefore no surprise that they are looking to their suppliers to do much of the heavy
lifting. Our research shows that two-thirds of MNCs are targeting supply chain emissions
as the first step on their transition journey. For suppliers, especially those in emerging
markets, the stakes couldn’t be higher: 57% of MNCs are willing to replace emerging-
market suppliers with ones in developed markets that are less reliant on fossil fuels if it
would help them reach net zero. There is clearly an expiry date for carbon-reliant
businesses, and it’s fast-approaching. However, if suppliers can show their MNC
partners that they are making progress in their transition and can become a positive link
in the chain, a share of a huge market could be theirs. In 12 key emerging and fast-
growing economies we reviewed exports to the tune of USD1.6tn, or around one-third,
are set to be subject to MNC zero tolerance on carbon. Closer to home, impact on
Malaysia’s export market, is estimated at USD65.3 billion, if the suppliers are not
embracing net-zero transitions expediently.
The above represents a major opportunity for net-zero-focused suppliers, but also
quantifies the potential losses to companies not embracing net-zero transition.
Suppliers cannot do it alone but will rely on support from both banks and trading partners
to reach net zero. Many of the MNCs with whom we spoke as part of our study are keen
to help, with almost one in five now offering grants or loans to their suppliers to invest in
reducing emissions from operations. Carbon markets and transparent carbon pricing will
provide even stronger signals to reduce carbon emissions and the tools to manage the
related risks.
The role of banks such as Standard Chartered is critical and cannot be underestimated.
We must provide the financing needed for companies in both emerging markets and
carbon-intensive sectors to transition to net zero.
In this regard, Standard Chartered has supported various clients on their Sustainability
journey. One such example is the recently mobilized executive green trade finance
facility to support Amplus Energy Solutions FZE, a subsidiary of Amplus Solar, in its
solar generation business. Amplus Solar is a member of the PETRONAS Group and is
Asia’s leading distributed energy company which provides low-carbon energy solutions
to its industrial and commercial customers. This facility is a significant milestone towards
the implementation of sustainable practices across ecosystems and in building more
resilient supply chains.
Launching sustainable trade is one of the key enablers in delivering our commitment to
fully integrate ESG into our business and financing decisions, from how we finance
suppliers to how we help deliver the SDGs and beyond.
We are committed to promote economic and social development in the markets we
serve, doing so sustainably and equitably in line with our purpose and valued behaviours
of “Never Settle”, “Better Together” and “Do the right thing”. This sustainability
philosophy sets out how Standard Chartered integrates sustainability into our
organisation decision making and we work closely with non-governmental organisations
(NGOs), investors and technical specialists to ensure our framework remains fit for
purpose.
34
Box B: Insuring sustainability for long-term benefits
The world is transforming at an unprecedented pace. The next generation will inherit the outcome of
our choices today. As such, we need to do and contribute more to play our part in preserving the
planet.
Zurich’s ambition is to become one of the most impactful and responsible companies in the world.
Central to our purpose, differentiation, and growth, is our commitment to sustainability. We want to
create a brighter future together to generate positive progress and impact, and through this journey,
unite our people and customers towards realising a shared vision: an inspiring and optimistic future.
Our 1.5°C Future
In June 2019, Zurich became the first insurer to sign the United Nations Business Ambition for 1.5°C
pledge, demonstrating our commitment towards climate action and accelerating action to reduce
climate risks. The road to achieve goals of the Paris Agreement to limit global warming to 1.5⁰C
requires immediate and decisive action. In translating our support for the transition to a climate
neutral future, we set science-based CO2 reduction targets and focused on innovation to drive
sustainable solutions.
Zurich Group’s operations have been carbon neutral since 2014, and we have now set targets to
further reduce emissions from operations of 50% by 2025, and 70% by 2029. We also target to adopt
100% renewable energy to power operations by end-2022, and electrify 100% of our corporate
vehicle fleet by end-2029.
As a responsible corporate citizen, we track our CO2 emissions. This is part of our accountability for
our impact on the environment. The amount of CO2 emissions from electricity utilised by Zurich
offices in Malaysia is equivalent to:
● About 10.5 million km driven by an average passenger vehicle
● 313 homes’ energy use for one year
● 316,027,596 number of smartphones charged
In offsetting our CO2 emissions, we are one of the early adopters in the financial industry in Malaysia
to purchase Renewable Energy Certificates (REC) as part of our pledge and global commitment
towards the utilisation of 100% renewable power.
“Our planet is at a climate crossroads now. Immediate, collective action to
halt this is paramount. We must act before it is too late. Progress over
perfection is much needed. While climate action is long-term, any action
today no matter how small is better than inaction.”
Junior Cho
Zurich Malaysia Country Lead“ 35
Box B: Insuring sustainability for long-term benefits (cont’d)
Work Sustainability
Apart from focusing on the action to preserve the planet, we also need to look at how our actions will
impact us − the people. Driven by technological advancements, the skills of today may no longer be
relevant in the future. These changing trends bring with it new challenges, and we care about these
challenges. Zurich acknowledges the need for individuals to be better protected. To this end, we
support our people and business in navigating the changing world of work and responding to evolving
customer needs.
For our own workforce, Zurich is committed to creating a sense of security and trust at the workplace.
Under this principle, we prioritise employee development by upskilling and reskilling, to help them
stay relevant and fit for the future as well as offer career opportunities to fulfil their individual
aspirations and business needs.
Our employees are the drivers of our business. Their wellbeing is our top priority. To build a
sustainable and diverse workforce, we must establish the feeling of shared ownership. Each and
every one of us plays an important role to create a meaningful impact to the business, our customers,
and the community that we serve.
At the start of the first Movement Control Order in March 2020, Zurich Malaysia became one of the
first companies to adapt and work fully remotely while maintaining our service standards to our
customers. On top of this, we implemented various programmes to manage and support employee
wellbeing such as webinars on various wellbeing pillars, COVID-19 vaccination programme and
working with partners like Naluri to provide a comprehensive mental and physical wellness
programme.
One of the ways to support our employees in their wellbeing journey especially during the pandemic
was a company-wide Wellbeing Day on 18 October 2021, where Zurich Malaysia employees were
given the day off to take time off from work and focus on themselves.
Confidence in Digital Society
The shift into working remotely during the pandemic has compelled us to change the way we interact
with our customers. When face-to-face interactions were restricted, we depend on technology to
ensure that we are able to provide the level of service expected by our customers. This is not only at
the organisational level, as the industry’s digital adoption and transformation took a quantum leap too.
A McKinsey Global Survey in October 2020 indicated that COVID-19 accelerated the digitisation of
customer interactions years ahead of the average rate of adoption from 2017 to 2019. In APAC, the
acceleration was ahead by 4 years, while the rest of the world was at 3 years.
The expectations and increased reliance on digital communication and services reinforces Zurich’s
commitment to be clearly responsible in the way we work with and handle data, and this is expressed
in our Data Commitment which was put in place in 2019.
36
Box B: Insuring sustainability for long-term benefits (cont’d)
Confidence in Digital Society (cont’d)
Zurich’s Data Commitment pledges to protect the personal data of our customers and never sell or
share it without being fully transparent. We will only use the data provided to us, to do what is best in
rendering our products and services to our customers, in line with Malaysia’s Personal Data
Protection Act.
Bearing this in mind, we will continue to contribute to increased cybersecurity through risk awareness,
risk mitigation and insurance programmes. In 2020, Zurich Malaysia together with Alliance Bank
introduced Malaysia’s first personal cyber insurance to safeguard Malaysians against financial losses
arising from cybercrime.
Supporting ESG in the communities around us
Flood resilience – “Being there when it matters most”
claims programme
Flood Aid Vehicles to provide on-the-spot claims approvals of up to
RM30k and disbursement of flood relief items, benefitting 124
policyholders/participants and totalling RM1.43mil. This was
supported by the 24-hour flood claims contact centre
Eat Right to Play Right
A 6-year integrated community programme in partnership with Zurich
Foundation to focus on children malnutrition by instilling healthy
eating habits; leveraging on grassroots football as a platform for
outreach
Home building and COVID-19 Collective for Orang Asli
82 communities across 5 states were engaged by grant partners and
Epic Society in initiatives across several impact areas such as
sustainable energy, education, food security, clean water, culture
preservation, health & hygiene awareness, socioeconomic
empowerment, digital literacy and skills training.
Disbursement of surplus sharing from the takaful fund for
the benefit of the community during the pandemic
Contributed monies accumulated from the general takaful surplus
pool as donation on behalf of our general takaful customers to
philanthropic or life-saving causes. The latest initiatives include
supporting the local COVID-19 vaccination programme in
collaboration with the Malaysian Red Crescent Society, and
purchasing medical equipment for government hospitals.
37
Box C: Role of a Fund Manager to drive SRI growth through ESG
incorporation
We believe our actions have both a direct and indirect impact on a wide range of stakeholders, ranging
from investors, corporations, employees and suppliers, as well as the local communities in which these
stakeholders live, work and serve. We also believe economic value creation can and should be
combined with environmental stewardship, social inclusion and good governance. The fund management
industry, being the primary savings and investment vehicles, could play a significant role to drive the SRI
growth through ESG incorporation and shareholder resolutions.
The fund manager should have the following in place to kick start its ESG roles: -
a. Sustainable investment approach (how the firm approaches sustainability).
b. Governance structure (how the firm ensures compliance with this policy).
c. Clear and transparent description of how ESG is integrated in the investment process.
By considering ESG criterion, fund managers seek to identify companies that are attractive for
investment because they have superior management practices or present lower risk to investors and
other stakeholders. ESG criteria have evolved over time to encompass a wide range of indicators as well
as take into account emerging trends. This has led to more disclosure from companies, more tools and
methods for investors to analyse ESG risks and opportunities, and in many cases more favourable
risk/return benefits for investors over the long term.
Fund managers incorporate ESG issues across a range of asset classes and investment vehicles. These
include unit trust funds and exchange traded funds and many others such as venture capital, private
equity, hedge and responsible property funds as well as other commingled, pooled products typically
reserved for specific kinds of institutions or other accredited high net worth investors.
Fund management companies may integrate
technology, data and finance to deliver
sustainable, transparent financial solutions
for a changing world. BIMB Investment is
leveraging on Arabesque S- Ray’s services
as well as other of major financial institutions,
investors, corporations and consultants,
together with media organisations and other
stakeholder groups. The Arabesque S-Ray
collects and processes information from a
variety of sources and this data is
transformed into proprietary scores based on
financial materiality. The S-Ray data engine
evaluates companies’ sustainability
performance across a spectrum of ESG
dimensions to create a suite of proprietary
scores:
S-Ray ESG Score, United Nations Global Compact (UNGC) Score and Temperature Score, in addition
to a Preference Filter, that allows for the screening of companies to align with investors’ values.
Arabesque S-Ray has increased BIMB Investment’s transparency into a company’s long- and short-
term risks and opportunities by analysing its corporate DNA through a range of sustainability lenses
which enhances financial decisions.
38
Box D: The importance of active stewardship to support the transition
towards a low carbon economy
BNP Paribas Asset Management has been a pioneer in sustainable investment since 2002 – with
sustainability at the heart of our approach. We launched our Global Sustainability Strategy in 2019 and
became the first global asset manager to commit and integrate sustainable investment across its flagship
fund range (i.e., all our applicable funds have ESG criteria integrated within their investment process).
We are committed to being a ’future maker‘, leveraging on our investments, voice to shape a better future.
We differentiate ourselves from our peers by defining six pillars of sustainable investment, which are
governed by robust and transparent policies and implemented across our portfolios. Within each pillar we
articulate several commitments to action including the commitment to align our overall portfolio with the
Paris Agreement.
This decision was made after years of climate leadership by our firm and has since been supported by
several portfolio and operational actions - ranging from engagement targets to specific KPIs.
BNPP AM now publishes the carbon footprint of its
funds and has set up portfolio KPIs, such as
targeting a higher weighted average ESG score
and a lower carbon footprint than the benchmark.
We also have sector policies covering the sectors
that are the most sensitive to climate change:
● in 2020, BNPP AM implemented a significantly
tighter exclusion policy on companies engaged
in the mining of thermal coal and the generation
of electricity from coal; and
● in 2021, we enhanced our policy on
Unconventional Oil & Gas. Climate indicators
are integrated in investment decisions, with
engagement to encourage better disclosure and
practices.
39
Box D: The importance of active stewardship to support the transition
towards a low carbon economy (cont’d)
Companies, investors and governments are also ramping up efforts to achieve their 2050 net zero
commitment and halve emission targets by 2030 in the coming years. These are aligned with The
Inevitable Policy Response (IPR)’s Forecast Policy Scenario (FPS) – and will result in growth in investors’
allocation to low carbon investment solutions.
Active stewardship plays a key part in aligning to the Paris Agreement. It includes effective voting
activities, direct and collaborative corporate engagement and public policy advocacy. Active stewardship
needs to be central to an asset manager’s strategy. It can help identify ESG risks and opportunities and
contribute to positive changes to economic and environmental ecosystems.
At BNP Paribas Asset Management, our Global Sustainability Strategy sets out the firm’s roadmap “to
make a substantive contribution to the low-carbon energy transition” and states that one of the ways we
will achieve this is by encouraging our investee companies “to align their strategies with the goals of the
Paris Agreement”.
BNP Paribas Asset Management plays an active role in collaborative engagement initiatives such as
Climate Action 100+ and the recently launched Asia Investor Group on Climate Change (AIGCC). We
believe in the importance of structured and focused engagement with companies rather than divestment.
When you divest, you lose the ability to influence a company.
BNP Paribas Asset Management was also co-leading engagements with CLP, a Hong Kong listed power
utility with businesses across APAC, operating a number of coal-fired power generation assets on their
coal policy, via a dedicated Engagement Program supported by the AIGCC. This Program is backed by
investors with over USD8.8tn in assets.
As a result of the ongoing engagement with CLP, the company announced on 23 September 2020 its
commitment to net zero by 2050 and coal exit by 2040. It set new science-based targets to align with the
goal of limiting global warming to well-below 2°C. The company also stated its ambition to further
strengthen its approach to align with 1.5°C.
Through engagement, we believe we can identify which companies are actively reducing their reliance on
coal and lowering their carbon intensity of power generation and continue to support them as they make
progress towards facilitating a low carbon future.
40
Box D: The importance of active stewardship to support the transition
towards a low carbon economy (cont’d)
We see urgency expressed by regulators in the region to address climate related risks, as Asia is not
immune to the impact of climate change. The formation of the Joint Committee for Climate Change (JC3)
co-chaired by Bank Negara Malaysia and Securities Commission Malaysia, which brings together major
financial institutions in Malaysia, outlines initiatives to strengthen climate-related risks in the industry. The
SRI Roadmap issued by the Securities Commission Malaysia in 2019 and the Climate Change and
Principle Based Taxonomy issued by Bank Negara Malaysia in 2021, set the fundamental framework and
commitment for all financial institutions to play a role in promoting economic and social development in a
sustainable way.
Ultimately, BNP Paribas Asset Management is committed to engaging with companies and working with
regulators, our clients and stakeholders in the region to take the necessary action to align to Paris targets
and commitment.
41
Box E: Setting a One-Stop Sustainability Solution for SMEs
CIMB GreenBizReady launched in February 2021, is a one-stop sustainability solution
for CIMB’s SME customers looking to start and advance in their sustainability journey.
SMEs will be connected to and supported by industry leaders and government agencies,
and will be offered a suite of solutions to enable and strengthen their sustainability
efforts. Solutions include sustainability-linked financing, sustainability service providers,
training and capacity building, certification and advisory services and business matching.
CIMB GreenBizReady will provide SMEs with a competitive advantage by equipping
them with practical knowledge and tools to incorporate Economic, Environmental and
Social considerations into their business, helping them become sustainability-ready for
long-term business resilience. This is also aligned with Bank Negara Malaysia’s Value-
Based Intermediation (“VBI”) initiative, of which CIMB Islamic is a strong proponent, and
a founding member of the VBI community of practitioners.
CIMB GreenBizReady’s strategic associates include MIDA, MATRADE, MGTC, SIRIM,
TNBX, PFAN, BuySolar, IMPACTO, MAEKO, Aerodyne, Sols Energy, Maqo Solar, and
Revotech, of which these strategic associates are grouped into the following pillars
respectively:
With the support of these strategic associates, GreenBizReady will enable SMEs to
participate in programmes and activities via online platforms while also enjoying
complimentary mentorship sessions on a regular basis. After completing each session,
SMEs will have a designated contact person to help them plan the next steps of their
sustainability journey by assessing their readiness and providing recommendations for
implementation.
42
Box E: Setting a One-Stop Sustainability Solution for SMEs
(cont’d)
CIMB GreenBizReady provides SMEs the flexibility to determine the best way for them
to embark on their own sustainability journey according to their preference, priorities, and
budget. However, the recommended first step for SMEs under GreenBizReady would be
through the CIMB - IMPACTO SME Adoption Programme because it will provide a
framework and structured approach for the SMEs, where they can build on from this
foundation going forward (e.g. global standards and best practices). In summary, the
programme is structured as follows:
Steps of the SME GreenBizReady
As this is a long-term journey and we are only at the beginning, we are working on
various awareness and engagement initiatives both internally and externally.
There is definitely a strong business case for SMEs to transition towards sustainability,
especially for SMEs in the global supply chain or SMEs that are exporting to advanced
economies. They would have come across the importance of sustainability in their
business dealings and recognised the opportunities available to them if they transition
earlier than their competitors.
S
te
p
1
S
te
p
3
S
te
p
2
Sustainability Self-Assessment Questionnaire
Upon expression of interest, CIMB will disseminate the assessment
questionnaire to its member SMEs
Summary Recommendation Report by Impacto
Completed questionnaires will be submitted for topline analysis and a Summary
Recommendation Report
Comprehensive Assessment* by Impacto
One-on-one sessions regarding operations and strategies, resulting in a
customised report with checklists, useful information and templates that can be
used for implementation. Using a scoring mechanism, baseline scores will be
attributed.
*For selected SMEs, subject to eligibility criterias
43
Box F: HLB’s Whole-of-bank approach to Sustainability
At Hong Leong Bank (HLB), we are cognisant that individuals and companies we do business with will
directly or indirectly affect the environment. This is why we are committed to adopting a whole-of-bank
approach towards integrating environmental and social considerations as well as good governance into
our business activities and solutions in order to create a better future for us, for our future generations,
and for our environment.
Products and Services
The Bank has identified Renewable Energy (RE) as a critical important and high growth industry with
significant commercial potentials. We believe in helping to steer the transition towards a more
sustainable source of energy. Our significant focus in sustainable financing focus are driven towards our
Corporate and SME customers that are investing in renewable energy; this includes solar, biogas and
small hydropower. Our initiatives are in line with the government’s goal to increase the share of RE to
20% of the country’s power mix by 2025.
Renewable energy has significant growth potential to support the country’s low carbon economy agenda,
as well as long-term advantages for households in terms of energy cost savings, cushioning against
future rise in energy costs and reducing carbon footprint in the process.
In 2021, the Bank successfully launched two Solar Financing initiatives, one catered to SMEs whilst the
other is to home owners. The HLB SME Solar Financing product is a green energy financing facility
developed for SMEs looking to install small-scale solar photovoltaic (PV) systems. On the other hand, the
HLB Solar Plus Loan/Financing-i product is a financing facility for installation of solar power systems in
homes. It allows home owners, including those with homes under construction, to seamlessly apply for
financing of solar power energy systems together with their home loan/financing application.
We have partnered with solar powered energy system specialists such as Solarvest, ERS Energy and
Solaroo Systems, that provides comprehensive one-stop installation, commissioning, operations and
maintenance services to our customers, and will look towards partnering additional well regarded solution
providers in the marketplace.
44
Our sustainability journey is guided by deep and meaningful
engagements with stakeholders to ensure that all of our
sustainability initiatives and policies are aligned with business
objectives and consistent with the bank’s values. Consequently,
we have progressed in integrating environmental, social and
governance (“ESG”) considerations into our daily business
practices, products and services, and in our interactions with
business partners and with our customers.
Our business activities and interactions with our stakeholder
partners and customers can be categorized into the four focus
areas as depicted in the accompanying diagram; namely the
areas of products and services, innovation and funding, advocacy
and advisory, as well as capacity building and knowledge sharing.
Box F: HLB’s Whole-of-bank approach to Sustainability (cont’d)
Funding and Innovation
There is growing demand from both investors and customers for sustainable financial and investment
products. In 2021, HLB was the first bank in Malaysia to undertake a consumer finance green
securitisation exercise worth RM300mil in sustainable home loans and financing. The issuance of the
green securitisation is to promote and grow the Ringgit bond market with high-quality sustainable
bond/sukuk offerings.
Advocacy and Advisory
The Bank’s commitment to sustainable business practices extends across our entire value chain. We
strive to create a fair, sustainable, responsible, and ethical approach to procuring and delivering goods
and services. To that end, we create meaningful partnerships with our suppliers and vendors. In addition,
we worked on embedding sustainability considerations across our entire value chain. The Bank has
enhanced our Procurement Policy to include ESG evaluation on all of the Bank’s vendors. More
importantly, we want to help our supply chain transition towards sustainable practices and we will
continue to advocate, advise and support our suppliers in embracing a greener future.
45
As part of our efforts to decarbonise transportation in
Malaysia, the Bank has developed a Green Car Financing
Framework which formulates initiatives to form
partnerships with hybrid car manufacturers as well as
community engagements to facilitate a shift in consumer
preferences towards green vehicles. We offer customers
competitive financing rates on new green car purchases,
as well as fast-track one-day approvals through our Green
Lane for priority credit evaluation.
To ensure that the Bank achieves its sustainability
aspirations, HLB constantly looks at developing new value
propositions in our products and services to drive greener
outcomes for us and our customers.
These home financing assets were amongst the Bank’s eligible
sustainable assets that met HLB’s and Cagamas’ stringent
environmental, social and governance (ESG) criteria.
Our efforts were recognised when the Bank won the Asset-
Backed/Asset-Based/Covered Sustainability Bond Of The Year in
the Environmental Finance's Bond Awards 2022.
Box F: HLB’s Whole-of-bank approach to Sustainability (cont’d)
In relation to our customers, and as part of our best efforts to focus on RE, the Bank has established a
dedicated RE specialist unit that draws expertise from professionals who have focused on the fields of
RE in order to help guide the Bank and our customers on the path towards transitioning to sustainable
energy sources and practices. We work closely with our customers to provide value-added services that
include advisory in guiding new energy players on warranties and guarantees form of coverage for
equipment as well as help customers evaluate the feasibility and generation capacity of their Renewable
Energy projects.
We make continuous efforts to build upon our sustainable banking practices. HLB implemented a
business and corporate banking framework, which governs our sustainable lending and financing
processes. By adopting an inclusionary approach, the aim is to work with and encourage our customers
in their transition to more sustainable business practices and mitigate environmental risks.
Capacity Building and Sharing
We believe capacity building and knowledge sharing is very important at this stage to engender more
broad-based awareness and galvanize more affirmative actions for the environment from our
communities. Towards this end, HLB has initiated a number of programmes as part of our efforts to
promote internal and community capacity building and sustainability knowledge sharing.
1. Collaboration with Jeffrey Sachs Centre on Sustainable Development
sustainable practices implemented by global and domestic companies, and the Bank’s ESG Policy &
Assessment Framework that was developed by the Bank in consultation with the WWF. To date, we have
completed training for over 400 of our relationship and credit risk managers and executives.
Concurrently, HLB hosted a strategic engagement and dialogue session on Sustainable Development at
Sunway University. The session facilitated a high-level discussion on climate-related risks, environmental
and social issues, and financial institutions’ role in supporting the transition towards a lower carbon
economy.
46
The Bank collaborated with Jeffrey Sachs Centre to
introduce a Sustainable Development Programme that
provides a comprehensive training module and certification
for our business relationship managers and credit risk
managers. The Programme covers climate change,
environmental and social themes, case studies of
Box F: HLB’s Whole-of-bank approach to Sustainability (cont’d)
2. Sustainability Roundtable Sessions
The Sustainability Roundtable sessions serve as our stakeholder engagement platform with the objective
of enabling our customers and business communities to learn more about the current and future ESG
related developments, issues and its impact on long-term sustainability and economic / social value
creation. We have conducted seven roundtable sessions since 2020 and have three more scheduled for
the remainder of 2022.
In addition, similar to digital transformation, many companies are keen to incorporate more sustainable
practices in their operations, but the lack of know-hows as well as the uncertainty in relation to returns-
on-investment may have discouraged them from making the shift.
The Bank made concerted efforts in engaging industry stakeholders such as regulators, governing
agencies, trade associations and key industry players as part of our discussion panels to share their
insights as well as their respective sustainability transformation and journey for the benefit of the
roundtable attendees.
We have created awareness amongst the wider community, on the importance of embedding ESG
practices as a core function of a company’s long-term sustainability.
As a banking institution, we also gained great insights in terms of understanding the different industries’
challenges and opportunities in the sustainability space, thus allowing HLB to empower our front-liners to
have more meaningful conversations with our borrowing customers, in our effort to support them to
transition towards better ESG & sustainable business practices.
47
Box F: HLB’s Whole-of-bank approach to Sustainability (cont’d)
3. Collaboration with Malaysian Green Technology and Climate Change Corporation (MGTC)
The Bank collaborated with MGTC to introduce an informational section on our corporate website which
will include infographics related to topics such as Types of Electric and Hybrid Vehicles and the Future of
EV Cars in Malaysia. Besides that, MGTC assisted the Bank in developing a GHG Carbon Calculator by
providing the Bank with the calculation methodology. The aim of the calculator is to track and analyse our
Scope 3 emissions from employees’ commute.
This is in line with the government’s plan to promote a more sustainable mode of transportation whereby
the Bank will, based on the analysis, be introducing initiatives such as lower interest rates for mobility
financing based on relative carbon savings.
Sustainability is the Now and Future
In conclusion, the Bank strives towards inclusive growth, ensuring that we provide economic
empowerment to our customers and communities while managing the climate and social impact of our
operations.
The Bank believes that sustainable banking practices will serve as the foundation to our continued
competitive advantage and contributes to a better future for the world. Sustainability is not just the future,
it needs to be acted upon now.
48
Box G: Providing Financial Solutions for the Climate
Demand for green banking solutions has accelerated in view of the continued and
sustained interest from the investment community, in particular by investors who are
focused on long-term, stable returns, and are more aware on the impact of
environmental risks on businesses, which have the potential to materialise over a longer
term.
For ASEAN, the demand for additional ASEAN green investment from 2016 to 2030 is
an estimated US$3 trillion. This opportunity represents a new ASEAN green investment
market 37 times the size of the global 2016 green bond market, which will certainly
benefit SMEs that are seeking sustainable financing. Additionally, part of our role as a
financial services provider is to steer customers / clients towards climate action and
sustainable practices. This will in turn, create actual impact and change in the real
economy for sustainable development which will contribute towards financial inclusion
and access, as well as sustainable investment.
RHB Banking Group has committed to extend RM5 billion towards green financing
activities by 2025 to further promote the transition to a low-carbon and climate-resilient
economy through lending, insurance, capital markets advisory and investment. As of the
first half of 2021, RHB has extended RM3.3 billion in green financing of which 20% is for
renewable energy projects.
As of June 2021, RHB Asset Management launched four ESG SRI-qualified funds - RHB
i-Global Sustainable Disruptors Fund which is a Shariah-compliant fund, RHB Global
Impact Fund, RHB Sustainable Global Thematic Fund and RHB Asia Sustainable
Leaders Fund with a combined AUM of RM812 million. The four hallmark ESG funds,
and potentially more new funds in the future, provide avenues for investors to deploy
their capital in sustainable investments, hence making a positive impact across the
national and global landscape.
Meanwhile, in the insurance space, RHB Insurance has been equally busy as well with
the launch of Hybrid/Electric car insurance in mid-August 2021 aimed at supporting
lower carbon emissions where preferred pricing is provided for hybrid/electric car
policyholders. Since its launch, the product has impacted about 300 policyholders, and
RHB Insurance will continue to develop more ESG insurance in supporting a sustainable
and responsible insurance.
Through RHB Investment Bank Berhad (RHBIB), as of June 2021 the group has
successfully originated and distributed RM1.65 billion worth of green/sustainable/SRI
Sukuk for our clients in the capital market and advisory segment. Certainly, this will be a
catalyst for the RHB Group to continue to support the development of ESG initiatives in
the capital markets space.
49
Box G: Providing Financial Solutions for the Climate (cont’d)
Notable programmes and deals by RHBIB relating to the group’s green financing
commitment include:
In August 2021, RHB launched the Sustainability Financing Programme (SFP), a Green
Financing product bundling programme aimed at reaching out to the needs of both Small
Medium Enterprises (SME) and Retail customers. The four pillars of the SFP comprise
Green Energy, Green Buildings, Green Process and Green Products, which aim to
promote sustainable development and support the nation’s transition to a low-carbon
economy through green financing solutions that integrate ESG criteria. They target to
grant a total of RM1 billion in new financing via the RHB Sustainability Financing
Programme by 2025.
In addition to this, RHB Islamic Bank Berhad (RHB Islamic)
has strengthened its commitment in sustainable practices
by becoming the first bank in Malaysia and in the Asia
Pacific region to introduce an eco-friendly recycled plastic
debit card via its collaboration with WWF-Malaysia and
Universiti Malaysia Terengganu. This revolutionary RHB
Visa WWF Debit Card-i forms part of RHB Islamic’s
initiative under its flagship initiative “Ocean Harmony” that
aims to raise public awareness in the conservation and
environmental sustainability of the marine ecosystem. The
first edition of the eco-friendly card features the Green Sea
Turtle, one of the most endangered sea creatures in the
world today.
RHIB as the Principal Adviser, Lead Manager,
and Lead Arranger for the issuance of
Malaysia’s 1st ever ESG-related Unrated
Perpetual Sukuk of up to RM500 million
RHIB as the sole Principal Adviser, sole Lead
Arranger and Joint Lead Manager for the
landmark issuance of the 1st ever
Sustainability Sukuk by a Malaysian
Development Financial Institution
RHBIB as the Sole Adviser, Lead Arranger and Lead Manager in the establishment of
Islamic Medium Term Notes programme of up to RM200 million in nominal value
(“ASEAN Green SRI Sukuk Programme”)
● In 2020, Pasukhas Green Asset Sdn Bhd’s RM17 million Green Sukuk was
commended with the following awards:
○ Best ASEAN Green SRI Sukuk by The Asset Triple A Islamic Finance Award
○ Green Deal of the Year by Asian Banking & Finance Corporate & Investment
Banking Awards 2020
RHB Visa WWF Debit Card-i
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Box H: Knowledge sharing that that tackles sustainability
challenges
Sustainability has long been top of mind in Malaysia, and we have seen significant
efforts towards creating a green market and increasing the share of renewables in the
energy mix.
Off the back of the recent Intergovernmental Panel on Climate Change (IPCC) report, it's
also becoming very clear that we all need to move towards immediate, rapid and large-
scale reductions in greenhouse gas emissions, moving to a net zero energy system by
2050, if feasible.
At Swiss Re, we continually share our knowledge in a way that tackles sustainability
challenges, creating long-term value across the re/insurance and re/takaful value chain.
In fact, we constantly manage and monitor risks and opportunities associated with ESG
issues and focus on long-term value generation, by reducing our underwriting activities
in sectors we do not consider sustainable – such as thermal coal, or stop investing in
companies with poor ESG ratings altogether.
Sustainable re/insurance and re/takaful covers all our business activities from liability to
the asset side of our balance sheet, our own operations and dialogue with our
stakeholders. Here in Malaysia, we are looking to support the transition to a low carbon
environment by enabling new risk solutions to come to market, thereby giving consumers
and businesses confidence to adopt new technologies – for example in green
infrastructure, energy and mobility projects and impact investing. Our dialogues with
clients on sustainability remain top of our agenda and our commitment to our Insurance
and Takaful clients stands strong, as we help our clients develop innovative products to
address growing environmental and social challenges. As a concrete example we are
currently developing a solar parametric solution for a large Malaysian client which will
help in the transition to this form of renewable energy.
Now, more than ever, shareholders are putting pressure on all companies to adopt more
sustainable practices; regulators are asking for more disclosure; employees, especially
the younger generation, also expect real progress towards a more sustainable future.
Thus, we have very active dialogues with Malaysian clients about sustainability topics.
As a business focused on building resilience in communities, we are also moving away
from providing insurance and takaful coverage to most carbon-intensive oil and gas
producers. At the same time, to encourage the transition towards renewable energy, we
are providing risk cover to more than 5,600 wind and solar farms globally. To achieve
our business and net-zero goals, we are continuing to build and scale on successful
partnerships with clients working on this transition.
As we move towards 2030, Malaysia's development priorities will forge ahead to align
and integrate with SDGs – advancing green growth towards a low-carbon nation,
attaining carbon neutral. We at Swiss Re will also do the same and we believe that
achieving net zero by 2050 is mission possible, however, we will need to speed up and
scale up climate solutions across all value chains.
51
Thank you
| Press Release |
25 Apr 2022 | International Reserves of Bank Negara Malaysia as at 15 April 2022 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-15-april-2022 | https://www.bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf | null |
Reading:
International Reserves of Bank Negara Malaysia as at 15 April 2022
Share:
53
International Reserves of Bank Negara Malaysia as at 15 April 2022
Embargo :
For immediate release
Not for publication or broadcast before
1500 on
Monday, 25 April 2022
25 Apr 2022
The international reserves of Bank Negara Malaysia amounted to USD114.4 billion as at 15 April 2022. The reserves position is sufficient to finance 6.0 months of imports of goods and services[1], and is 1.2 times total short-term external debt.
[1] Under the previous import coverage measure, reserves is sufficient to finance 7.1 months of retained imports of goods. For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27, which can be accessed at at bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf Related Assets
BNM Statement of Assets & Liabilities - 15 April 2022
Bank Negara Malaysia
25 April 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
Monthly Highlights
Headline inflation declined to 3.4% in March
March 2023
1
3.7 3.4
3.9 3.8
0.00
2.00
4.00
0.0
2.0
4.0
J
a
n
-2
2
F
e
b
-2
2
M
a
r-
2
2
A
p
r-
2
2
M
a
y
-2
2
J
u
n
-2
2
J
u
l-
2
2
A
u
g
-2
2
S
e
p
-2
2
O
c
t-
2
2
N
o
v
-2
2
D
e
c
-2
2
J
a
n
-2
3
F
e
b
-2
3
M
a
r-
2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation declined to 3.4% in March
(February: 3.7%) due mainly to lower inflation for
fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation moderated slightly to 3.8% during
the month (February: 3.9%), driven largely by
lower inflation for food away from home.
1
Robust growth in volume index driven by retail and motor vehicles
Index of Wholesale and Retail Trade
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded by 10.6% in February 2023
(January: 8.5%).
• The higher growth was driven mainly by retail
sales in non-specialised stores (e.g., department
stores) followed by continued strength in
purchases of motor vehicles amid the ongoing
fulfilment of backlog orders.
• On a month-on-month seasonally adjusted basis,
the index accelerated by 5.5% (January: 0.2%).
9.5 8.510.6
0
10
20
30
40
Feb-
22
Mar-
22
Apr-
22
May-
22
Jun-
22
Jul-
22
Aug-
22
Sep-
22
Oct-
22
Nov-
22
Dec-
22
Jan-
23
Feb-
23
ppt, %yoy
Motor vehicles Retail Wholesale
2.4
5.2
4.4
0
1
2
3
4
5
6
7
Mar-22 Jul-22 Nov-22 Mar-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Growth in credit to the private non-financial sector moderated
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
2.7 2.6 2.7 2.6
1.0 0.6 0.7 0.7
1.0
1.1 1.1 0.9
4.7 4.3 4.5 4.2
Dec-22 Jan-23 Feb-23 Mar-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Contribution to growth (ppt)
• Credit to the private non-financial sector grew by
4.2% as at end-March (February: 4.5%), attributed
to slower growth in credit to businesses (3.2%;
February: 3.7%).
• While growth in outstanding corporate bonds
moderated (4.4%; February : 5.5%), outstanding
business loan growth was sustained at 2.4%
(February: 2.4%). This was supported by the
continued growth in both working capital (2.2%;
February: 1.9%) and investment-related loans
(4.3%; February: 4.2%).
• Outstanding household loan growth remained
broadly stable (5.2%; February: 5.3%), supported
by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan
growth for the purchase of securities (-6.9%;
February: -3.3%).
Credit to the Private Non-Financial Sector1,2
Monthly Highlights
March 2023
Domestic financial market conditions remained orderly
Financial Market Performance in March 2023
Source: Bank Negara Malaysia, Bursa Malaysia
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
11.0
-2.1
-5.3
0.0
-2.2
1.7
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-10 -5 0 5 10 15
Mar-23
Feb-23
• In March, global financial markets were affected by
the emergence of banking sector stress in some
major economies. As spillovers were contained thus
far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds
improved.
• In line with the performance of regional currencies,
the ringgit appreciated by 1.7% against the US
dollar. Conditions in the domestic bond market
also remained stable.
• The FBM KLCI declined by 2.2% during the month.
2
Banks maintained strong liquidity and funding positions to support intermediation
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.9
157.4
0
40
80
120
160
70
75
80
85
90
95
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
increased slightly to 1.8% (February-23: 1.8%) and
1.2% (February-23: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory
reserves) continue to record a prudent level of
110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
%
1.8
1.2
1.7
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
157.4% (February-23: 152.7%).
• The aggregate loan-to-fund ratio remained stable at
81.9% (February-23: 81.6%).
PRESS RELEASE
Ref. No.: 04/23/05 EMBARGO: Not for publication or
broadcast before 1500 hours on
Friday, 28 April 2023
Monthly Highlights – March 2023
Headline inflation declined to 3.4% in March
• Headline inflation declined to 3.4% in March (February: 3.7%) due mainly
to lower inflation for fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation1 moderated slightly to 3.8% during the month
(February: 3.9%), driven largely by lower inflation for food away from
home.
Robust growth in volume index driven by retail and motor vehicles
• The Index of Wholesale and Retail Trade (IOWRT) expanded by 10.6%
in February 2023 (January: 8.5%).
• The higher growth was driven mainly by retail sales in non-specialised
stores (e.g., department stores) followed by continued strength in
purchases of motor vehicles amid the ongoing fulfilment of backlog
orders.
• On a month-on-month seasonally adjusted basis, the index accelerated
by 5.5% (January: 0.2%).
1 Core inflation is computed by excluding price-volatile and price-administered items.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth in credit to the private non-financial sector2,3 moderated
• Credit to the private non-financial sector grew by 4.2% as at end-March
(February: 4.5%), attributed to slower growth in credit to businesses
(3.2%; February: 3.7%).
• While growth in outstanding corporate bonds moderated (4.4%;
February: 5.5%), outstanding business loan growth was sustained at
2.4% (February: 2.4%). This was supported by the continued growth in
both working capital (2.2%; February: 1.9%) and investment-related
loans (4.3%; February: 4.2%).
• Outstanding household loan growth remained broadly stable (5.2%;
February: 5.3%), supported by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan growth for the purchase of
securities (-6.9%; February: -3.3%).
Domestic financial market conditions remained orderly
• In March, global financial markets were affected by the emergence of
banking sector stress in some major economies. As spillovers were
contained thus far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds improved.
• In line with the performance of regional currencies, the ringgit
appreciated by 1.7% against the US dollar. Conditions in the domestic
bond market also remained stable.
• The FBM KLCI declined by 2.2% during the month.
Banks maintained strong liquidity and funding positions to support
intermediation
• Banks continued to record healthy liquidity buffers with the aggregate
Liquidity Coverage Ratio at 157.4% (February: 152.7%).
2 Comprises loans to households and non-financial corporations from the banking system and development financial
institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
3 Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced
to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
• The aggregate loan-to-fund ratio remained stable at 81.9%
(February: 81.6%).
Asset quality in the banking system remained intact
• Overall gross and net impaired loans ratios increased slightly to 1.8%
(February: 1.8%) and 1.2% (February: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory reserves) continues to
record a prudent level of 110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
Bank Negara Malaysia
28 April 2023
20230428_BNM Monthly Highlights-March_en
Slide 1
Slide 2
20230428_BNM PR_Monthly Highlights-Mar 2023_eng
| Press Release |
07 Apr 2022 | International Reserves of Bank Negara Malaysia as at 31 March 2022 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-31-march-2022 | https://www.bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf | null |
Reading:
International Reserves of Bank Negara Malaysia as at 31 March 2022
Share:
155
International Reserves of Bank Negara Malaysia as at 31 March 2022
Embargo :
For immediate release
Not for publication or broadcast before
1500 on
Thursday, 7 April 2022
7 Apr 2022
The international reserves of Bank Negara Malaysia amounted to USD115.6 billion as at 31 March 2022. The reserves level has taken into account the quarterly foreign exchange revaluation changes. The reserves position is sufficient to finance 6.1 months of imports of goods and services[1], and is 1.2 times total short-term external debt.
[1] Under the previous import coverage measure, reserves is sufficient to finance 7.4 months of retained imports of goods (15 March 2022: 7.3 months). For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27, which can be accessed at bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf Related Assets
BNM Statement of Assets & Liabilities - 31 March 2022
Bank Negara Malaysia
7 April 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
Monthly Highlights
Headline inflation declined to 3.4% in March
March 2023
1
3.7 3.4
3.9 3.8
0.00
2.00
4.00
0.0
2.0
4.0
J
a
n
-2
2
F
e
b
-2
2
M
a
r-
2
2
A
p
r-
2
2
M
a
y
-2
2
J
u
n
-2
2
J
u
l-
2
2
A
u
g
-2
2
S
e
p
-2
2
O
c
t-
2
2
N
o
v
-2
2
D
e
c
-2
2
J
a
n
-2
3
F
e
b
-2
3
M
a
r-
2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation declined to 3.4% in March
(February: 3.7%) due mainly to lower inflation for
fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation moderated slightly to 3.8% during
the month (February: 3.9%), driven largely by
lower inflation for food away from home.
1
Robust growth in volume index driven by retail and motor vehicles
Index of Wholesale and Retail Trade
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded by 10.6% in February 2023
(January: 8.5%).
• The higher growth was driven mainly by retail
sales in non-specialised stores (e.g., department
stores) followed by continued strength in
purchases of motor vehicles amid the ongoing
fulfilment of backlog orders.
• On a month-on-month seasonally adjusted basis,
the index accelerated by 5.5% (January: 0.2%).
9.5 8.510.6
0
10
20
30
40
Feb-
22
Mar-
22
Apr-
22
May-
22
Jun-
22
Jul-
22
Aug-
22
Sep-
22
Oct-
22
Nov-
22
Dec-
22
Jan-
23
Feb-
23
ppt, %yoy
Motor vehicles Retail Wholesale
2.4
5.2
4.4
0
1
2
3
4
5
6
7
Mar-22 Jul-22 Nov-22 Mar-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Growth in credit to the private non-financial sector moderated
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
2.7 2.6 2.7 2.6
1.0 0.6 0.7 0.7
1.0
1.1 1.1 0.9
4.7 4.3 4.5 4.2
Dec-22 Jan-23 Feb-23 Mar-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Contribution to growth (ppt)
• Credit to the private non-financial sector grew by
4.2% as at end-March (February: 4.5%), attributed
to slower growth in credit to businesses (3.2%;
February: 3.7%).
• While growth in outstanding corporate bonds
moderated (4.4%; February : 5.5%), outstanding
business loan growth was sustained at 2.4%
(February: 2.4%). This was supported by the
continued growth in both working capital (2.2%;
February: 1.9%) and investment-related loans
(4.3%; February: 4.2%).
• Outstanding household loan growth remained
broadly stable (5.2%; February: 5.3%), supported
by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan
growth for the purchase of securities (-6.9%;
February: -3.3%).
Credit to the Private Non-Financial Sector1,2
Monthly Highlights
March 2023
Domestic financial market conditions remained orderly
Financial Market Performance in March 2023
Source: Bank Negara Malaysia, Bursa Malaysia
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
11.0
-2.1
-5.3
0.0
-2.2
1.7
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-10 -5 0 5 10 15
Mar-23
Feb-23
• In March, global financial markets were affected by
the emergence of banking sector stress in some
major economies. As spillovers were contained thus
far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds
improved.
• In line with the performance of regional currencies,
the ringgit appreciated by 1.7% against the US
dollar. Conditions in the domestic bond market
also remained stable.
• The FBM KLCI declined by 2.2% during the month.
2
Banks maintained strong liquidity and funding positions to support intermediation
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.9
157.4
0
40
80
120
160
70
75
80
85
90
95
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
increased slightly to 1.8% (February-23: 1.8%) and
1.2% (February-23: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory
reserves) continue to record a prudent level of
110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
%
1.8
1.2
1.7
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
157.4% (February-23: 152.7%).
• The aggregate loan-to-fund ratio remained stable at
81.9% (February-23: 81.6%).
PRESS RELEASE
Ref. No.: 04/23/05 EMBARGO: Not for publication or
broadcast before 1500 hours on
Friday, 28 April 2023
Monthly Highlights – March 2023
Headline inflation declined to 3.4% in March
• Headline inflation declined to 3.4% in March (February: 3.7%) due mainly
to lower inflation for fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation1 moderated slightly to 3.8% during the month
(February: 3.9%), driven largely by lower inflation for food away from
home.
Robust growth in volume index driven by retail and motor vehicles
• The Index of Wholesale and Retail Trade (IOWRT) expanded by 10.6%
in February 2023 (January: 8.5%).
• The higher growth was driven mainly by retail sales in non-specialised
stores (e.g., department stores) followed by continued strength in
purchases of motor vehicles amid the ongoing fulfilment of backlog
orders.
• On a month-on-month seasonally adjusted basis, the index accelerated
by 5.5% (January: 0.2%).
1 Core inflation is computed by excluding price-volatile and price-administered items.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth in credit to the private non-financial sector2,3 moderated
• Credit to the private non-financial sector grew by 4.2% as at end-March
(February: 4.5%), attributed to slower growth in credit to businesses
(3.2%; February: 3.7%).
• While growth in outstanding corporate bonds moderated (4.4%;
February: 5.5%), outstanding business loan growth was sustained at
2.4% (February: 2.4%). This was supported by the continued growth in
both working capital (2.2%; February: 1.9%) and investment-related
loans (4.3%; February: 4.2%).
• Outstanding household loan growth remained broadly stable (5.2%;
February: 5.3%), supported by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan growth for the purchase of
securities (-6.9%; February: -3.3%).
Domestic financial market conditions remained orderly
• In March, global financial markets were affected by the emergence of
banking sector stress in some major economies. As spillovers were
contained thus far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds improved.
• In line with the performance of regional currencies, the ringgit
appreciated by 1.7% against the US dollar. Conditions in the domestic
bond market also remained stable.
• The FBM KLCI declined by 2.2% during the month.
Banks maintained strong liquidity and funding positions to support
intermediation
• Banks continued to record healthy liquidity buffers with the aggregate
Liquidity Coverage Ratio at 157.4% (February: 152.7%).
2 Comprises loans to households and non-financial corporations from the banking system and development financial
institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
3 Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced
to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
• The aggregate loan-to-fund ratio remained stable at 81.9%
(February: 81.6%).
Asset quality in the banking system remained intact
• Overall gross and net impaired loans ratios increased slightly to 1.8%
(February: 1.8%) and 1.2% (February: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory reserves) continues to
record a prudent level of 110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
Bank Negara Malaysia
28 April 2023
20230428_BNM Monthly Highlights-March_en
Slide 1
Slide 2
20230428_BNM PR_Monthly Highlights-Mar 2023_eng
| Press Release |
31 Mar 2022 | Monetary and Financial Developments in February 2022 | https://www.bnm.gov.my/-/monetary-and-financial-developments-in-february-2022 | https://www.bnm.gov.my/documents/20124/6675125/i_en.pdf | null |
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Monetary and Financial Developments in February 2022
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Monetary and Financial Developments in February 2022
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Headline inflation moderated to 2.2% in February
Headline inflation moderated to 2.2% in February (Jan: 2.3%), mainly reflecting lower inflation in the transport (Feb: 3.9%; Jan: 6.0%) segment.
Underlying inflation, as measured by core inflation 1 , was higher at 1.8% during the month (Jan: 1.6%), driven mainly by food away from home and rental.
Export growth remained strong in February
Exports grew by 16.8% (Jan: 23.9%), reflecting continued strength across Malaysia’s export products.
Moving forward, export performance will continue to benefit from the expansion in external demand and global technology upcycle. In addition, high commodity prices will provide support to export growth.
Nonetheless, the trade outlook remains contingent on the path of the pandemic, global supply chain disruptions as well as risks surrounding the global growth outlook amid the military conflict in Ukraine.
Net financing growth was sustained in February
Net financing2 growth was sustained at 4.8%, as outstanding corporate bonds growth increased (Feb: 5.2%; Jan: 5.0%) while outstanding loan growth was stable at 4.7%.
Outstanding household loans continued to expand at 4.7%, reflecting broadly sustained growth across most purposes.
For businesses, outstanding loan growth increased (Feb: 5.5%; Jan: 5.3%) amid higher lending to SMEs and sustained growth in working capital loans (Feb: 8.3%; Jan: 8.2%; 2017-19 average: 4.3%).
Growth in total loan disbursements moderated in February but remained high (Feb: 12.3%; Jan: 21.5%; 2017-19 average: 5.0%), as disbursements growth for businesses continued to be elevated.
Domestic financial markets were orderly amid ongoing geopolitical conflict
In February, the military conflict in Ukraine had affected global financial markets, resulting in increased volatility. Spillovers to domestic financial markets and broader financial conditions were however contained, reflecting positive investor sentiments, given Malaysia’s position as a net commodities exporter amid higher global commodity prices.
The domestic equity market had increased, driven by the plantation sector. The FBM KLCI rose by 6.3% to 1,608 points as at end-February.
The 10-year MGS yields declined by 0.6 basis points while the ringgit depreciated by 0.3%.
Banks maintained sufficient liquidity to support intermediation activities
Banking system continued to maintain healthy liquidity positions with the Liquidity Coverage Ratio remaining strong at 151.3%.
Banks’ funding profile remained stable supported by sustained growth in deposits.
The Net Stable Funding Ratio (NSFR) stood at 116.4% as at December 2021.
Banks’ asset quality remained sound
Gross and net impaired loans ratios remained low at 1.5% and 0.9% respectively
Banks continue to be prudent in loan provisioning to buffer against potential credit losses, with total provisions and regulatory reserves amounting to RM41.1 billion (Jan-22: RM40.8 billion).
Total provisions stood at 1.9% as a share of total banking system loans.
1 Core inflation is computed by excluding price-volatile and price-administered items. It also excludes the estimated direct impact of tax policy changes.
2 Refers to outstanding loans of the banking system (excluding development financial institutions (DFIs)) and outstanding corporate bonds.
View Monthly Highlights [PDF] Related Assets
Monthly Highlights & Statistics February 2022
Bank Negara Malaysia
31 March 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
Monthly Highlights May 2023
Monthly Highlights
Headline inflation declined further to 2.8% in May
May 2023
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation moderated to 2.8% (April 2023:
3.3%). This decline was largely due to non-core
CPI components, particularly lower inflation for
fuel (-0.2 percentage points, ppt) and fresh food
(-0.1ppt).
• Core inflation also declined slightly to 3.5% (April
2023: 3.6%) amid lower inflation for
communication services.
3.3
2.8
3.6 3.5
0.00
2.00
4.00
0.0
2.0
4.0
J
a
n
-2
2
F
e
b
-2
2
M
a
r-
2
2
A
p
r-
2
2
M
a
y
-2
2
J
u
n
-2
2
J
u
l-
2
2
A
u
g
-2
2
S
e
p
-2
2
O
c
t-
2
2
N
o
v
-2
2
D
e
c
-2
2
J
a
n
-2
3
F
e
b
-2
3
M
a
r-
2
3
A
p
r-
2
3
M
a
y
-2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
1.6
5.1
4.6
0
1
2
3
4
5
6
7
May-22 Sep-22 Jan-23 May-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Credit to the Private Non-Financial Sector1,2
1
Growth in credit to the private non-financial sector improved in May
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
Contribution to growth (ppt)
• Credit to the private non-financial sector expanded
by 4.0% as at end-May (April 2023: 3.7%), driven
mainly by higher growth in credit to businesses
(2.8%; April 2023: 2.5%).
• Outstanding corporate bonds grew by 4.6% (April
2023: 4.4%), while outstanding business loans
expanded by 1.6% (April 2023: 1.0%). The higher
business loan growth reflected improvement in
loans for both working capital and investments to
SMEs and non-SMEs.
• In the household segment, outstanding loan
growth was sustained at 5.1% (April 2023: 5.0%),
supported by higher growth across most loan
purposes. Of note, household loan growth
continued to be driven by loans for the purchase of
houses and cars, which grew by 7.0% and 8.4%,
respectively (April 2023: 6.8% and 8.0%).
2.7 2.6 2.5 2.6
0.7 0.7 0.3 0.5
1.1 0.9
0.9 1.0
4.5 4.2
3.7 4.0
Feb-23 Mar-23 Apr-23 May-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Index of wholesale and retail trade growth moderated in April
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded more moderately by 4.7% in
April 2023 (March 2023: 9.4%). The lower growth
was due mainly to the decline in the motor vehicle
segment.
• However, the retail segment continued to record a
double-digit growth of 10.0% (March 2023:
13.8%), supported by sales in non-specialised and
other specialised stores1.
• On a month-on-month seasonally adjusted basis,
the index increased at a faster pace of 6.5%
(March 2023: -0.9%).
1 Other goods in specialised stores includes clothing, footwear,
pharmaceuticals, cosmetics, watches, jewellery and optical goods.
10.6
9.4
4.7
-2
3
8
13
18
23
28
33
Apr-22 Jun-22 Aug-22 Oct-22 Dec-22 Feb-23 Apr-23
ppt, %yoy
Motor vehicles Retail Wholesale
Index of Wholesale and Retail Trade
Monthly Highlights
2
May 2023
Domestic financial markets were largely affected by external factors
Financial Market Performance in May 2023
-18.0
-0.5
-1.1
-3.0
-2.0
-3.4
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-20 -15 -10 -5 0
May-23 Apr-23
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
1Regional countries comprise Singapore, Thailand, Philippines, Indonesia, and Korea
Source: Bank Negara Malaysia, Bursa Malaysia
• Global investors maintained a risk-off approach
throughout May, as concerns over the impact of the
US debt ceiling crisis and the weaker-than-
expected rebound in China’s economy weighed on
global financial markets.
• As a result, the ringgit depreciated against the US
dollar by 3.4% (regional1 average: -1.2%). Similarly,
the FBM KLCI declined by 2.0% (regional1 average:
-1.3%).
• Nonetheless, the 10-year MGS yields decreased
slightly by 3 basis points, supported by non-resident
inflows into the domestic bond market.
Banks maintained strong liquidity and funding positions to support intermediation
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
151.2% (April 2023: 154.3%).
• The aggregate loan-to-fund ratio remained stable at
81.8% (April 2023: 82.1%).
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.8
151.2
0
40
80
120
160
70
75
80
85
90
95
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
A
p
r
2
3
M
a
y
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
remained broadly unchanged at 1.80% (April
2023: 1.78%) and 1.10% (April 2023: 1.10%),
respectively.
• Loan loss coverage ratio (including regulatory
reserves) remained at a prudent level of 114.1%
of impaired loans, with total provisions accounting
for 1.7% of total loans.
%
1.8
1.1
1.7
0.5
1.0
1.5
2.0
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
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2
2
S
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2
2
O
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2
N
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2
2
D
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2
2
J
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3
F
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b
2
3
M
a
r
2
3
A
p
r
2
3
M
a
y
2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
April 2023 Monthly Highlights
Slide 1
Slide 2
| Press Release |
31 Mar 2022 | Detailed Disclosure of International Reserves as at end-February 2022 | https://www.bnm.gov.my/-/detailed-disclosure-of-international-reserves-as-at-end-february-2022-1 | null | null |
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Detailed Disclosure of International Reserves as at end-February 2022
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Detailed Disclosure of International Reserves as at end-February 2022
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In accordance with the IMF SDDS format, the detailed breakdown of international reserves provides forward-looking information on the size, composition and usability of reserves and other foreign currency assets, and the expected and potential future inflows and outflows of foreign exchange of the Federal Government and Bank Negara Malaysia over the next 12-month period.
The detailed breakdown of international reserves based on the SDDS format is shown in Tables I, II, III and IV. As shown in Table I, official reserve assets amounted to USD115,762.2 million, while other foreign currency assets amounted to USD133.8 million as at end-February 2022. As shown in Table II, for the next 12 months, the pre-determined short-term outflows of foreign currency loans, securities and deposits, which include among others, scheduled repayment of external borrowings by the Government and the maturity of foreign currency Bank Negara Interbank Bills, amounted to USD5,599.4 million. The short forward positions amounted to USD8,473.1 million while long forward positions amounted to USD130 million as at end-February 2022, reflecting the management of ringgit liquidity in the money market. In line with the practice adopted since April 2006, the data excludes projected foreign currency inflows arising from interest income and the drawdown of project loans. Projected foreign currency inflows amount to USD2,271.2 million in the next 12 months. As shown in Table III, the only contingent short-term net drain on foreign currency assets are Government guarantees of foreign currency debt due within one year, amounting to USD401.8 million. There are no foreign currency loans with embedded options, no undrawn, unconditional credit lines provided by or to other central banks, international organisations, banks and other financial institutions. Bank Negara Malaysia also does not engage in foreign currency options vis-à-vis ringgit.
Overall, the detailed breakdown of international reserves under the IMF SDDS format indicates that as at end-February 2022, Malaysia’s international reserves remain usable. Related Assets
International Reserves and Foreign Currency Liquidity (28 February 2022)
Bank Negara Malaysia
31 March 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
30 Mar 2022 | BNM publishes AR 2021, EMR 2021 and FSR 2H2021 | https://www.bnm.gov.my/-/ar2021_en_pr | https://www.bnm.gov.my/documents/20124/6459002/fsr21h2_en_hhdebt.pdf, https://www.bnm.gov.my/documents/20124/6458991/ar2021_en_slides.pdf, https://www.bnm.gov.my/documents/20124/6459002/fsr21h2_en_housing.pdf | null |
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BNM publishes AR 2021, EMR 2021 and FSR 2H2021
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BNM publishes AR 2021, EMR 2021 and FSR 2H2021
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30 Mar 2022
Bank Negara Malaysia (BNM) today published its Annual Report 2021 (AR 2021), Economic and Monetary Review 2021 (EMR 2021) and Financial Stability Review for Second Half 2021 (FSR 2H2021).
Annual Report 2021
AR 2021 sets out the initiatives and workings of the Bank in 2021 in fulfilling its mandates to promote monetary stability and financial stability conducive to the sustainable growth of the Malaysian economy. This includes the means in which BNM discharged its mandates to support Malaysia’s transition through and out of the pandemic, as well as other challenges such as the floods. AR 2021 also provides an account of the Bank’s operations and resources that enable it to function effectively and efficiently.
Four box articles on topical interests are featured in AR 2021:
Cost of living.
Linkages for efficient cross-border payments.
Repayment assistance.
Money laundering and terrorism financing.
The report also sets out BNM’s Audited Financial Statements for the financial year ended 31 December 2021. As audited and certified by the Auditor General, the financial position of BNM remained stable in 2021. BNM’s total assets amounted to RM551.6 billion as at 31 December 2021. A net profit of RM12.8 billion was recorded for the financial year, of which RM7.8 billion will be transferred into the General Reserve Fund. BNM has declared a dividend of RM5 billion to the Government for the financial year 2021.
Economic and Monetary Review 2021
The Economic and Monetary Review sets out BNM’s economic assessments and outlook.
Highlights of EMR 2021 include:
2022 is set to be a watershed year as most countries progressively transition towards endemic management of COVID-19. However, even as the global economy is expected to continue its recovery path, policymakers are adjusting their policy settings against rapidly evolving uncertainties, including the military conflict in Ukraine which began in February.
The pace of economic recovery in Malaysia is projected to gather further momentum amid the reopening of the economy and international borders. With better COVID-19 management and higher vaccination rates, BNM expects less disruption to domestic economic activity and spending in the event of resurgences. Malaysia will also continue to benefit from the expansion in global demand. For 2022 as a whole, the economy is expected to grow between 5.3% and 6.3%.
Headline inflation is forecasted to average between 2.2% and 3.2% in 2022. While high input costs are projected to exert some pressures on selected fresh food prices, these pressures will be partly mitigated by price controls. Meanwhile, core inflation is expected to average higher between 2.0% and 3.0% in 2022 due to stronger demand conditions amid lingering cost pressures. However, the extent of upward adjustments in core inflation will remain partly contained by the continued slack in the economy and labour market.
Labour market conditions are expected to improve in 2022 as economic activity picks up. The unemployment rate is expected to decline further to around 4% of the labour force. This sustained recovery in employment and income is expected to drive an improvement in household spending.
Monetary policy will remain accommodative to support a sustainable economic recovery while ensuring price stability. BNM is cognisant of the consequences of keeping interest rates low for an extended period of time. As the outlook for inflation remains largely supply-driven, BNM is closely monitoring for any signs of potential second-round effects, where price pressures could become more entrenched as domestic demand recovers. Ultimately, any potential adjustments to the degree of accommodation will remain data-dependent and be undertaken in a measured and gradual way to preserve an appropriate level of support to the economy.
The EMR 2021 also features two box articles pertinent to issues relating to the post-pandemic recovery:
Recovery Prospects in the Global Economy after the Great Lockdown: Lessons from Cyclical and Structural Perspectives.
Anatomy of Inflation: Effects from the Enduring Pandemic.
Financial Stability Review for Second Half 2021
The Financial Stability Review is a biannual publication which details BNM’s assessment of risks and outlook for domestic financial stability.
Highlights of FSR 2H 2021 include:
Financial institutions remained vigilant in managing their risks given the continued uncertainty posed by domestic and global developments. Credit risk remains a key focus as banks continue to build up provisions to buffer against a potential rise in impairments. Provisions against loan losses in the banking system currently stand at 143%, which is close to its historical high. Despite expectations of continued market volatility, conditions in domestic financial markets are expected to remain orderly. This is supported by Malaysia’s deep and liquid bond market, diverse investor base, as well as positive real yields.
Sound risk management practices of financial institutions, coupled with their strong capital and liquidity buffers, will continue to preserve domestic financial stability. Latest stress tests conducted by BNM continue to affirm the resilience of capital buffers of banks and insurers to withstand potential losses under severe macroeconomic and financial shocks, while sustaining support for economic recovery. Almost all banks were able to maintain post-shock capital ratios above the regulatory minimum. Banks' excess capital buffers currently amount to RM135 billion.
Ensuring operational and cyber resilience remains a key focus for BNM and financial institutions. This comes amid an increasing reliance by financial institutions on third party service providers, higher cloud adoption and rising ransomware threats. Effectively managing the effects of climate risks will also be at the forefront of the financial sector agenda for BNM and the industry in the coming years.
Two box articles are featured in FSR 2H2021:
Evolving Spaces in the Wake of the Pandemic: Vulnerabilities from the Commercial Real Estate Sector.
Implementation of the Climate Change and Principle-based Taxonomy (CCPT) in the Financial Sector.
Bank Negara Malaysia Governor Tan Sri Nor Shamsiah Yunus said, “Going forward, well-executed structural reforms are needed to address the critical challenge of reinvigorating growth opportunities and strengthening our economic fundamentals. The three key areas that we ought to focus on are inclusivity, digitalisation, and sustainability. We must make the most out of this recovery period to rebuild better and ensure that Malaysia is well-prepared to harness future trends to our benefit.”
For more details of the publications, please visit bnm.gov.my/ar2021.
See also:
EMR 2021 Key Highlights
FSR 2H2021 Key Highlights
Spotlight: Household Debt
Spotlight: Housing (Un)affordability
Press conference slides
Bank Negara Malaysia
30 March 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services
27Quarterly Bulletin | 4Q 2021
Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to
Imports of Goods and Services
One of the indicators used by the Bank to measure international reserve adequacy is the reserve coverage
of retained imports,1 which is communicated on a fortnightly basis. As the economy grew and evolved with
higher share of the services sector, this has raised the prominence of services imports in the measure of
reserve adequacy. Given this consideration and in line with the international best practice, future fortnightly
reporting of Malaysia’s international reserves will include the indicator on reserve coverage of imports of
goods and services, effective from 22 February 2022.2
1 Defined as gross imports subtracted with re-exports. The 12-month average retained imports can be derived from the Monthly Highlight and Statistics Table
3.6.8 (Imports by End-Use; see Appendix 1).
2 For the international reserves position as at 15 February 2022.
3 Defined as imports plus exports.
4 From RM101.3 billion to RM351.3 billion, or a compound annual growth rate (CAGR) of 6.4%.
5 Based on JP Morgan’s Government Bond Index for Emerging Markets.
Services tradeC1
0
100
200
300
400
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
RM billion
Travel1
Computer and information
Transport
Manufacturing
Other business3
Other2
Perdagangan perkhidmatanR1
0
100
200
300
400
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
RM bilion
Perjalanan1
Komputer dan informasi
Pengangkutan
Pembuatan
Perniagaan Lain3
Lain-lain2
Nota: Data sebelum tahun 2005 adalah berdasarkan garis panduan dalam Edisi Kelima Manual Imbangan Pembayaran dan Kedudukan
............Pelaburan Antarabangsa (BPM5) IMF. Data bagi tahun 2005 dan selanjutnya adalah berdasarkan BPM6.
1 Termasuk perbelanjaan perjalanan bagi aktiviti pelancongan.
2 Termasuk pembinaan, caj penggunaan harta intelek, perkhidmatan persendirian, kebudayaan dan rekreasi.
3 Perkhidmatan perniagaan lain termasuk perkhidmatan penyelidikan dan pembangunan, profesional, teknikal, berkaitan perdagangan dan
...perkhidmatan perniagaan lain.
Sumber: Jabatan Perangkaan Malaysia dan Bank Negara Malaysia
Note: Data prior to 2005 are based on the guideline in the Fifth Edition of the Balance of Payments and International Investment Position
............Manual (BPM5) of the IMF. Data for 2005 and beyond are based on BPM6.
1 Includes travel spending for tourism activity.
2 Includes construction, charges for intellectual property use, personal, culture & recreational services.
3 Other business services comprise research and development, professional, technical, trade-related and other business services.
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
The Bank’s reporting of the reserve coverage of retained imports was published as early as in the 1990s. Data
on retained imports are available on monthly basis and thereby closely match the fortnightly release of the
international reserves data. However, retained imports do not include payment for services, which has grown
over the past two decades. From 1999 to 2019, services trade3 has increased by 246.9%4 (Chart 1). This was
mainly due to higher tourism activity as well as payments for foreign transport services for goods trade. In
addition, there was also an expansion in goods import, largely in support of domestic investment activities
and production of manufactured goods.
Malaysia’s performance on this indicator is in line with regional and peer5 economies. On historical basis,
reserve coverage of imports of goods and services indicator has been in the range of between 5 and 8
months since 2008 – well above the generally-accepted ‘rule of thumb’ adequacy threshold of 3-months, and
demonstrates the ability of the Malaysian economy to withstand against external shocks.
28 Quarterly Bulletin | 4Q 2021
It is also important to emphasize that the assessment of reserve adequacy should not be solely based
on the face value of these indicators. This needs to be complemented with deeper understanding about
the country’s external position, financial system and broad economic policies. In particular, international
reserves is not the only means to meet external obligations.6 Prevailing assessment indicates that the
country’s external position7 is underpinned by its strong economic fundamentals including healthy current
account surplus, large foreign currency external assets held by domestic entities8 and the flexible ringgit
exchange rate.
References
Department of Statistics, Malaysia. ‘External Sector’, Jabatan Perangkaan Malaysia, Putrajaya.
Greenspan, A., ‘Currency reserves and debt’. Remarks before the World Bank Conference on Recent Trends in
Reserves Management, Washington, DC, 29 April 1999.
International Monetary Fund, (2016). ‘Guidance Note on the Assessment of Reserve Adequacy and Related
Considerations’.
Appendix 1: Calculation of international reserves coverage of retained imports
aFor example, to calculate monthly retained imports for December 2019, the retained imports for the months of
January to December 2019 is summed up (i.e. rolling 12-months of retained imports). This number is then divided
by 12, to obtain a monthly average. The figures can be obtained from BNM’s MHS Table 3.6.8, column S.
6 Further information can be found in the box article “Malaysia’s Resilience in Managing External Debt Obligations and the Adequacy of International Reserves”
in BNM’s Annual Report 2018.
7 In addition, it has also been emphasized that Malaysia’s external debt position, including short-term external debt, remains manageable. This is supported by
the favourable currency and maturity profile on its external debt as well as domestic entities’ resilient repayment capacity. Foreign-currency external debt of
corporates are also mainly subject to prudential and hedging requirements (refer to the latest assessment on external debt developments on page 25)
8 Amounting to RM1.1 trillion as at end-2021.
2021 Annual Report, EMR & FSR Presentation Slides
Option 1
BANK NEGARA MALAYSIA
► ANNUAL REPORT 2021
► ECONOMIC AND MONETARY REVIEW 2021
► FINANCIAL STABILITY REVIEW – SECOND HALF 2021
30 MARCH 2022
1
2
► However, lingering uncertainties remain along with unfolding
developments that could affect Malaysia’s growth prospects
► Policies remain in place to support vulnerable segments and
secure a sustainable economic recovery
► Need to advance implementation of structural reforms that
furthers a conducive investment climate and enhance
long-term competitiveness for the Malaysian economy
to emerge stronger and more resilient
The Malaysian economy to strengthen in 2022
0
30
60
90
120
150
0
20
40
60
80
100
Jan-20 Jul-20 Feb-21 Aug-21 Mar-22
Volatility Index
Oil Prices (RHS)
Volatility Index and Brent Oil Prices
Index USD/Barrel
Economic recovery on track despite challenging global conditions
Source: Bank Negara Malaysia estimates, Intercontinental Exchange, Bloomberg, International Monetary Fund
► State of the pandemic
Resurgences would still weigh on growth
through sentiments and absenteeism.
► Military conflict in Ukraine
exerting further pressure on growth via trade,
inflation and financial markets.
► Pace of policy normalisation
in major economies
amid a challenging operating landscape
and tighter financial conditions.
Growth in 2022 to be affected by..
3
-3.1
5.8
3.8 to 4.3
2020 2021e 2022f
Global Real GDP Growth
Annual Change (%)
Malaysia’s exports to benefit from continued global demand and
higher commodity prices
Source: WSTS, IC Insights, MPOB, PETRONAS and Bank Negara Malaysia estimates
4
26.2
26.0
10.4
11.0
WSTS
IC
Insights
2022f 2021
Global Semiconductor Sales Forecasts
Annual Change (%)
26.0
10.9
2021p 2022f
Gross Exports
Annual Change (%)
LNG (RM/tonne)
3.0% 1,469
2,000 - 2,200
Brent (USD/barrel)
1.6% 71
100 - 120
CPO (RM/tonne)
6.1% of MY
exports (2021)
4,430
6,200 - 6,600
2021 2022f
2011-19
Avg.: 5.2%
2016-19 Avg.: 6.8%
2011-19 Avg.: 4.1%
Rest of the
World
Europe and
Americas
Other Asian
Countries
ASEAN
Further lift to growth from reopening of international borders
Reopening of borders to international tourists would support the recovery of travel receipts
Source: Department of Statistics, Malaysia, Tourism Malaysia, newsflows
Travel Receipts
RM billion
5
Share of Tourist Expenditure in Malaysia by Region
% share of 2019
9
37
51
4
International
Tourism Bubbles
Travel bubble for international tourists
to Langkawi
15 Nov.
2021
Vaccinated Travel
Lane (VTL)
Singapore (21 January 2022), Thailand
and Cambodia (15 March 2022)
1Q
2022
Reopening of Borders
Reopening of international
borders to all foreign tourists
1 Apr.
2022
2019:
82.1
2020:
12.6
2021:
0.4
High vaccine coverage domestically enables a more
targeted approach to manage COVID-19
Note: Data as at 11.59 PM on 24 March 2022
Source: Ministry of Health Malaysia GitHub (github.com/MoH-Malaysia/covid19-public)
6
97.5
66.2
Adult
Booster
Primary Vaccinated
Primary Vaccinated
Partially Vaccinated
% of adult population (aged 18+)
Vaccine Coverage
High booster coverage among adults
36.1Children
Partially
Vaccinated
% of children (aged 5-11)
Steadily increasing take-up as PICKids continues
High vaccine coverage and effectiveness allows for
proportionate, targeted and calibrated approach
►No nationwide containment measures, albeit some impact from
self-isolation, absenteeism and risk aversion as cases rise
0
5
10
15
20
0
10
20
30
40
Jun-21 Sep-21 Dec-21 Mar-22
New COVID-19 Cases (7 Day Average, Thousands)
New ICU COVID-19 Cases (RHS, 7 Day Average, Hundreds)
COVID-19 Cases and ICU Cases
94.6
91.5
Adolescent
% of adolescents (aged 12-17)
Near-universal coverage among adolescents
Partially Vaccinated
Primary Vaccinated
Further improvement in employment prospects amid
encouraging signs of hiring activity in 2022
* Tourism-related industries follows SOCSO definition and includes wholesale retail, administrative and support services, accommodation and F&B, transportation and storage, entertainment and recreation
** The placement rate refers to the number of people placed in new jobs under the Employment Insurance Scheme (EIS) for every 100 persons retrenched
*** Long-term reforms refer to the initiatives to raise the quality of education, strengthen the technical and vocational education and training (TVET) ecosystem and implement market-based tools to manage foreign workers
Source: SOCSO, Department of Statistics, Malaysia, Ministry of Finance (MOF), and Bank Negara Malaysia estimates
Policy measures supporting the labour market
7
Wage Subsidy
Programme
Progress of
Long-term
Reforms***
Upskilling &
Reskilling
Initiatives
MySTEPJaminKerja
Avg. Daily Loss of Employment (LOE)
and Placement Rate
Number of Persons (As at 18 March 2022)
157 171
118 125
40
31
45 41
-100
-80
-60
-40
-20
0
20
40
60
0
50
100
150
200
250
300
2Q21 3Q21 4Q21 1Q22
Non tourism-related LOE
Tourism-related LOE*
Placement rate**
15.13 15.10 15.29
~15.6
2019 2020 2021p 2022f
Total Employment
Million Persons
Unemployment and Underemployment
% of Labour Force
3.3
4.5 4.6 ~4.0
1.2
2.3 2.0
~1.3
2019 2020 2021p 2022f
Underemployment Rate
Unemployment Rate
2020,
-1.1
2021,
3.0
Jan-22,
4.1
2020,
-0.2%
2021,
1.3%
2022f,
~2.3%
Continued improvement in both employment and income growth
*Nominal wages deflated by CPI; ** Average for retail, recreation, grocery and pharmacy categories
Note: p Preliminary, f Forecast
Source: Department of Statistics, Malaysia, Google Mobility (data up to 21 March 2022) and Bank Negara Malaysia.
Jan-21,
-25.8
Jan-Mar-22
avg., 3.2
Jan-21 Apr-21 Jul-21 Oct-21 Jan-22
Improvements in labour market to support household spending
Google Mobility**
Change Relative to 3 Jan – 6 Feb 2020 (%)
Real Private
Consumption
Annual Change (%)
8
Credit Card Spending by Local Cardholders
Annual Change (%)
Jan-21,
-16.6
Jan-Feb-22
avg., 28.8
Jan-21 Apr-21 Jul-21 Oct-21 Jan-22
Absence of strict containment measures to provide additional lift to spending,
with further support from pent up demand
Nominal Manufacturing Wages
Annual Change, %
1.9
9.0
2021p 2022f
Employment Growth
Annual Change, %
Jan-22: 2.9%
Real Manufacturing Wages*
-0.01%
0.5%
1.7%
Malaysians are highly indebted but their capacity to repay remain
supported by targeted assistance and prudent lending standards
While debt-servicing capacity of
borrowers remained sound…
Matters
arising
Household debt-to-GDP ratio remains on the higher
end compared to regional economies
TH = Thailand; SG = Singapore; ID = Indonesia; PH = Philippines
1 As at Sep. 2021. Household debt-to-GDP ratio for Indonesia and the Philippines covers household debt from the banking system only, while for Thailand and Singapore, it covers household debt from banks and non-banks.
Source: Bank Negara Malaysia, Bank of International Settlement, Bursa Malaysia, Employees Provident Fund, national authorities, Securities Commission Malaysia, World Bank, and Bank Negara Malaysia estimates.
82.7
87.4
93.2
89.6 89.0 89.3
69.7
17.2
9.9
Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 TH SG ID PH
Household Debt-to-GDP
%
Outstanding household loans
(Jun ’21: 35%)
35%
Newly-approved loans
(Jun ’21: 44%)
44%
Median Debt Service Ratios (DSRs)
Malaysia Regional Economies1
9
...further excessive debt
accumulation can affect
households' spending power
Key drivers for overall investment
Strong FDI and investment intentions
Investments’ recovery to be driven by continued capacity expansions
and higher technology adoption
32.4
14.6
54.9
2019 2020 2021
Real Gross Fixed Capital
Formation (GFCF)
Annual Change (%)
Key Factors Supporting GFCF Growth
Foreign Direct Investments
Net inflows, RM bn
Total Approved Investments
RM bn
Greater ESG
considerations
E&E
Metal Products
Key Industries
Source: Department of Statistics Malaysia, MIDA and Bank Negara Malaysia
Note: *Refers to investments in business services sub-sectors including financial services, information and communications, support services and global establishments (investments in principal hubs and regional offices )
10
Professional
Business
Services*
128 103 98
83
64
209
2019 2020 2021
Domestic Foreign
Continuation of
large infrastructure
projects
Nationwide digital
connectivity
enhancements
Post-pandemic shift
towards automation
and digitalisation
-0.9
6.3
2021p 2022f
Policies remain in place to support vulnerable segments
and secure a sustainable recovery
Policy support in 2022 for
households and businesses
Source: Newsflows and Bank Negara Malaysia
11
Enhance physical connectivity
Strengthen ESG adoption
Social protection reform
Ensuring sustainable economic
recovery on multiple fronts
Attract quality foreign investments
Special Strategic Investment Fund (RM 2 bil)
Digital Ecosystem Acceleration Scheme
Incentives for greater adoption of e-commerce
Accelerate digital connectivity
Create a future-ready workforce
Policy
Initiatives
Direct cash assistance
Bantuan Keluarga Malaysia (RM8.2 bil)
Hiring incentives
Jamin Kerja Keluarga Malaysia (RM2 bil)
EPF-related measures
Headline inflation to average between 2.2% - 3.2%
amid higher underlying inflation
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
Headline inflation to average between
2.2% - 3.2% (2021: 2.5%)
Headline Inflation
Annual Change, %
Amid existing policy interventions to contain
pass-through from global cost pressures
Core inflation to average higher,
between 2.0% - 3.0% (2021: 0.7%)
As economic activity continues to pick up amid
environment of high input costs
Inflation outlook subject to
Global commodity price developments amid
risks from prolonged supply-related disruptions
12
2.5
3.2
1.0
0.7
-1.2
2.5
2.2
2018 2019 2020 2021 2022f
-0.2
0.9
0.9
0.9
1.4
1.7
2.0
2.1
2.5
2.7
2.8
3.6
4.2
4.5
5.2
6.6
7.3
-1 0 1 2 3 4 5 6 7 8
Japan
PR China
Malaysia
Thailand
France
Indonesia
Singapore
South Korea
Germany
Canada
United Kingdom
Philippines
United States
South Africa
Mexico
Russia
Brazil
Cumulative Inflation Target/Average
Several factors have in part contained overall domestic
inflationary pressures at the current juncture
Source: National authorities and Bank Negara Malaysia estimates
Note: For more information, please refer to the EMR 2021 box article ‘An Anatomy of Inflation: Effects from the Prolonged Pandemic’
Offsetting factors for Malaysia
Cumulative CPI Inflation (Dec-19 to Dec-21)
Annualised, %
Policy interventions
Price ceiling on retail fuel, electricity rebates, price controls on
some staple food items
Less severe pandemic-related
disruptions
Proximity to global manufacturing hub
Labour participation rate remains forthcoming
Spare capacity in the economy
and labour market
Economic activity well below pre-pandemic trend, with
unemployment rate yet to fully recover
13
While overall headline inflation has remained manageable,
cost of living concerns have re-emerged
Net Income by Income Group
RM/month
Price pressures in 2021 were
driven by specific items...
…disproportionately affecting low-income
households with low buffers
Percentage of CPI Basket with Elevated Inflation in 2021
% of CPI Basket, Weighted
Note: Elevated inflation is defined as inflation being above 1 standard deviation from mean, in any months in 2021
* The weighted average is estimated by taking the inflation of individual items and calculating their weighted
average. The figures might not add up to the official CPI inflation of 2.5% due to different methodology
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
Note: Net income is gross income net expenditure and financial obligations
Source: Bank Negara Malaysia estimates based on 2019 Household Income and Expenditure Survey,
Department of Statistics, Malaysia
Examples of
affected items
(2021 Inflation)
▲ Fuel: 24.1%
▲ Electricity: 15.2%
▲ Fresh Meat: 3.8%
RM4,081
RM1,127
RM230
RM922
RM349
RM203
T20
M40
B40
Expenditure on items experiencing high
inflation (excl. fuel & electricity)
Net income
80
20
Percentage of CPI Basket
0.8
13.5
Weighted Average
Inflation by CPI Basket*
Other items High-inflation items
Small portion of
CPI basket…
…experienced sharp
price increases
14
Key Growth Drivers
Malaysia GDP Growth
Annual Change (%)
2022f:
5.3% - 6.3%
Continued expansion in external
demand supported by the tech upcycle
Improvement in employment and
income prospects
Lifting of containment measures &
reopening of international borders
Continued access to targeted
policy measures
The Malaysian economy is projected to grow
between 5.3% and 6.3% in 2022
Note: p Preliminary, f Forecast
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
Growth to be underpinned by both external and domestic demand against a challenging operating environment
Key Challenges in 2022
► COVID-19 pandemic
developments
Risk aversion affecting household
and business sentiments, and minor
disruptions due to absenteeism
► Ongoing geopolitical
conflicts
Escalation of conflicts leading to
elevated commodity prices and
supply chain disruptions
► Elevated cost and price
pressures
Cost of living and profitability
concerns weighing on household
and business sentiments
15
2020:
-5.6%
2021p:
3.1%
Risks to the economic outlook remain tilted to the downside
Upside risks from external and domestic demand
Downside risks from COVID-19, geopolitical conflicts and cost pressures
▼ Weaker-than-expected global growth
▼ Further escalation in geopolitical conflicts
▼ Worsening supply disruptions and labour shortages
▼ Heightened financial market volatility leading to tightening financial conditions
▼ Higher-than-expected cost and price pressures weighing on business and household sentiments
▼ Emergence of severe, vaccine-resistant VOCs
▼ Domestic policy uncertainty
16
2022f:
5.3% - 6.3%
▲ Higher-than expected global growth
▲ Stronger-than-expected improvement in tourism-related sectors amid reopening of borders
Monetary policy in 2022 will continue to facilitate a sustainable
economic recovery while preserving price stability
Determined by new data amid
heightened uncertainty and fast-
evolving conditions
► Added layer of complexity amid
combination of downside risks to
growth and upside risks to inflation
Ensure degree of accommodation
is consistent with the improving
economic environment
Updated
OPR unchanged at 1.75% to
maintain support to the economy 2021
Monetary policy stance to facilitate
sustainable economic recovery
and price stability
2022
Any potential policy adjustments
would be gradual and measured
Overnight Policy Rate (OPR)
%
Mar. 2022:
1.75%
1.0
1.5
2.0
2.5
3.0
3.5
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: Bank Negara Malaysia
17
2.9 3.3
1.6
1.4
4.5 4.6
2020 2021
Outstanding corporate bonds*
Outstanding loans
Net financing
Outstanding Business Loan Growth
Annual Change (%)
Financing to businesses and households remain supportive
of economic activity
Note: Net financing and household loans include loans from the banking system, development financial institutions (DFIs) and major non-bank financial institutions (NBFIs). Overall business loans include loans from
the banking system and DFIs, while working capital loans include loans from the banking system only.
*Excludes issuances by Cagamas and non-residents.
** Based on weighted responses of 20 banks, representing 96% of total outstanding banking system loans.
Source: Bank Negara Malaysia
Outstanding Household Loan Growth
Annual Change (%)
…amid continued flow of credit to
businesses and households…
Net Financing
Annual Change (%) / Cont. to Growth (ppt)
Net financing growth was
sustained in 2021…
4.8
7.4
1Q-21 2Q-21 3Q-21 4Q-21
Working Capital
Overall Business
4.1
1.3
7.2
1Q-21 2Q-21 3Q-21 4Q-21
Overall
Household
Residential Property
Cars
…with banks targeting higher
loan growth in 2022
3.4
3.9
4.5
2019 2020 2021 2022f
Outstanding Banking System Total Loan Growth
Annual Change (%)
Actual Banks’ Loan
Growth Target**
6.4%
-
5.4%
18
Banks remain cautious amid the uncertain credit risk outlook
1 Refers to loans classified as Stage 2 as % of household or business loans. Stage 2 loans refers to exposures that have exhibited deterioration in credit risk, for
which banks are required to set aside provisions based on lifetime expected credit losses under Malaysian Financial Reporting Standard 9.
2 Includes regulatory reserves.
Source: Bank Negara Malaysia
While impairments remain low, banks continue
to be cautious in managing credit risks…
Matters
arising
Impairment
Ratio
Households
… and have built sizeable buffers against a
potential rise in impairments
Loan Loss Coverage Ratio2
%
2015-19
Average
Jun '21 Dec '21
Businesses
(Jun ’21: 1.1%)
1.0%
(Jun ’21: 2.7%)
2.4%
Provisions-to-Total Loans
%
1.4
1.8
1.9
2015-19
Average
Jun '21 Dec '21
1.4
1.8
1.9
113
129
143
Share of
Stage 2 Loans1
(Jun ’21: 6.9%)
8.5%
(Jun ’21: 15.6%)
16.7%
19
Latest stress tests affirm banks’ ability to support economic recovery
under two hypothetical adverse scenarios with extended stress up to end-2024
Rising corporate debt globally warrants continued vigilance
Corporate debt has increased with higher
financing needs during the pandemic
Source: Bank for International Settlements (BIS) Credit Database
Critical to balance between short- and long-
term economic goals
Corporate Debt
Share of GDP (%)
73
102
115
Advanced
Economies
4Q 10 4Q 19 2Q 21
84
95
105
World
Emerging
Economies
89
91
98
20
Timely, Direct, and Proportionate
Policy Support
Unprecedented policies cushioned the downturn; but policy
recalibration is required as demand conditions improve.
Structural Reforms to Enhance
Economic Resilience
Labour market flexibility and stronger insolvency laws could
expedite resource reallocation and increase productivity.
Well-Capitalised Banks to Ensure
Macroeconomic and Financial Stability
Healthy bank balance sheets disincentivise continued
lending to zombie firms.
1980s 1990s 2000s 2010s 2020 2021p 2022f 2023f -
2025f
Industrialisation
Promotion of
Investment Act
Note: f Forecast, 2023f – 2025f refers to forecasts from the 12th Malaysia Plan; *Based on emissions intensity in 2005
Source: Department of Statistics Malaysia
Physical
Connectivity
North-South Highway
Enabling the
Services Sector
Financial sector reforms
High-speed broadband
Malaysia GDP Growth
Annual Change (%)
Effective implementation of structural reforms are key to ensure the
Malaysian economy emerges from the crisis stronger and more resilient
Past reforms have underpinned Malaysia’s economic development
Sustainability
45% reduction in GHG emissions intensity
to GDP by 2030*, net zero by 2050
►Greening finance and financing green
Inclusivity
Strengthening the effectiveness of financial
intermediation ecosystem
►Diversifying choices for customers,
including “digital-first” solutions
Digitalisation
25.5% contribution of the digital
economy to GDP by 2025
►Digitalising financial services
Key Reform Areas
21
Financial Sector Blueprint: Key priorities for 2022-2023
3Broad Themes
Finance for All
• Diverse financial choices
• Strong financial safety nets
• Confident consumers
Finance for
Transformation
• Grow alternative finance
• Deeper global integration
• Vibrant financial landscape
Finance for Sustainability
• Wider adoption of value-based intermediation
• Greening finance and financing green
5Strategic Thrusts
Fund Malaysia’s
Economic Transformation1
Elevate the Financial
Well-being of Households
and Businesses
2
Advance Digitalisation3
Facilitate an Orderly
Transition to a Greener
Economy
4
Advance Value Based
Finance Through Islamic
Finance Leadership
5
► Further develop alternative financing instruments to complement
traditional finance
• Launch a Business Recapitalisation Fund based on blended finance
• Operationalise a dedicated alternative finance collaboration mechanism
► Issue the Financial Inclusion Framework 2022-2026
► Enact the Consumer Credit Act (CCA) and establish the Consumer Credit
Oversight Board (CCOB)
► Strengthen resolution arrangements by consolidating the Ombudsman for
Financial Services (OFS) and Securities Industry Dispute Resolution
Centre (SIDREC)
► Issue and operationalise digital bank licenses in 2022 and roll out the digital
insurance / takaful framework
► Facilitate identification and testing of high-impact data sharing use cases
► Implement Climate Change and Principles-based Taxonomy (CCPT)
► Issue principles and guidance on Climate Risk Management, Stress Testing
and Scenario Analysis
► Mainstream social finance including expansion of iTEKAD
► Form and operationalise the MIFC Leadership Council (MLC) as an industry-
led committee in driving MIFC aspirations
* Priorities are non-exhaustive
Priorities for 2022-2023*
Complemented by regulatory enhancements to address risks, promote fair treatment of consumers, and ensure efficient payment infrastructure
22
In 2022, the Bank aims to further support an orderly and just transition
for Malaysia to reach net zero by 2050
Matters
arising
Key priorities in 2022
Integrate climate-related
and environmental risks
in prudential regulation and
supervision
► Advance adoption of Climate Change
and Principle-based Taxonomy and
VBIAF1 Sectoral Guides
► Finalise climate risk management
requirements2 and VBIAF Sectoral
Guides
► Continue preparations for industry-
wide Climate Change Stress Tests in
2024
Scale up green
finance
► Operationalise Low
Carbon Transition Facility
► Continue to actively
engage business
communities, including
SMEs to create greater
awareness on climate risk
and the need to transition
► Facilitate development of
more targeted financial
solutions
Intensify efforts to
bridge data gaps
► Roll out data catalogue,
covering the top 8 climate
data sources3 for
reference by the financial
sector
Strengthen
practices in the
disclosure of climate
risk by financial
institutions
► Step up preparations for
mandatory TCFD aligned
climate-related financial
disclosures by financial
institutions
Align the financial
sector’s response
with national strategy
► Intensify engagements
with relevant Government
ministries, agencies and
authorities
1 Value-based Intermediation Financing and Investment Impact Assessment Framework
2 Climate Risk Management and Scenario Analysis (CRMSA) policy document
3 i) GHG emissions; (ii) green/sustainable lending and financing; iii) energy consumption and renewable energy sources; iv) exposure to physical risks v) asset
value at risk from natural catastrophes; vi) ESG ratings; vii) water consumption and waste management; viii) biodiversity and deforestation indicators
The Bank will continue to work closely with financial industry through the Joint Committee on Climate Change (JC3)
23
Total Assets RM551.6 bil
International
Reserves
RM486.9 bil
USD116.9 bil
Net Profit RM12.8 bil
Dividend
Payable
to the Government
RM5.0 bil
Bank Negara Malaysia: Financial position remained stable in 2021
* Special Drawing Rights ** Malaysian Government Securities
Source: Bank Negara Malaysia
Financial Position
(RM billion, as at 31 December 2021)
24
Income and Expenditures
(RM billion, year ended 31 December 2021)
Total Income
14.73
Net Profit
12.80
Recurring
Expenditure
1.30
Development
Expenditure
0.59
Taxation
0.04
Capital &
Liabilities
Assets
RM552 bil
Capital
RM187 bil
Liabilities
RM365 bil
Summary
Malaysian economy is projected to expand between 5.3% - 6.3%, driven
by continued external demand and improved domestic economic activity
Headline inflation to average between 2.2% - 3.2%, while
underlying inflation is expected to average higher
Balance of risks remain tilted to the downside, mainly arising from
developments surrounding COVID-19 and geopolitical conflicts
Financing to businesses and households to continue
being supportive of economic activity
Imperative to pursue structural reforms to ensure the Malaysian
economy emerges from the crisis stronger and more resilient
25
Option 1
Thank you
26
Option 1
Q & A
27
Option 1
Additional Information
28
Higher growth across most economic sectors
GDP Growth by
Economic Activity
(Annual Change, %)
%
Share
(2021p)
2020 2021p 2022f
Real GDP 100 -5.6 3.1
5.3 -
6.3
Services 57.0 -5.5 1.9 6.9
Manufacturing 24.3 -2.6 9.5 5.2
Mining & Quarrying 6.7 -10.6 0.7 2.5
Agriculture 7.2 -2.2 -0.2 1.5
Construction 3.7 -19.4 -5.2 6.1
-3.2
1.1
3.9
-0.6
2.2
1.3
-0.8
0.0
0.2
-0.2
-0.01
0.1
-0.9
-0.2
0.2
2020 2021p 2022f
Services
Manufacturing
Mining & Quarrying
Agriculture
Construction
Malaysia GDP Growth by Economic Activity
Annual Change (%), Ppt. Contribution
Note: p Preliminary, f Forecast
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
Real GDP:
-5.6% 3.1% 5.3% - 6.3%
29
-2.5
1.1
5.3
-2.0
0.4
0.8
0.5
0.9
0.2
-1.3
-0.6
0.4
-0.9
-0.4
0.2
0.7
1.7
-1.0
2020 2021p 2022f
Private Consumption
Private Investment
Public Consumption
Public Investments
Net Exports of Goods & Services
Change in Stocks
Improvement across most demand components
Note: p Preliminary, f Forecast, 1 Excluding stocks
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
GDP Growth by
Expenditure
Components
(Annual Change, %)
%
Share
(2021p)
2020 2021p 2022f
Real GDP 100 -5.6 3.1
5.3 -
6.3
Domestic Demand1 92.7 -5.8 1.9 7.2
Private Consumption 58.8 -4.3 1.9 9.0
Private Investment 15.6 -11.9 2.6 5.3
Public Consumption 13.8 3.9 6.6 1.2
Public Investment 4.5 -21.3 -11.4 9.6
Net Exports of
Goods and Services
6.0 -13.0 -5.8 2.6
Exports 69.2 -8.9 15.9 4.8
Imports 63.2 -8.4 18.5 5.1
Malaysia GDP Growth by Expenditure Components
Annual Change (%), Ppt. Contribution
Real GDP:
-5.6% 3.1% 5.3% - 6.3%
30
Negative output gap to narrow further in 2022 amid quicker recovery
in actual output growth
Note: e Estimate, f Forecast
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
Actual Output and Potential Output Growth Output Gap
0.8 0.7 0.4
-6.8
-6.0
2017 2018 2019 2020 2021e 2022f
% Share of Potential OutputAnnual Change (%)
31
5.8 4.8
4.3
-5.6
3.14.9
4.9
4.8
1.6
2.3
2017 2018 2019 2020 2021e 2022f
Actual Output
Potential Output
5.3 - 6.3
3.0 - 4.0
Continued growth in potential output, supported
by expansion in factors of production
1
Labour Force
Expansion
-4.0 to -3.0
Quicker recovery in actual output growth to narrow
negative output gap
3
Productivity
Improvement
2
Capital
Accumulation
Factors of Production
4.2
3.5
-90
-40
10
60
110
160
210
260
-0.5
0.5
1.5
2.5
3.5
4.5
2020 2021 2022f
Current Account Balance
% of GDP
Current account to remain in surplus within 4.2% - 4.7% in 2022
Current account surplus to be driven
by goods surplus...
…supported by diversified export
products and markets
Non-E&E, 47%
Note: G3 includes the US, the euro area and Japan. Newly Industrialised Economies (NIEs) refers to Hong Kong SAR, Korea and Chinese Taipei.
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
4.2 - 4.7
Exports by Products and Markets (2021)
% Share of Total Exports
Markets
ASEAN,
28%
PR
China,
15%
NIEs,
12%
G3,
27%
ROW,
18%
Goods
Surplus
Income
Deficits
Services
Deficit
Current
Account
Balance
Products
E&E,
37%
Non-E&E
(Resource based),
26%
Mining,
6%
Agriculture,
8%
Non-E&E
(Non-resource based),
24%
32
2021 Annual Report, EMR & FSR Presentation Slides
Option 1
BANK NEGARA MALAYSIA
► ANNUAL REPORT 2021
► ECONOMIC AND MONETARY REVIEW 2021
► FINANCIAL STABILITY REVIEW – SECOND HALF 2021
30 MARCH 2022
1
2
► However, lingering uncertainties remain along with unfolding
developments that could affect Malaysia’s growth prospects
► Policies remain in place to support vulnerable segments and
secure a sustainable economic recovery
► Need to advance implementation of structural reforms that
furthers a conducive investment climate and enhance
long-term competitiveness for the Malaysian economy
to emerge stronger and more resilient
The Malaysian economy to strengthen in 2022
0
30
60
90
120
150
0
20
40
60
80
100
Jan-20 Jul-20 Feb-21 Aug-21 Mar-22
Volatility Index
Oil Prices (RHS)
Volatility Index and Brent Oil Prices
Index USD/Barrel
Economic recovery on track despite challenging global conditions
Source: Bank Negara Malaysia estimates, Intercontinental Exchange, Bloomberg, International Monetary Fund
► State of the pandemic
Resurgences would still weigh on growth
through sentiments and absenteeism.
► Military conflict in Ukraine
exerting further pressure on growth via trade,
inflation and financial markets.
► Pace of policy normalisation
in major economies
amid a challenging operating landscape
and tighter financial conditions.
Growth in 2022 to be affected by..
3
-3.1
5.8
3.8 to 4.3
2020 2021e 2022f
Global Real GDP Growth
Annual Change (%)
Malaysia’s exports to benefit from continued global demand and
higher commodity prices
Source: WSTS, IC Insights, MPOB, PETRONAS and Bank Negara Malaysia estimates
4
26.2
26.0
10.4
11.0
WSTS
IC
Insights
2022f 2021
Global Semiconductor Sales Forecasts
Annual Change (%)
26.0
10.9
2021p 2022f
Gross Exports
Annual Change (%)
LNG (RM/tonne)
3.0% 1,469
2,000 - 2,200
Brent (USD/barrel)
1.6% 71
100 - 120
CPO (RM/tonne)
6.1% of MY
exports (2021)
4,430
6,200 - 6,600
2021 2022f
2011-19
Avg.: 5.2%
2016-19 Avg.: 6.8%
2011-19 Avg.: 4.1%
Rest of the
World
Europe and
Americas
Other Asian
Countries
ASEAN
Further lift to growth from reopening of international borders
Reopening of borders to international tourists would support the recovery of travel receipts
Source: Department of Statistics, Malaysia, Tourism Malaysia, newsflows
Travel Receipts
RM billion
5
Share of Tourist Expenditure in Malaysia by Region
% share of 2019
9
37
51
4
International
Tourism Bubbles
Travel bubble for international tourists
to Langkawi
15 Nov.
2021
Vaccinated Travel
Lane (VTL)
Singapore (21 January 2022), Thailand
and Cambodia (15 March 2022)
1Q
2022
Reopening of Borders
Reopening of international
borders to all foreign tourists
1 Apr.
2022
2019:
82.1
2020:
12.6
2021:
0.4
High vaccine coverage domestically enables a more
targeted approach to manage COVID-19
Note: Data as at 11.59 PM on 24 March 2022
Source: Ministry of Health Malaysia GitHub (github.com/MoH-Malaysia/covid19-public)
6
97.5
66.2
Adult
Booster
Primary Vaccinated
Primary Vaccinated
Partially Vaccinated
% of adult population (aged 18+)
Vaccine Coverage
High booster coverage among adults
36.1Children
Partially
Vaccinated
% of children (aged 5-11)
Steadily increasing take-up as PICKids continues
High vaccine coverage and effectiveness allows for
proportionate, targeted and calibrated approach
►No nationwide containment measures, albeit some impact from
self-isolation, absenteeism and risk aversion as cases rise
0
5
10
15
20
0
10
20
30
40
Jun-21 Sep-21 Dec-21 Mar-22
New COVID-19 Cases (7 Day Average, Thousands)
New ICU COVID-19 Cases (RHS, 7 Day Average, Hundreds)
COVID-19 Cases and ICU Cases
94.6
91.5
Adolescent
% of adolescents (aged 12-17)
Near-universal coverage among adolescents
Partially Vaccinated
Primary Vaccinated
Further improvement in employment prospects amid
encouraging signs of hiring activity in 2022
* Tourism-related industries follows SOCSO definition and includes wholesale retail, administrative and support services, accommodation and F&B, transportation and storage, entertainment and recreation
** The placement rate refers to the number of people placed in new jobs under the Employment Insurance Scheme (EIS) for every 100 persons retrenched
*** Long-term reforms refer to the initiatives to raise the quality of education, strengthen the technical and vocational education and training (TVET) ecosystem and implement market-based tools to manage foreign workers
Source: SOCSO, Department of Statistics, Malaysia, Ministry of Finance (MOF), and Bank Negara Malaysia estimates
Policy measures supporting the labour market
7
Wage Subsidy
Programme
Progress of
Long-term
Reforms***
Upskilling &
Reskilling
Initiatives
MySTEPJaminKerja
Avg. Daily Loss of Employment (LOE)
and Placement Rate
Number of Persons (As at 18 March 2022)
157 171
118 125
40
31
45 41
-100
-80
-60
-40
-20
0
20
40
60
0
50
100
150
200
250
300
2Q21 3Q21 4Q21 1Q22
Non tourism-related LOE
Tourism-related LOE*
Placement rate**
15.13 15.10 15.29
~15.6
2019 2020 2021p 2022f
Total Employment
Million Persons
Unemployment and Underemployment
% of Labour Force
3.3
4.5 4.6 ~4.0
1.2
2.3 2.0
~1.3
2019 2020 2021p 2022f
Underemployment Rate
Unemployment Rate
2020,
-1.1
2021,
3.0
Jan-22,
4.1
2020,
-0.2%
2021,
1.3%
2022f,
~2.3%
Continued improvement in both employment and income growth
*Nominal wages deflated by CPI; ** Average for retail, recreation, grocery and pharmacy categories
Note: p Preliminary, f Forecast
Source: Department of Statistics, Malaysia, Google Mobility (data up to 21 March 2022) and Bank Negara Malaysia.
Jan-21,
-25.8
Jan-Mar-22
avg., 3.2
Jan-21 Apr-21 Jul-21 Oct-21 Jan-22
Improvements in labour market to support household spending
Google Mobility**
Change Relative to 3 Jan – 6 Feb 2020 (%)
Real Private
Consumption
Annual Change (%)
8
Credit Card Spending by Local Cardholders
Annual Change (%)
Jan-21,
-16.6
Jan-Feb-22
avg., 28.8
Jan-21 Apr-21 Jul-21 Oct-21 Jan-22
Absence of strict containment measures to provide additional lift to spending,
with further support from pent up demand
Nominal Manufacturing Wages
Annual Change, %
1.9
9.0
2021p 2022f
Employment Growth
Annual Change, %
Jan-22: 2.9%
Real Manufacturing Wages*
-0.01%
0.5%
1.7%
Malaysians are highly indebted but their capacity to repay remain
supported by targeted assistance and prudent lending standards
While debt-servicing capacity of
borrowers remained sound…
Matters
arising
Household debt-to-GDP ratio remains on the higher
end compared to regional economies
TH = Thailand; SG = Singapore; ID = Indonesia; PH = Philippines
1 As at Sep. 2021. Household debt-to-GDP ratio for Indonesia and the Philippines covers household debt from the banking system only, while for Thailand and Singapore, it covers household debt from banks and non-banks.
Source: Bank Negara Malaysia, Bank of International Settlement, Bursa Malaysia, Employees Provident Fund, national authorities, Securities Commission Malaysia, World Bank, and Bank Negara Malaysia estimates.
82.7
87.4
93.2
89.6 89.0 89.3
69.7
17.2
9.9
Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 TH SG ID PH
Household Debt-to-GDP
%
Outstanding household loans
(Jun ’21: 35%)
35%
Newly-approved loans
(Jun ’21: 44%)
44%
Median Debt Service Ratios (DSRs)
Malaysia Regional Economies1
9
...further excessive debt
accumulation can affect
households' spending power
Key drivers for overall investment
Strong FDI and investment intentions
Investments’ recovery to be driven by continued capacity expansions
and higher technology adoption
32.4
14.6
54.9
2019 2020 2021
Real Gross Fixed Capital
Formation (GFCF)
Annual Change (%)
Key Factors Supporting GFCF Growth
Foreign Direct Investments
Net inflows, RM bn
Total Approved Investments
RM bn
Greater ESG
considerations
E&E
Metal Products
Key Industries
Source: Department of Statistics Malaysia, MIDA and Bank Negara Malaysia
Note: *Refers to investments in business services sub-sectors including financial services, information and communications, support services and global establishments (investments in principal hubs and regional offices )
10
Professional
Business
Services*
128 103 98
83
64
209
2019 2020 2021
Domestic Foreign
Continuation of
large infrastructure
projects
Nationwide digital
connectivity
enhancements
Post-pandemic shift
towards automation
and digitalisation
-0.9
6.3
2021p 2022f
Policies remain in place to support vulnerable segments
and secure a sustainable recovery
Policy support in 2022 for
households and businesses
Source: Newsflows and Bank Negara Malaysia
11
Enhance physical connectivity
Strengthen ESG adoption
Social protection reform
Ensuring sustainable economic
recovery on multiple fronts
Attract quality foreign investments
Special Strategic Investment Fund (RM 2 bil)
Digital Ecosystem Acceleration Scheme
Incentives for greater adoption of e-commerce
Accelerate digital connectivity
Create a future-ready workforce
Policy
Initiatives
Direct cash assistance
Bantuan Keluarga Malaysia (RM8.2 bil)
Hiring incentives
Jamin Kerja Keluarga Malaysia (RM2 bil)
EPF-related measures
Headline inflation to average between 2.2% - 3.2%
amid higher underlying inflation
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
Headline inflation to average between
2.2% - 3.2% (2021: 2.5%)
Headline Inflation
Annual Change, %
Amid existing policy interventions to contain
pass-through from global cost pressures
Core inflation to average higher,
between 2.0% - 3.0% (2021: 0.7%)
As economic activity continues to pick up amid
environment of high input costs
Inflation outlook subject to
Global commodity price developments amid
risks from prolonged supply-related disruptions
12
2.5
3.2
1.0
0.7
-1.2
2.5
2.2
2018 2019 2020 2021 2022f
-0.2
0.9
0.9
0.9
1.4
1.7
2.0
2.1
2.5
2.7
2.8
3.6
4.2
4.5
5.2
6.6
7.3
-1 0 1 2 3 4 5 6 7 8
Japan
PR China
Malaysia
Thailand
France
Indonesia
Singapore
South Korea
Germany
Canada
United Kingdom
Philippines
United States
South Africa
Mexico
Russia
Brazil
Cumulative Inflation Target/Average
Several factors have in part contained overall domestic
inflationary pressures at the current juncture
Source: National authorities and Bank Negara Malaysia estimates
Note: For more information, please refer to the EMR 2021 box article ‘An Anatomy of Inflation: Effects from the Prolonged Pandemic’
Offsetting factors for Malaysia
Cumulative CPI Inflation (Dec-19 to Dec-21)
Annualised, %
Policy interventions
Price ceiling on retail fuel, electricity rebates, price controls on
some staple food items
Less severe pandemic-related
disruptions
Proximity to global manufacturing hub
Labour participation rate remains forthcoming
Spare capacity in the economy
and labour market
Economic activity well below pre-pandemic trend, with
unemployment rate yet to fully recover
13
While overall headline inflation has remained manageable,
cost of living concerns have re-emerged
Net Income by Income Group
RM/month
Price pressures in 2021 were
driven by specific items...
…disproportionately affecting low-income
households with low buffers
Percentage of CPI Basket with Elevated Inflation in 2021
% of CPI Basket, Weighted
Note: Elevated inflation is defined as inflation being above 1 standard deviation from mean, in any months in 2021
* The weighted average is estimated by taking the inflation of individual items and calculating their weighted
average. The figures might not add up to the official CPI inflation of 2.5% due to different methodology
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
Note: Net income is gross income net expenditure and financial obligations
Source: Bank Negara Malaysia estimates based on 2019 Household Income and Expenditure Survey,
Department of Statistics, Malaysia
Examples of
affected items
(2021 Inflation)
▲ Fuel: 24.1%
▲ Electricity: 15.2%
▲ Fresh Meat: 3.8%
RM4,081
RM1,127
RM230
RM922
RM349
RM203
T20
M40
B40
Expenditure on items experiencing high
inflation (excl. fuel & electricity)
Net income
80
20
Percentage of CPI Basket
0.8
13.5
Weighted Average
Inflation by CPI Basket*
Other items High-inflation items
Small portion of
CPI basket…
…experienced sharp
price increases
14
Key Growth Drivers
Malaysia GDP Growth
Annual Change (%)
2022f:
5.3% - 6.3%
Continued expansion in external
demand supported by the tech upcycle
Improvement in employment and
income prospects
Lifting of containment measures &
reopening of international borders
Continued access to targeted
policy measures
The Malaysian economy is projected to grow
between 5.3% and 6.3% in 2022
Note: p Preliminary, f Forecast
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
Growth to be underpinned by both external and domestic demand against a challenging operating environment
Key Challenges in 2022
► COVID-19 pandemic
developments
Risk aversion affecting household
and business sentiments, and minor
disruptions due to absenteeism
► Ongoing geopolitical
conflicts
Escalation of conflicts leading to
elevated commodity prices and
supply chain disruptions
► Elevated cost and price
pressures
Cost of living and profitability
concerns weighing on household
and business sentiments
15
2020:
-5.6%
2021p:
3.1%
Risks to the economic outlook remain tilted to the downside
Upside risks from external and domestic demand
Downside risks from COVID-19, geopolitical conflicts and cost pressures
▼ Weaker-than-expected global growth
▼ Further escalation in geopolitical conflicts
▼ Worsening supply disruptions and labour shortages
▼ Heightened financial market volatility leading to tightening financial conditions
▼ Higher-than-expected cost and price pressures weighing on business and household sentiments
▼ Emergence of severe, vaccine-resistant VOCs
▼ Domestic policy uncertainty
16
2022f:
5.3% - 6.3%
▲ Higher-than expected global growth
▲ Stronger-than-expected improvement in tourism-related sectors amid reopening of borders
Monetary policy in 2022 will continue to facilitate a sustainable
economic recovery while preserving price stability
Determined by new data amid
heightened uncertainty and fast-
evolving conditions
► Added layer of complexity amid
combination of downside risks to
growth and upside risks to inflation
Ensure degree of accommodation
is consistent with the improving
economic environment
Updated
OPR unchanged at 1.75% to
maintain support to the economy 2021
Monetary policy stance to facilitate
sustainable economic recovery
and price stability
2022
Any potential policy adjustments
would be gradual and measured
Overnight Policy Rate (OPR)
%
Mar. 2022:
1.75%
1.0
1.5
2.0
2.5
3.0
3.5
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: Bank Negara Malaysia
17
2.9 3.3
1.6
1.4
4.5 4.6
2020 2021
Outstanding corporate bonds*
Outstanding loans
Net financing
Outstanding Business Loan Growth
Annual Change (%)
Financing to businesses and households remain supportive
of economic activity
Note: Net financing and household loans include loans from the banking system, development financial institutions (DFIs) and major non-bank financial institutions (NBFIs). Overall business loans include loans from
the banking system and DFIs, while working capital loans include loans from the banking system only.
*Excludes issuances by Cagamas and non-residents.
** Based on weighted responses of 20 banks, representing 96% of total outstanding banking system loans.
Source: Bank Negara Malaysia
Outstanding Household Loan Growth
Annual Change (%)
…amid continued flow of credit to
businesses and households…
Net Financing
Annual Change (%) / Cont. to Growth (ppt)
Net financing growth was
sustained in 2021…
4.8
7.4
1Q-21 2Q-21 3Q-21 4Q-21
Working Capital
Overall Business
4.1
1.3
7.2
1Q-21 2Q-21 3Q-21 4Q-21
Overall
Household
Residential Property
Cars
…with banks targeting higher
loan growth in 2022
3.4
3.9
4.5
2019 2020 2021 2022f
Outstanding Banking System Total Loan Growth
Annual Change (%)
Actual Banks’ Loan
Growth Target**
6.4%
-
5.4%
18
Banks remain cautious amid the uncertain credit risk outlook
1 Refers to loans classified as Stage 2 as % of household or business loans. Stage 2 loans refers to exposures that have exhibited deterioration in credit risk, for
which banks are required to set aside provisions based on lifetime expected credit losses under Malaysian Financial Reporting Standard 9.
2 Includes regulatory reserves.
Source: Bank Negara Malaysia
While impairments remain low, banks continue
to be cautious in managing credit risks…
Matters
arising
Impairment
Ratio
Households
… and have built sizeable buffers against a
potential rise in impairments
Loan Loss Coverage Ratio2
%
2015-19
Average
Jun '21 Dec '21
Businesses
(Jun ’21: 1.1%)
1.0%
(Jun ’21: 2.7%)
2.4%
Provisions-to-Total Loans
%
1.4
1.8
1.9
2015-19
Average
Jun '21 Dec '21
1.4
1.8
1.9
113
129
143
Share of
Stage 2 Loans1
(Jun ’21: 6.9%)
8.5%
(Jun ’21: 15.6%)
16.7%
19
Latest stress tests affirm banks’ ability to support economic recovery
under two hypothetical adverse scenarios with extended stress up to end-2024
Rising corporate debt globally warrants continued vigilance
Corporate debt has increased with higher
financing needs during the pandemic
Source: Bank for International Settlements (BIS) Credit Database
Critical to balance between short- and long-
term economic goals
Corporate Debt
Share of GDP (%)
73
102
115
Advanced
Economies
4Q 10 4Q 19 2Q 21
84
95
105
World
Emerging
Economies
89
91
98
20
Timely, Direct, and Proportionate
Policy Support
Unprecedented policies cushioned the downturn; but policy
recalibration is required as demand conditions improve.
Structural Reforms to Enhance
Economic Resilience
Labour market flexibility and stronger insolvency laws could
expedite resource reallocation and increase productivity.
Well-Capitalised Banks to Ensure
Macroeconomic and Financial Stability
Healthy bank balance sheets disincentivise continued
lending to zombie firms.
1980s 1990s 2000s 2010s 2020 2021p 2022f 2023f -
2025f
Industrialisation
Promotion of
Investment Act
Note: f Forecast, 2023f – 2025f refers to forecasts from the 12th Malaysia Plan; *Based on emissions intensity in 2005
Source: Department of Statistics Malaysia
Physical
Connectivity
North-South Highway
Enabling the
Services Sector
Financial sector reforms
High-speed broadband
Malaysia GDP Growth
Annual Change (%)
Effective implementation of structural reforms are key to ensure the
Malaysian economy emerges from the crisis stronger and more resilient
Past reforms have underpinned Malaysia’s economic development
Sustainability
45% reduction in GHG emissions intensity
to GDP by 2030*, net zero by 2050
►Greening finance and financing green
Inclusivity
Strengthening the effectiveness of financial
intermediation ecosystem
►Diversifying choices for customers,
including “digital-first” solutions
Digitalisation
25.5% contribution of the digital
economy to GDP by 2025
►Digitalising financial services
Key Reform Areas
21
Financial Sector Blueprint: Key priorities for 2022-2023
3Broad Themes
Finance for All
• Diverse financial choices
• Strong financial safety nets
• Confident consumers
Finance for
Transformation
• Grow alternative finance
• Deeper global integration
• Vibrant financial landscape
Finance for Sustainability
• Wider adoption of value-based intermediation
• Greening finance and financing green
5Strategic Thrusts
Fund Malaysia’s
Economic Transformation1
Elevate the Financial
Well-being of Households
and Businesses
2
Advance Digitalisation3
Facilitate an Orderly
Transition to a Greener
Economy
4
Advance Value Based
Finance Through Islamic
Finance Leadership
5
► Further develop alternative financing instruments to complement
traditional finance
• Launch a Business Recapitalisation Fund based on blended finance
• Operationalise a dedicated alternative finance collaboration mechanism
► Issue the Financial Inclusion Framework 2022-2026
► Enact the Consumer Credit Act (CCA) and establish the Consumer Credit
Oversight Board (CCOB)
► Strengthen resolution arrangements by consolidating the Ombudsman for
Financial Services (OFS) and Securities Industry Dispute Resolution
Centre (SIDREC)
► Issue and operationalise digital bank licenses in 2022 and roll out the digital
insurance / takaful framework
► Facilitate identification and testing of high-impact data sharing use cases
► Implement Climate Change and Principles-based Taxonomy (CCPT)
► Issue principles and guidance on Climate Risk Management, Stress Testing
and Scenario Analysis
► Mainstream social finance including expansion of iTEKAD
► Form and operationalise the MIFC Leadership Council (MLC) as an industry-
led committee in driving MIFC aspirations
* Priorities are non-exhaustive
Priorities for 2022-2023*
Complemented by regulatory enhancements to address risks, promote fair treatment of consumers, and ensure efficient payment infrastructure
22
In 2022, the Bank aims to further support an orderly and just transition
for Malaysia to reach net zero by 2050
Matters
arising
Key priorities in 2022
Integrate climate-related
and environmental risks
in prudential regulation and
supervision
► Advance adoption of Climate Change
and Principle-based Taxonomy and
VBIAF1 Sectoral Guides
► Finalise climate risk management
requirements2 and VBIAF Sectoral
Guides
► Continue preparations for industry-
wide Climate Change Stress Tests in
2024
Scale up green
finance
► Operationalise Low
Carbon Transition Facility
► Continue to actively
engage business
communities, including
SMEs to create greater
awareness on climate risk
and the need to transition
► Facilitate development of
more targeted financial
solutions
Intensify efforts to
bridge data gaps
► Roll out data catalogue,
covering the top 8 climate
data sources3 for
reference by the financial
sector
Strengthen
practices in the
disclosure of climate
risk by financial
institutions
► Step up preparations for
mandatory TCFD aligned
climate-related financial
disclosures by financial
institutions
Align the financial
sector’s response
with national strategy
► Intensify engagements
with relevant Government
ministries, agencies and
authorities
1 Value-based Intermediation Financing and Investment Impact Assessment Framework
2 Climate Risk Management and Scenario Analysis (CRMSA) policy document
3 i) GHG emissions; (ii) green/sustainable lending and financing; iii) energy consumption and renewable energy sources; iv) exposure to physical risks v) asset
value at risk from natural catastrophes; vi) ESG ratings; vii) water consumption and waste management; viii) biodiversity and deforestation indicators
The Bank will continue to work closely with financial industry through the Joint Committee on Climate Change (JC3)
23
Total Assets RM551.6 bil
International
Reserves
RM486.9 bil
USD116.9 bil
Net Profit RM12.8 bil
Dividend
Payable
to the Government
RM5.0 bil
Bank Negara Malaysia: Financial position remained stable in 2021
* Special Drawing Rights ** Malaysian Government Securities
Source: Bank Negara Malaysia
Financial Position
(RM billion, as at 31 December 2021)
24
Income and Expenditures
(RM billion, year ended 31 December 2021)
Total Income
14.73
Net Profit
12.80
Recurring
Expenditure
1.30
Development
Expenditure
0.59
Taxation
0.04
Capital &
Liabilities
Assets
RM552 bil
Capital
RM187 bil
Liabilities
RM365 bil
Summary
Malaysian economy is projected to expand between 5.3% - 6.3%, driven
by continued external demand and improved domestic economic activity
Headline inflation to average between 2.2% - 3.2%, while
underlying inflation is expected to average higher
Balance of risks remain tilted to the downside, mainly arising from
developments surrounding COVID-19 and geopolitical conflicts
Financing to businesses and households to continue
being supportive of economic activity
Imperative to pursue structural reforms to ensure the Malaysian
economy emerges from the crisis stronger and more resilient
25
Option 1
Thank you
26
Option 1
Q & A
27
Option 1
Additional Information
28
Higher growth across most economic sectors
GDP Growth by
Economic Activity
(Annual Change, %)
%
Share
(2021p)
2020 2021p 2022f
Real GDP 100 -5.6 3.1
5.3 -
6.3
Services 57.0 -5.5 1.9 6.9
Manufacturing 24.3 -2.6 9.5 5.2
Mining & Quarrying 6.7 -10.6 0.7 2.5
Agriculture 7.2 -2.2 -0.2 1.5
Construction 3.7 -19.4 -5.2 6.1
-3.2
1.1
3.9
-0.6
2.2
1.3
-0.8
0.0
0.2
-0.2
-0.01
0.1
-0.9
-0.2
0.2
2020 2021p 2022f
Services
Manufacturing
Mining & Quarrying
Agriculture
Construction
Malaysia GDP Growth by Economic Activity
Annual Change (%), Ppt. Contribution
Note: p Preliminary, f Forecast
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
Real GDP:
-5.6% 3.1% 5.3% - 6.3%
29
-2.5
1.1
5.3
-2.0
0.4
0.8
0.5
0.9
0.2
-1.3
-0.6
0.4
-0.9
-0.4
0.2
0.7
1.7
-1.0
2020 2021p 2022f
Private Consumption
Private Investment
Public Consumption
Public Investments
Net Exports of Goods & Services
Change in Stocks
Improvement across most demand components
Note: p Preliminary, f Forecast, 1 Excluding stocks
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
GDP Growth by
Expenditure
Components
(Annual Change, %)
%
Share
(2021p)
2020 2021p 2022f
Real GDP 100 -5.6 3.1
5.3 -
6.3
Domestic Demand1 92.7 -5.8 1.9 7.2
Private Consumption 58.8 -4.3 1.9 9.0
Private Investment 15.6 -11.9 2.6 5.3
Public Consumption 13.8 3.9 6.6 1.2
Public Investment 4.5 -21.3 -11.4 9.6
Net Exports of
Goods and Services
6.0 -13.0 -5.8 2.6
Exports 69.2 -8.9 15.9 4.8
Imports 63.2 -8.4 18.5 5.1
Malaysia GDP Growth by Expenditure Components
Annual Change (%), Ppt. Contribution
Real GDP:
-5.6% 3.1% 5.3% - 6.3%
30
Negative output gap to narrow further in 2022 amid quicker recovery
in actual output growth
Note: e Estimate, f Forecast
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
Actual Output and Potential Output Growth Output Gap
0.8 0.7 0.4
-6.8
-6.0
2017 2018 2019 2020 2021e 2022f
% Share of Potential OutputAnnual Change (%)
31
5.8 4.8
4.3
-5.6
3.14.9
4.9
4.8
1.6
2.3
2017 2018 2019 2020 2021e 2022f
Actual Output
Potential Output
5.3 - 6.3
3.0 - 4.0
Continued growth in potential output, supported
by expansion in factors of production
1
Labour Force
Expansion
-4.0 to -3.0
Quicker recovery in actual output growth to narrow
negative output gap
3
Productivity
Improvement
2
Capital
Accumulation
Factors of Production
4.2
3.5
-90
-40
10
60
110
160
210
260
-0.5
0.5
1.5
2.5
3.5
4.5
2020 2021 2022f
Current Account Balance
% of GDP
Current account to remain in surplus within 4.2% - 4.7% in 2022
Current account surplus to be driven
by goods surplus...
…supported by diversified export
products and markets
Non-E&E, 47%
Note: G3 includes the US, the euro area and Japan. Newly Industrialised Economies (NIEs) refers to Hong Kong SAR, Korea and Chinese Taipei.
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
4.2 - 4.7
Exports by Products and Markets (2021)
% Share of Total Exports
Markets
ASEAN,
28%
PR
China,
15%
NIEs,
12%
G3,
27%
ROW,
18%
Goods
Surplus
Income
Deficits
Services
Deficit
Current
Account
Balance
Products
E&E,
37%
Non-E&E
(Resource based),
26%
Mining,
6%
Agriculture,
8%
Non-E&E
(Non-resource based),
24%
32
| Press Release |
25 Mar 2022 | BNM launches Malaysia Islamic Overnight Rate (MYOR-i) to spur Islamic financial product innovation | https://www.bnm.gov.my/-/myor-i-launch | https://www.bnm.gov.my/documents/20124/938039/pd-myor-i.pdf | null |
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BNM launches Malaysia Islamic Overnight Rate (MYOR-i) to spur Islamic financial product innovation
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BNM launches Malaysia Islamic Overnight Rate (MYOR-i) to spur Islamic financial product innovation
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Bank Negara Malaysia (BNM) is pleased to announce the launch of MYOR-i. The introduction of MYOR-i will spur the development of innovative Shariah-compliant financial products which will further deepen Malaysia’s Islamic financial market. It will also reinforce a holistic Shariah-compliant ecosystem and enhance best market practices and standards.
MYOR-i, the first transaction-based Islamic benchmark rate in the world, is developed in accordance with the Principles for Financial Benchmarks [1]. BNM’s Shariah Advisory Council (SAC) has also confirmed that MYOR-i is Shariah-compliant. MYOR-i will replace the Kuala Lumpur Islamic Reference Rate (KLIRR), which will be discontinued with immediate effect.
BNM has collaborated with the Financial Markets Committee (FMC) [2] and the AIBIM-FMAM [3]Islamic Market Technical and Development Committee (IMTDC) on the development of MYOR-i. The policy document is now published on BNM’s website with the following key features and governance standards:
MYOR-i is administered and calculated by BNM. It is a volume-weighted average rate of return on Shariah-compliant unsecured overnight Ringgit interbank transactions. This includes BNM’s Islamic overnight monetary operations [4].
MYOR-i is currently based on the Commodity Murabahah instrument. New Shariah-compliant instruments may be included in the future.
MYOR-i for any given Kuala Lumpur business day will be published on BNM’s website at 12 p.m. on the following business day.
BNM will conduct periodic reviews of MYOR-i to ensure that it remains robust and representative of conditions in the underlying market.
The establishment of MYOR-i as the Islamic benchmark rate will be a catalyst in driving Islamic financial product innovation and creating transparency for market players to negotiate and standardise their financial contracts, thus achieving efficient pricing across all financial instruments. This will help to deepen the onshore Islamic financial market and enhance its role in financing real economic activities in Malaysia.
For enquiries, the public can reach out to the Financial Benchmark Review team of BNM at fbr@bnm.gov.my.
See also:
Malaysia Islamic Overnight Rate (MYOR-i) and aggregate volumes
Malaysia Islamic Overnight Rate (MYOR-i) Policy Document
Footnotes
[1] The Principles for Financial Benchmarks is developed by the International Organization of Securities Commissions (IOSCO). It provides an overarching framework of principles for benchmarks used in financial markets.
[2] The FMC is a committee established by BNM in May 2016. It comprises of representatives from BNM, financial institutions, corporations, financial service providers and other institutions who have prominent roles or participation in the financial markets.
[3] AIBIM: Association of Islamic Banking and Financial Institutions Malaysia
FMAM: Financial Markets Association Malaysia
[4] Excludes Standing Facilities.
Bank Negara Malaysia
25 March 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
Malaysia Islamic Overnight Rate (MYOR-i)
Issued on: 25 March 2022 BNM/RH/PD 034-4
Malaysia Islamic Overnight Rate
(MYOR-i)
Applicable to the following interbank institutions:
1. Licensed Islamic banks
2. Licensed banks and licensed investment banks carrying on Islamic banking business
3. Prescribed development financial institutions carrying on Islamic financial business
4. Other interbank institutions that are direct participants of RENTAS
Malaysia Islamic Overnight Rate (MYOR-i)
Issued on: 25 March 2022
TABLE OF CONTENTS
PART A OVERVIEW ............................................................................................... 1
1 Introduction ................................................................................................ 1
2 Applicability ............................................................................................... 1
3 Legal provisions ........................................................................................ 1
4 Effective date ............................................................................................. 1
5 Interpretation ............................................................................................. 1
6 Related legal instruments, policy documents and Shariah rulings ............. 3
PART B DESIGN AND METHODOLOGY ............................................................... 4
7 Calculation and eligible transactions ......................................................... 4
8 Data sources and quality ........................................................................... 4
9 Publication ................................................................................................. 5
PART C GOVERNANCE ......................................................................................... 6
10 Administration of MYOR-i .......................................................................... 6
11 Contingency arrangements ....................................................................... 6
APPENDIX 1 Eligible Instruments ............................................................................. 7
APPENDIX 2 MYOR-i features ................................................................................. 8
APPENDIX 3 Template for submission of RENTAS transaction data ....................... 9
APPENDIX 4 Illustration of a contingency calculation ............................................. 10
Malaysia Islamic Overnight Rate (MYOR-i) 1 of 10
Issued on: 25 March 2022
PART A OVERVIEW
1.1 In line with the continued development of the Islamic financial market, the
Financial Markets Committee (FMC), in consultation with the AIBIM-FMAM1
Islamic Market Technical and Development Committee (IMTDC), recommended
for the replacement of the Kuala Lumpur Islamic Reference Rate (KLIRR) with
a new Islamic benchmark rate, named the Malaysia Islamic Overnight Rate
(MYOR-i). MYOR-i is designed based on the International Organization of
Securities Commissions (IOSCO)’s Principles for Financial Benchmarks.
1.2 This policy document sets out the benchmark design, methodology and
governance framework to ensure the integrity and credibility of MYOR-i.
2.1 This policy document is applicable to interbank institutions as defined in
paragraph 5.2.
3.1 The requirements in this policy document are specified pursuant to sections 152
and 155 of the Islamic Financial Services Act 2013 (IFSA) and section 116 of
the Development Financial Institutions Act 2002 (DFIA).
3.2 The guidance in this policy document is issued pursuant to section 277 of the
IFSA and section 126 of the DFIA.
4.1 This policy document comes into effect on 25 March 2022.
5.1 The terms and expressions used in this policy document shall have the same
meanings assigned to them in the Financial Services Act 2013 (FSA), IFSA or
DFIA, as the case may be, unless otherwise defined in this policy document.
5.2 For the purposes of this policy document:
1 AIBIM: Association of Islamic Banking and Financial Institutions Malaysia
FMAM: Financial Markets Association Malaysia
1 Introduction
2 Applicability
3 Legal provisions
4 Effective date
5 Interpretation
Malaysia Islamic Overnight Rate (MYOR-i) 2 of 10
Issued on: 25 March 2022
“S” denotes a standard, an obligation, a requirement,
specification, direction, condition and any interpretative,
supplemental and transitional provisions that must be
complied with. Non-compliance may result in enforcement
action;
“G” denotes guidance which may consist of statements or
information intended to promote common understanding
and advice or recommendations that are encouraged to be
adopted;
“agent” refers to a market participant, generally an interbank
institution or an approved money broker, who executes
deals on behalf of its clients pursuant to the clients’
mandate and without taking on market risk in connection
with the deals;
“business day” means any calendar day from Monday to Friday except a
public or bank holiday in Kuala Lumpur;
“Commodity
Murabahah”
refers to a contract based on the sale and purchase of
Shariah-compliant commodities where the acquisition cost
and the mark-up are disclosed to the purchaser;
“Eligible Instrument” means a Shariah-compliant instrument listed in Appendix 1;
“FAST” means the Fully Automated System for Issuing / Tendering
which is a centralised system for the issuance of debt
securities and to facilitate the Bank’s monetary policy
operations;
“Funding Facility” refers to the funding facility provided by the Bank to meet
temporary liquidity needs of interbank institutions at a profit
rate as referenced in the Bank’s Policy Document on
Standing Facilities;
“interbank institutions” refer to the following institutions which are approved by the
Bank to deal in the interbank market, whether acting as
principals or agents in the wholesale financial markets –
(a) licensed Islamic banks under the IFSA;
(b) licensed banks and licensed investment banks
approved under section 15(1)(a) of the FSA to carry
on Islamic banking business;
(c) prescribed development financial institutions
approved under section 33B(1) of the DFIA to carry on
Islamic financial business; and
(d) any other interbank institution which is a direct
participant of the Real-Time Electronic Transfer of
Funds and Securities System (RENTAS);
Malaysia Islamic Overnight Rate (MYOR-i) 3 of 10
Issued on: 25 March 2022
“MYOR-i” refers to the Malaysia Islamic Overnight Rate, which is the
Shariah-compliant transaction-based Islamic benchmark
rate for Malaysia with features listed in Appendix 2;
“principal” refers to a market participant who transacts for its own
account and not acting as an agent;
“RENTAS” means the Real-Time Electronic Transfer of Funds and
Securities System which is the real-time gross settlement
system;
“senior management” refers to the chief executive officer and senior officers of
interbank institutions;
“Shariah Advisory
Council”
refers to the Bank’s Shariah Advisory Council (SAC)
established under section 51 of the Central Bank of
Malaysia Act 2009, which is the authority for the
ascertainment of Islamic law for the purposes of Islamic
financial business;
“Shariah-compliant” refers to Islamic financial products and services that are
consistent with Shariah principles and approved by the
Bank’s SAC; and
“Standing Facilities” means both the Lending / Funding Facility and Deposit /
Acceptance Facility offered by the Bank.
6.1 This policy document must be read together with other relevant legal
instruments, policy documents, guidelines, codes or circulars issued by the
Bank, in particular -
(a) Code of Conduct for Malaysia Wholesale Financial Markets;
(b) Participation Rules for Payments and Securities Services;
(c) Operational Procedures for Malaysian Ringgit (MYR) Settlement in
RENTAS;
(d) Policy Document on Standing Facilities;
(e) Policy Document on Murabahah;
(f) Policy Document on Tawarruq;
(g) Policy Document on Wakalah; and
(h) the Shariah Advisory Council of Bank Negara Malaysia (SAC) Ruling on
the New Islamic Reference Rate i.e Malaysia Islamic Overnight Rate
(MYOR-i) based on the 218th SAC Meeting dated 28 October 2021.
6 Related legal instruments, policy documents and Shariah rulings
Malaysia Islamic Overnight Rate (MYOR-i) 4 of 10
Issued on: 25 March 2022
PART B DESIGN AND METHODOLOGY
G 7.1 MYOR-i is calculated as the volume-weighted average rate of return on Shariah-
compliant unsecured overnight MYR interbank placements, rounded to two
decimal places. Eligible transactions comprise the following transactions that are
based on an Eligible Instrument:
(a) Unsecured placements between interbank institutions (either brokered or
direct/bilateral); and
(b) The Bank’s Islamic overnight monetary operations, which comprise tenders
conducted through FAST or manual operations, and direct overnight
placements between the Bank and interbank institutions, excluding
Standing Facilities.
G 7.2 To ensure MYOR-i is reflective of the latest conditions and developments in the
Islamic financial market, new Eligible Instruments may be added in the future,
subject to the following conditions:
(a) Instruments shall be approved by the Bank’s SAC; and
(b) Instruments shall meet all requirements for MYOR-i as assessed by the
Bank, including but not limited to liquidity, data quality and robust
governance standards.
G
8.1 The data used to calculate MYOR-i is collected from two key sources:
(a) RENTAS; and
(b) FAST.
S 8.2 In the event2 that there is insufficient or missing transaction data submitted
through RENTAS3, interbank institutions shall provide all relevant data on their
overnight interbank money market transactions to the Bank according to the
template provided in Appendix 3 via email by RENTAS closing time, or
immediately upon request by the Bank.
S
8.3 Interbank institutions shall notify the Investment Operations and Financial
Market Department of the Bank and provide all relevant transaction data by the
cut-off time specified in paragraph 9.2 upon identification of errors in RENTAS
transaction data which affect the calculation of MYOR-i. The notification shall
first be made via telephone followed by an email with supporting documentation.
S 8.4 The senior management of interbank institutions shall put in place and
implement robust internal policies and mechanisms, including effective back-up
arrangements to ensure the accuracy of RENTAS transaction data and enable
timely detection of errors which may affect the calculation of MYOR-i.
2 For example, due to IT or RENTAS-related issues.
3 Information in MT202 settlement instructions.
7 Calculation and eligible transactions
8 Data sources and quality
Malaysia Islamic Overnight Rate (MYOR-i) 5 of 10
Issued on: 25 March 2022
G
9.1 MYOR-i for a given business day is published by 12:00 noon on the following
business day on the Bank’s official website.
S 9.2 Interbank institutions shall report any identified errors to the Investment
Operations and Financial Market Department of the Bank by 2:00 p.m. on the
publication day. Errors identified or reported after 2:00 p.m. shall not be taken
into account by the Bank for the determination of the correct rate.
G 9.3 A republication shall be made by the Bank if the erroneous rate is two or more
basis points away from the correct rate.
G 9.4 A notification shall be made by the Bank by 3:00 p.m. on the same publication
day on the official webpage for MYOR-i to indicate a potential republication due
to erroneous data. In the absence of such a notification, MYOR-i will not be
republished.
G 9.5 The republication shall be made by the Bank by 4:00 p.m. on the same
publication day. An annotation shall be made to the republished rate to indicate
a rate change.
9 Publication
Malaysia Islamic Overnight Rate (MYOR-i) 6 of 10
Issued on: 25 March 2022
PART C GOVERNANCE
G 10.1 The Bank is the administrator of MYOR-i and shall undertake periodic reviews
of the design and methodology of MYOR-i to ensure that the benchmark rate
accurately reflects the underlying market structure.
G 10.2 The Bank will seek the views of the FMC and the IMTDC to ensure that a holistic
approach is undertaken when reviewing any changes to MYOR-i design or
methodology. For material changes, the Bank will conduct a public consultation
to seek feedback from market participants.
G 11.1 In the event of disruption to the normal production of MYOR-i (e.g. disruption to
trade settlement, interbank trading or data collection), the Bank shall calculate
and publish MYOR-i based on the average MYOR-i, adjusted for any changes
in the Funding Facility profit rate, over the previous three publication days:
MYOR-it =
1
3
�[MYOR-it-n + (FFPRt − FFPRt-n)]
3
𝑛𝑛=1
where t = day of disruption event (i.e. contingency calculation day); and
FFPR = Funding Facility profit rate
Refer to Appendix 4 for an illustration of the contingency calculations.
G 11.2 For exceptional circumstances other than short-term disruptions, the Bank shall
exercise expert judgement and recommend an appropriate rate for publication.
10 Administration of MYOR-i
11 Contingency arrangements
Malaysia Islamic Overnight Rate (MYOR-i) 7 of 10
Issued on: 25 March 2022
1. Commodity Murabahah
APPENDIX 1 Eligible Instruments
Malaysia Islamic Overnight Rate (MYOR-i) 8 of 10
Issued on: 25 March 2022
Description MYOR-i is the transaction-based Islamic benchmark
rate based on Shariah-compliant unsecured
overnight MYR interbank placements.
Administrator and
calculator
The Bank
Calculation methodology Volume-weighted average
Rounding precision Rounded to two decimal places
Eligible transactions Eligible transactions comprise the following
transactions that are based on an Eligible Instrument:
(a) Unsecured placements between interbank
institutions (either brokered or direct/bilateral);
and
(b) The Bank’s Islamic overnight monetary
operations, which comprise tenders conducted
through FAST or manual operations, and direct
overnight placements between the Bank and
interbank institutions, excluding Standing
Facilities.
Data sources RENTAS and FAST
Data collection window Eligible transactions done throughout the entire
business day (i.e. until RENTAS close).
Publication 12:00 noon Kuala Lumpur time on the next business
day on the Bank’s official website.
Republication A republication shall be made by the Bank if the
erroneous rate is two or more basis points away from
the correct rate and is identified or reported by 2:00
p.m. on the publication day.
A notification on potential republication due to
erroneous data will be made by 3:00 p.m., with
republication (if any) by the Bank by 4:00 p.m. on the
same day.
Contingency
arrangements
In the event of disruption to the normal production of
MYOR-i, the Bank shall calculate MYOR-i based on
the average MYOR-i, adjusted for any changes in the
Funding Facility profit rate, over the previous three
publication days. For exceptional circumstances, the
Bank shall exercise expert judgement and
recommend an appropriate rate.
APPENDIX 2 MYOR-i features
Malaysia Islamic Overnight Rate (MYOR-i) 9 of 10
Issued on: 25 March 2022
Institution: ________________________
Date : ________________________
MT202 Additional Info
Transaction
ID
Sender
Ref ID
Seller BIC Buyer BIC Settlement
date
TRN
code
Trans
type
Status Currency
code
Amount Market
Type
Method /
Brokers
Product Rate Maturity
date
MMO00 MT202 Settled MYR I MUR
For the columns under “MT202 Additional Info”, the information shall be consistent with the codes outlined in Appendix XVII of the
Operational Procedures for MYR Settlement in RENTAS, in particular:
Category Details Code
Market type Islamic I
Method /
Brokers
Brokered Affin Moneybrokers
Brokered ICAP (Malaysia)
Brokered Harlow’s & MGI
Direct Trade
AF
IM
HA
DT
Product Murabahah MUR
Rate Up to 2 decimal places x.xx
Maturity date
MMM format:
JAN, FEB, MAR, APR, MAY, JUN,
JUL, AUG, SEP, OCT, NOV, DEC
DDMMMYY
APPENDIX 3 Template for submission of RENTAS transaction data
Malaysia Islamic Overnight Rate (MYOR-i) 10 of 10
Issued on: 25 March 2022
Add the difference between
the FFPR for the contingency
calculation day (t) and the
historical date (t-n)
For illustrative purposes, the MYOR-i for t-3, t-2 and t-1 were 1.73%, 1.75% and 2.02%
respectively. There was a 25 bps increase in the Funding Facility profit rate (FFPR) on
day t-1:
Rates expressed as percentages (%)
Day t-3 t-2 t-1 t
MYOR-i 1.73 1.75 2.02 Contingency
FFPR 2.00 2.00 2.25 2.25
*25 bps increase in FFPR
According to the formula, the MYOR-i for day t-3 and day t-2 will be adjusted upwards
by 25 bps to 1.98% and 2.00% respectively:
Day t-3 t-2 t-1
Adjusted MYOR-i 1.73 + (2.25 - 2.00)
= 1.98
1.75 + (2.25 - 2.00)
= 2.00
2.02 + (2.25 - 2.25)
= 2.02
Contingency MYOR-i for day t = (1.98 + 2.00 + 2.02) / 3 = 2.00
APPENDIX 4 Illustration of a contingency calculation
TABLE OF CONTENTS
PART A OVERVIEW
1 Introduction
2 Applicability
3 Legal provisions
4 Effective date
5 Interpretation
6 Related legal instruments, policy documents and Shariah rulings
PART B DESIGN AND METHODOLOGY
7 Calculation and eligible transactions
8 Data sources and quality
9 Publication
PART C GOVERNANCE
10 Administration of MYOR-i
11 Contingency arrangements
APPENDIX 1 Eligible Instruments
APPENDIX 2 MYOR-i features
APPENDIX 3 Template for submission of RENTAS transaction data
APPENDIX 4 Illustration of a contingency calculation
| Press Release |
22 Mar 2022 | International Reserves of Bank Negara Malaysia as at 15 March 2022 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-15-march-2022 | null | null |
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International Reserves of Bank Negara Malaysia as at 15 March 2022
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International Reserves of Bank Negara Malaysia as at 15 March 2022
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22 Mar 2022
The international reserves of Bank Negara Malaysia amounted to USD115.2 billion as at 15 March 2022. The reserves position is sufficient to finance 6.0 months of imports of goods and services, and is 1.2 times total short-term external debt. Related Assets
BNM Statement of Assets & Liabilities - 15 March 2022
Bank Negara Malaysia
22 March 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
22 Mar 2022 | BIS Innovation Hub and central banks of Australia, Malaysia, Singapore and South Africa develop experimental multi-CBDC platform for international settlements | https://www.bnm.gov.my/-/project-dunbar-update1 | null | null |
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BIS Innovation Hub and central banks of Australia, Malaysia, Singapore and South Africa develop experimental multi-CBDC platform for international settlements
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BIS Innovation Hub and central banks of Australia, Malaysia, Singapore and South Africa develop experimental multi-CBDC platform for international settlements
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1435 on
Tuesday, 22 March 2022
22 Mar 2022
Project Dunbar developed two prototypes for a shared platform that could enable international settlements using digital currencies issued by multiple central banks.
The platform was designed to facilitate direct cross-border transactions between institutions in different currencies, with the potential to cut costs and increase speed.
The project identified challenges of implementing a multi-CBDC platform shared across central banks and proposes practical solution designs to address them.
The Bank for International Settlements (BIS) Innovation Hub, the Reserve Bank of Australia, Bank Negara Malaysia, the Monetary Authority of Singapore, and the South African Reserve Bank today announced the completion of prototypes for a common platform enabling international settlements using multiple central bank digital currencies (mCBDCs).
Led by the Innovation Hub’s Singapore Centre, Project Dunbar proved that financial institutions could use CBDCs issued by participating central banks to transact directly with each other on a shared platform. This has the potential to reduce reliance on intermediaries and correspondingly, the costs and time taken to process cross-border transactions.
The project was organised along three workstreams: one focusing on high-level functional requirements and design, and two concurrent technical streams that developed prototypes on different technological platforms (Corda and Partior).
The project identified three critical questions: which entities should be allowed to hold and transact with CBDCs issued on the platform? How could the flow of cross-border payments be simplified while respecting regulatory differences across jurisdictions? What governance arrangements could give countries sufficient comfort to share critical national infrastructure such as a payments system?
The project proposed practical solutions for addressing these issues, which were validated through the development of prototypes that demonstrated the technical viability of multi-CBDC shared platforms for international settlements.
“A common platform is the most efficient model for payments connectivity but is also the most challenging to achieve. Project Dunbar demonstrated that key concerns of trust and shared control can be addressed through governance mechanisms enforced by robust technological means, laying the foundation for the development of future global and regional platforms,” said Andrew McCormack, Head of the BIS Innovation Hub Centre in Singapore.
Bank Negara Malaysia Assistant Governor Fraziali Ismail said, "The successful completion of Project Dunbar has produced meaningful insights on how a multi-CBDC platform may potentially solve complex issues in the cross-border payment space. The project is a testament to the importance of central bank collaboration in supporting the development of next-generation payment infrastructures. We intend to carry these insights through other proofs-of-concept as we continue our CBDC exploration journey.”
The project’s findings also affirmed that any such arrangement should be subject to the governance deemed appropriate by central bank participants, including allowing them to retain control of the application of rules on a jurisdictional and currency level.
The details and conclusions of the project were published today in a report that supports the efforts of the G20 roadmap for enhancing cross-border payments, particularly in exploring an international dimension of CBDC design. Feedback on the joint report can be directed to the Dunbar project team at singapore.centre@bisih.org.
Download the full report here: https://www.bis.org/publ/othp47.htm
Bank Negara Malaysia
BIS Innovation Hub
Monetary Authority of Singapore
Reserve Bank of Australia
South African Reserve Bank
Bank Negara Malaysia
22 March 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
16 Mar 2022 | Appointment of Suhaimi Ali as Assistant Governor and Retirement of Assistant Governor Norzila Abd Aziz | https://www.bnm.gov.my/-/bnm-new-ag-suhaimi | null | null |
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Appointment of Suhaimi Ali as Assistant Governor and Retirement of Assistant Governor Norzila Abd Aziz
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Appointment of Suhaimi Ali as Assistant Governor and Retirement of Assistant Governor Norzila Abd Aziz
Embargo :
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16 Mar 2022
Bank Negara Malaysia (BNM) wishes to announce the appointment of Encik Suhaimi Ali as Assistant Governor effective 1 April 2022.
Encik Suhaimi joined BNM in 1998 after graduating from the University of Notre Dame, United States of America. Throughout his career with BNM, he has served in various areas which include financial sector development, regulation and supervision, strategic planning, market conduct, international negotiations and IT services, as well as in the Governor’s Office.
BNM would also like to announce the retirement of Assistant Governor Puan Norzila Abdul Aziz on 1 April 2022. Since joining the Bank in 1988, Puan Norzila has played an instrumental role in strengthening and modernising BNM’s investment operations and financial markets functions, and in driving the BNM’s efforts to deepen the Malaysia’s financial market.
Assistant Governor Encik Adnan Zaylani Mohamad Zahid will assume Puan Norzila’s existing portfolio comprising the Investment Operations and Financial Markets and Foreign Exchange Policy departments. He will also oversee the Data Management and Statistics department. Encik Suhaimi will meanwhile assume Encik Adnan’s existing portfolio comprising the Financial Development and Innovation, Islamic Finance, as well as Financial Inclusion departments.
Governor Tan Sri Nor Shamsiah Mohd Yunus said, “On behalf of BNM, I would like to express my thanks and utmost appreciation to Norzila for her significant contributions to BNM and country in her 35 years of service. Norzila has been a valued member of BNM’s leadership team. Her dedicated service and leadership has helped us navigate and respond to challenging episodes which include the Asian and global financial crises, and the pandemic. We are truly grateful for her service. As for Suhaimi, I am confident that his appointment will strengthen our ability to deliver BNM’s mandates”.
Bank Negara Malaysia
16 March 2022
© Bank Negara Malaysia, 2022. All rights reserved.
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15 Mar 2022 | Bank Negara Malaysia and World Bank assess nature-related financial risks for Malaysian banks | https://www.bnm.gov.my/-/bnm-wb-report-2022 | https://www.bnm.gov.my/documents/20124/3770663/wb-bnm-2022-report.pdf | null |
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Bank Negara Malaysia and World Bank assess nature-related financial risks for Malaysian banks
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Tuesday, 15 March 2022
15 Mar 2022
Bank Negara Malaysia and the World Bank published today a report entitled “An Exploration of Nature-related Financial Risks in Malaysia”.
This exploratory study, jointly undertaken by Bank Negara Malaysia and the World Bank, uses local and global data to examine the relationship between the Malaysian financial sector and nature. It also assesses potential exposures to nature-related risks through banks’ financing activities.
Bank Negara Malaysia Governor Tan Sri Nor Shamsiah said, “Ecosystem and planetary health matters to economic and financial stability. While the primary responsibility for addressing these priorities rests with the government, the financial industry and authorities have a critical interest in deepening our understanding and appreciation of the interactions between climate and nature-related risks – because how these risks evolve, both affect and are affected by, the actions of financial institutions.”
“By identifying and quantifying nature-related financial risks, authorities will be better positioned to prioritize initiatives within their scope of mandate in managing this concern,” said Ndiame Diop, World Bank Country Director for Brunei, Malaysia, Philippines and Thailand. “We are happy to have partnered with Bank Negara Malaysia to support their leadership on this issue. This report is the first of its kind published by a central bank in Asia. We hope that it will provide an example for other countries facing similar challenges,” added Ndiame.
The report provides a launch pad for further study on nature-related risks and highlights the importance of tackling nature loss and climate change in a coherent manner. It also recognises the opportunity to leverage on the progress made on climate initiatives to address broader nature-related risks. Bank Negara Malaysia will continue to engage with the financial sector and other key stakeholders to build capacity in this area.
Download the full report here.
Bank Negara Malaysia
The World Bank
Bank Negara Malaysia
15 March 2022
© Bank Negara Malaysia, 2022. All rights reserved.
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An Exploration of Nature-Related Financial Risks in Malaysia
MARCH 2022
An Exploration
of Nature-Related
Financial Risks
in Malaysia
CONNECT WITH US
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BNM Official
Bank Negara Malaysia
MARCH 2022
An Exploration of
Nature-Related
Financial Risks
in Malaysia
© 2022 International Bank for Reconstruction and Development / The World Bank
Sasana Kijang, 2 Jalan Dato Onn, Kuala Lumpur 50480, Malaysia
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Acknowledgements
List of Figures
List of Boxes
Acronyms and Abbreviations
Executive Summary
ES.1 Introduction
ES.2 Key Findings
ES.3 Potential Actions to Address Challenges of Nature-Related Financial Risks
CHAPTER 1: Biodiversity, Nature, and Banking in Malaysia
1.1 The Malaysian Banking Sector
1.2 Malaysia, a Biodiversity Hotspot
1.3 Nature-Related Financial Risks
CHAPTER 2: Exposure Assessment
2.1 Dependency on Ecosystem Services
2.2 Impacts on Ecosystem Services
2.3 Activities in Key Biodiversity Areas
2.4 Physical and Transition Risk Scenarios
CHAPTER 3: Potential Actions to Address Nature-Related Financial Risks
CHAPTER 4: Conclusions
4.1 Key Findings
4.2 Potential Actions to Address Challenges of Nature-Related Financial Risks
4.3 Areas for Future Exploration
References
Appendix
A.1 Methodology
A.2 ENCORE Definitions
A.3 Reputational Risk
A.4 Drivers of Nature-Related Financial Risk Scenarios in Malaysia
A.4.1 Land and Sea Use Change
A.4.2 Natural Resource Use and Exploitation
A.4.3 Climate Change
A.4.4 Pollution
A.4.5 Invasive Species and Diseases
A.4.6 Governance Issues
A.4.7 Policy Uncertainty
A.5 Interviews with Experts Focused on Biodiversity in Malaysia
A.6 Full List of Explorative Nature-Related Risk Scenarios
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Table of Contents
3An Exploration of Nature-Related Financial Risks in Malaysia
An Exploration of Nature-related Financial Risks in Malaysia was prepared through a joint Bank Negara
Malaysia-World Bank collaboration by core team members Nepomuk Dunz, Henk Jan Reinders, Shahira Johan
Arief Jothi, Rekha Reddy, Martijn Regelink, Fiona Stewart (World Bank), Mohd Shazwan Shuhaimen, and Thulaja
Thessa K. Vasudhevan (BNM), under the supervision of Cecile Thioro Niang (World Bank) and Madelena
Mohamed (BNM). Shashank Singh, Samantha Power, Uma Rajoo (World Bank), Keshia Jasmine Ashaari, Nur
Izzati Jamal, Nur Zalini Abdul Rahman, and Chow Chin Hwa (BNM) provided key inputs. Pietro Calice, Rafaello
Cervigni, Souleymane Coulibaly, Katia D’Hulster, Erik Feyen, Federico Diaz Kalan, Tatiana Didier, Olga Gavryliuk,
Giovanni Ruta, Marc Schrijver, Tao Wang (World Bank), Jessica Chew Cheng Lian, Fraziali Ismail, Suraya Sani,
Razeen Mohd Rom, Chuah Kue Peng, Katie Lee, Audrey Lim Shu Wen, Nur Syairah Husna (BNM), and Quek Yew
Aun of the Ministry of Energy and Natural Resources (KeTSA) provided useful comments on draft versions of
this report. Kane Chong and Francis Sim designed the report and its cover. The views, thoughts, and opinions
expressed in the text belong solely to the authors, and not necessarily to the authors’ employer, organization,
committee, or other group or individual.
Acknowledgements
4 An Exploration of Nature-Related Financial Risks in Malaysia
List of Figures
Figure 1 From nature-related risks to financial risks 9
Figure 2 Percentage of Malaysian banks’ commercial loans to sectors with high and very high
scores on nature-related risk dimensions
11
Figure 3 Top-15 identified nature-related financial risk scenarios by banking sector commercial
loans exposure
13
Figure 4 Possible actions to address challenges of nature-related financial risks 15
Figure 5 Scope of nature-related financial risks within the environmental, social, and governance
framework
18
Figure 6 Overall assets per bank type 19
Figure 7 Overall commercial lending of Malaysian banks by sector, as of December 2020 20
Figure 8 Commercial lending by Malaysian banks by state, as of December 2020 21
Figure 9 Projected GDP per sector by state level contribution (percent, 2019) 21
Figure 10 Malaysian environmental performance across several indicators in 2010 and 2020. 26
Figure 11 Change in 2030 real GDP under a partial ecosystem collapse scenario (compared with a
no-tipping-point scenario)
27
Figure 12 From nature-related risks to financial risks 31
Figure 13 The financial sector and ecosystem services dependencies per Malaysian ringgit
invested (in million RM)
34
Figure 14 Relative commercial lending exposure to sectors with high or very high dependencies
(physical risk)
35
Figure 15 Dependency of the commercial lending portfolio to individual ecosystem services
(percentage)
36
Figure 16 Unweighted share of commercial lending portfolio with high or very high dependencies
on ecosystem services by type of bank
36
Figure 17 The environmental impact of financial sector lending per Malaysian ringgit invested (in
million RM)
37
Figure 18 Relative commercial lending exposure to NACE sectors with high or very high impacts 38
Figure 19 Impact of the commercial lending portfolio on impact drivers from firms’ business
activities (in percentage)
39
Figure 20 Unweighted share of commercial lending portfolio with high or very high impact drivers
from firms’ activities on natural assets and ecosystem services by type of bank
40
Figure 21 High resolution Malaysia industrial and smallholder oil palm map for 2019 41
Figure 22 Protected areas in Malaysia 43
Figure 23 Protected and non-protected KBA as a share of Malaysian States area (percent of total
state area)
44
Figure 24 Commercial residential and non-residential purchase lending exposure by Postal Code
area of Malaysian banks to non-protected KBA
45
Figure 25 Net ecosystem service use (potential vs. realized services index) per district in Malaysia.
Model results from the Co$tingNature version 3 policy support system
45
Figure 26 Identified nature-related financial risk scenarios by banking sector exposure 48
5An Exploration of Nature-Related Financial Risks in Malaysia
List of Boxes
Box 1 Assessing materiality of an ecosystem service for a business 24
Box 2 Case Study − Transition risk for Malaysia’s palm oil sector 41
Box 3 Context for nature-related risks to the financial sector: Findings from the Netherlands, France,
and Brazil
49
Box 4 Mobilizing private finance for nature 53
Box 5 Nature-related disclosure developments 56
6 An Exploration of Nature-Related Financial Risks in Malaysia
Acronyms and Abbreviations
ASEAN Association of Southeast Asian Nations
BNM Bank Negara Malaysia
CO2/
CO2e
Carbon Dioxide/Carbon Dioxide
Equivalent
CCPT Climate Change and Principle Based
Taxonomy
DFI Development Finance Institutions
DNB Dutch Central Bank (De Nederlandsche
Bank)
ESG Environmental, Social, and Governance
ENCORE Exploring Natural Capital Opportunities,
Risks and Exposure (biodiversity tool)
EU European Union
EUR Euro (currency)
GDP Gross Domestic Product
GHG Greenhouse Gas
Gt Gigaton
IPBES Intergovernmental Science-Policy
Platform on Biodiversity and Ecosystem
Services
IBAT Integrated Biodiversity Assessment Tool
KBA Key Biodiversity Areas
JC3 Joint Committee on Climate Change
MSA Mean Species Abundance
MSPO Malaysia Sustainable Palm Oil
MyBIS Malaysia Biodiversity Information
System
NACE Statistical Classification of Activities
in the European Community
(Nomenclature des Activités
Économiques dans la Communauté
Européenne)
NGFS Network for Greening the Financial
System
NGO Non-Governmental Organization
RM Malaysian ringgit (currency)
TCFD Task Force for Climate-related Financial
Disclosure
TNFD Task Force for Nature-related Financial
Disclosure
UEBT Union for Ethical Biotrade
UK United Kingdom
UN United Nations
USD United States dollar (currency)
VBI/
VBIAF
Value-Based Intermediation/Value-
Based Intermediation Financing
and Investment Impact Assessment
Framework
WB World Bank
WEF World Economic Forum
7An Exploration of Nature-Related Financial Risks in Malaysia
Executive Summary
The term megadiverse country refers to any one of a group of nations that harbor the majority of Earth’s species and high numbers of endemic species. The
World Conservation Monitoring Centre of the United Nations Environment Program has identified 17 mega-diverse countries, one of which is Malaysia.
For example, this study finds that two important nature-related factors Malaysian banks may have exposure to are: (1) the imposition of more stringent climate
policies and (2) enhanced efforts to preserve nature’s function as a store of carbon-dioxide (C02). It also finds highly relevant risk factors that are connected to
climate change – including those related to extensive water use, land use, and pollution other than greenhouse gases (GHGs).
1
2
Malaysia is one of the world’s megadiverse countries, and many of its economic activities are directly
or indirectly dependent on nature and its associated ecosystem services.1 The COVID-19 pandemic,
with its far-reaching economic impacts, is a reminder of the link between human health and planetary health,
given that most human infectious diseases are transmitted between species (Taylor et al. 2001). Ecosystem
services are broadly defined as the benefits that people obtain from ecosystems and include regulating
services (such as regulation of droughts, floods, and land degradation), provisioning services (such as crops,
fresh water, aquaculture, and timber), supporting services (such as photosynthesis, nutrient cycle, and water
cycle), and cultural services (such as recreational and other non-material benefits). A recent World Bank (WB)
study found that, in a worst-case scenario of partial ecosystem collapse, Malaysia could experience a 6 percent
gross domestic product (GDP) annual loss by 2030 compared to a baseline scenario (Johnson et al. 2021). In
Malaysia, the losses would be driven by a decline in export demand and adverse impacts of the partial collapse
of forestry and fishery ecosystem services.
In parallel to climate-related risks, nature-related risks can lead to economic and financial losses. As
shown in Figure 1, nature-related risks as defined in this study encompass a broad set of risks that are related
to ecosystem services, biodiversity, and natural assets (such as water and forests). Within the environmental
risk dimension of the environmental, social, and governance (ESG) framework on sustainability, these risks
complement and partly overlap with those risks associated with climate change.2 Physical risk could emerge from
the deterioration and loss of ecosystem services that firms depend on. At the same time business operations
may have an impact on biodiversity and ecosystem services via excessive natural resources extraction, disposal
of waste, or land-use change. If firms do not adapt in a timely fashion and banks do not adjust their lending
portfolio, nature-related financial transition risk could materialize. Transition risk consists of sudden changes
in policy, technology, and consumer preferences in response to nature loss and can have a substantial impact
on the economic, financial, and reputational position of firms and their financing banks with large impacts on
biodiversity and ecosystems.
Central banks have recently started to investigate biodiversity and other nature-related impacts and
dependencies of financial systems. Central banks and supervisors have so far focused mainly on climate-
related risks but have recently expanded their efforts to cover a broader set of environmental risks. Studies
include France (Svartzman et al. 2021), the Netherlands (van Toor et al. 2020), and Brazil (Calice et al. 2021). Such
studies on nature-related risks are nevertheless at a nascent stage and largely exploratory in nature (Network
for Greening the Financial System (NGFS) 2021).
ES.1 Introduction
8 An Exploration of Nature-Related Financial Risks in Malaysia
Executive Summary
One of the main roles of the financial system is to allocate capital (both equity and debt) to productive activities. When risks are not adequately understood and
priced in, this could lead to an overallocation of capital to sectors that is not in line with sustainability objectives. Furthermore, it hinders adequate mitigation
actions to prevent or limit financial impacts of such risks.
Exposure is defined here as the fraction of outstanding loans to highly vulnerable sectors and regions that could potentially be affected by adverse nature-
related risk factors and scenarios.
3
4
More comprehensive regulatory and supervisory policy implications are under development. The NGFS,
of which Bank Negara Malaysia (BNM) is a member, has recommended several first actions that could be taken
by financial sector regulators and supervisors to help build the foundations for more comprehensive measures,
namely: (1) capacity building, (2) assessing domestic financial system dependencies and impacts on nature,
(3) awareness raising and signaling, and (4) supporting relevant initiatives to the extent possible (NGFS 2021).
BNM, as part of its mandate to promote monetary and financial stability conducive to the sustainable
growth of the Malaysian economy, has an interest in understanding nature-related financial risks
to the financial sector. A better understanding of nature-related financial risks is important for prudential
supervision to identify and address any emerging risks in the loan books and investments of banks and other
financial institutions. This work is the result of a collaboration between the WB and BNM to: (1) build capacity
to develop the analytical framework through which nature-related financial risks can be analyzed and managed
and (2) raise awareness of these issues within BNM and among stakeholders in the government and the financial
sector. Sustainable policies for the maintenance of ecosystem services are the main responsibility of the line-
ministries within the government. However, adequate pricing of nature-related financial risks is important to
align capital allocation, including loan origination, with Malaysia’s sustainability goals.3
This report assesses the exposure of Malaysian banks to sectors and regions that are highly vulnerable
to nature-related risks.4 Expanding on the work of other central banks, three main types of exposures are
examined. These include (1) the exposure of banks to sectors that are highly dependent on ecosystem services
and hence pose physical risk, (2) the exposure of banks to sectors that negatively affect ecosystem services
Figure 1: From nature-related risks to financial risks
Source: Based on van Toor et al. 2020 and Svartzman et al. 2021
Nature
Financial
system
Physical risk
• Loss of Ecosystem Services
creating
» ‘slow-onset’ loss
» ‘sudden-onset’ events
• Interactions with other
ecological issues
(e.g., climate change)
Dependency
Macroeconomic
deterioration
Impact Revised lending
conditions
Economy
Economic risks
• Supply chain disruptions
• Raw material price volatility
• Limited substitutability of
essential ecosystem services
• Productivity changes
(e.g., agriculture)
• Changing demand and costs
• Stranded assets
• Relocation of activities
• Legal liabilities
• Lower asset value
Financial risks
• Credit risk
(e.g., losses on corporate
loans)
• Underwriting risk
(e.g., inaccurate risk
assessment)
• Market risk
(e.g., losses on shares and
bonds)
• Operational risk
(e.g., liability risks, legal
costs, reputational damage)
• Liquidity risk
(e.g., refinancing risk)
Transition and reputation risk
• Policy and regulation change
• Change in demand – including
from international buyers
• Change in technology
Liability risk
• Lawsuits from harmed
communities
• Fines from regulators
9An Exploration of Nature-Related Financial Risks in Malaysia
Executive Summary
and hence pose transition risk, and (3) the exposure of banks to Key Biodiversity Areas (KBA) that may become
protected in the future. In addition, a first set of adverse scenarios are identified that are most relevant to
Malaysia and these are mapped to bank’s loan exposures.
This study makes use of both Malaysian and global data. The sectoral mapping data is primarily obtained
from the Exploring Capital Opportunities, Risks and Exposure (ENCORE) database while the exposure data
is obtained from BNM. The spatial analysis uses data on KBA in Malaysia from the World Database of Key
Biodiversity Areas, hosted by the Integrated Biodiversity Assessment Tool (IBAT). The sectoral analysis covers
approximately 90 percent of the total commercial loan portfolio of Malaysian banks while data for the spatial
analysis are far more limited.
Given that the data and methodologies to assess nature-related financial risks are currently limited,
this study is exploratory in nature. This report constitutes a first step towards assessing the exposure
of Malaysian banks to nature-related financial risks. However, data on economic and financial vulnerability
is often incomplete or unavailable. To get a more complete understanding of nature-related financial risks,
further research is needed, this may include developing: (1) a comprehensive set of scenarios to be used in
assessing nature-related financial risks, (2) a better understanding of how scenarios lead to adverse economic
and financial outcomes (e.g., transmission channels), and (3) models to understand the quantitative impact
of scenarios and transmission channels on economic sectors and financial institutions, including banks. Key
findings are provided in section ES.2 and a list of potential actions in section ES.3.
This terminology refers to the provision of clean water from rain and water flow from natural sources.
This terminology refers to unsustainable land use change or resource use, which reduces the extent of natural ecosystems, or over exploits them beyond their
ability to replenish, which in turn affects continuous provision of ecosystem services.
5
6
ES.2 Key Findings
Based on loans to economic sectors, Malaysian banks are exposed to a broad range of nature-related
physical and transition risks. Of the commercial loans portfolio analyzed, 54 percent is exposed to sectors
that depend to a high extent on ecosystem services. This high dependency exposes Malaysian banks to
physical risk from ecosystem deterioration, particularly related to deterioration in surface water5 (29 percent),
climate regulation such as carbon storage (26 percent), and flood and storm protection (16 percent) (Figure 2,
panel a). Of the commercial loans portfolio, 87 percent is also exposed to sectors that strongly impact
ecosystem services (thus potentially facing a higher level of transition risk from changes in regulations and
policies), particularly related to greenhouse gas (GHG) emissions (61 percent), water use (55 percent), and
terrestrial ecosystem use6 (43 percent) among others (Figure 2, panel b).
There are wide differences between individual banks and bank types in their exposure to physical
risk arising from lending to sectors that depend highly on ecosystem services and transition risk, and
arising from lending to sectors that have significant impact on nature. The differences are linked to the
target sector of lending that those banks predominantly serve. For example, construction lending is strongly
dependent on surface water6,climate regulation, and flood and storm protection, and strongly impacts nature
via terrestrial ecosystem use, freshwater use, and GHG emissions, among others.
10 An Exploration of Nature-Related Financial Risks in Malaysia
Executive Summary
Figure 2. Percentage of Malaysian banks’ commercial loans to sectors with high and very high
scores on nature-related risk dimensions
Source: ENCORE, BNM, WB calculations
Animal-based energy
Buffering and attenuation of mass �ows
Climate regulation
Disease control
Fibers and other materials
Flood and storm protection
Ground water
Maintain nursery habitatsMass stabilization and erosion control
Pest control
Pollination
Soil quality
Surface water
Water �ow maintenance
Water quality
0% 5% 10%
15%
20%
25%
30%
5%
0%
10%
15%
20%
25%
30%
0% 10%
20%
30%
40%
50%
60%
Disturbances
Freshwater ecosystem use
GHG emissions
Marine ecosystem use
Non-GHG air pollutants
Other resource useSoil pollutants
Solid waste
Terrestrial ecosystem use
Water pollutants
Water use
10%
20%
30%
40%
50%
60%
(a) Dependency on ecosystem services (physical risk)
(b) Impacts on ecosystem services induced by firms’ business activities (transition risk)
11An Exploration of Nature-Related Financial Risks in Malaysia
Executive Summary
For physical risk, individual banks’ exposure to one or more sectors that are highly or very highly
dependent on ecosystem services range between 5 and 83 percent of the total commercial loan
portfolio. The average exposure according to bank type ranges from 40 percent (investment banks) to 55
percent (Islamic banks). As for transition risk, the individual banks’ exposures to sectors that highly or very
highly impact nature range between 28 and 100 percent. The average exposure according to bank type ranges
from 70 percent (investment banks) to 95 percent (development finance institutions (DFIs). The largest variance
in exposures to both physical and transition risks according to bank type is observed in investment banks.
Based on the spatial distribution of loans, Malaysian banks have limited direct exposure to KBA that
may be increasingly protected in the future. KBA are sites that contribute significantly to maintaining global
biodiversity and are hence important candidates for future protective regulation (i.e., transition risk).7 The
states Perak and Kedah currently have more than a quarter of their territory designated as non-protected KBA.
However, the majority of the commercial loans analyzed are channeled to Kuala Lumpur and Selangor, areas
that are already well developed. Less than one percent of Malaysian banks’ lending portfolio (RM 329 million,
USD 78 million) is estimated to go to firms in currently non-protected KBA.
Due to data limitations, however, it is possible that exposures are higher.8 It would be important to
monitor new loan origination practices towards both currently protected areas and areas that may become
protected in the future, especially as there are ongoing discussions for an increased target on protected areas
under the Convention on Biological Diversity, to which Malaysia is a signatory. There may also be an important
role to monitor more indirect exposures through, for example, supply chain linkages between firms in and
outside protected areas.
An explorative set of nature-related events shows that there is a wide range of adverse physical
risk and transition risk scenarios that could affect Malaysian banks. Based on ENCORE and interviews
with stakeholders, 21 possible scenarios of nature-related financial physical risk and 7 nature-related financial
transition risk scenarios were identified. These scenarios were not projections of a business-as-usual scenario,
but rather state the current financial exposure if affected ecosystem services of identified scenarios defaulted.
Scenarios with the highest banking sector exposure are those that affect a wide range of sectors.
These include: reduced ecosystem services due to continued high resource use, pollution, and urban sprawl
(44 percent of the commercial loans portfolio), sudden and unexpected introduction of new climate policy (38
percent), and deterioration of ecosystem services due to continued high rates of deforestation (30 percent), as
shown in Figure 3.
Sectors including agriculture, forestry, fisheries, and tourism are affected by many different financial
physical and transition risk scenarios. Other sectors, such as real estate, construction, and wholesale, are
large sectors within the Malaysian banking sector’s loan books but have a more limited number of relevant
scenarios connected to them. These sectors are specifically exposed to scenarios that limit water availability
and scenarios that affect a wide range of ecosystem services (such as deforestation-induced ecosystem service
deterioration).
The Integrated Biodiversity Assessment Tool website (IBAT) utilizes two subsets of KBA in virtually all countries: Important Bird and Biodiversity Areas (IBA)
and Alliance for Zero Extinction Sites (AZE). For Malaysia, KBA data is primarily based on IBA data, capturing bird population and diversity. IBAT data show
that IBAs make up 55 of 60 terrestrial KBA in Malaysia. Other areas could be important for biodiversity and at risk as well, where currently no data is available.
See Appendix Section A1 for details on data limitations.
7
8
12 An Exploration of Nature-Related Financial Risks in Malaysia
Executive Summary
Source: ENCORE, BNM, interviews, WB calculations.
Note: Dark blue scenarios are nature-related financial transition risk scenarios, light blue scenarios are nature-related financial physical risk scenarios. Exposure
amounts are based on the share of corporate loans to economic sectors that could be directly affected in the scenario under consideration.
Figure 3: Top-15 identified nature-related financial risk scenarios by banking sector
commercial loans exposure
Reduced ecosystem services due to resource overuse, pollution and urban sprawl
Sudden and unexpected climate policy introduction
Ecosystem services deterioration due to deforestation
Sudden increase in the price of water
Regulatory restriction of water pollution
Changed ocean current and circulation
Increase in sea surface temperature
Severe reduction in available timber
Severe �ooding occurrence
Severe storm occurrence
Increased ocean acidi�cation
Extension of protected areas
Lower clean water availability due to continously high water pollution
Regulatory restriction of non-sustainable fertilizers
Regulatory restriction of non-sustainable pesticides
N
at
ur
e-
re
la
te
d
�
na
nc
ia
l r
is
k
sc
en
ar
io
Share of total commercial loans outstanding (%)
0 20 40
13An Exploration of Nature-Related Financial Risks in Malaysia
Executive Summary
ES.3 Potential Actions to Address Challenges
of Nature-Related Financial Risks
Based on this initial assessment, the findings of this report may support further policy discussions
to understand the potential impacts of nature-related financial risks on the financial sector and the
economy. Like climate change, addressing the nature-related agenda demands a multistakeholder approach
driven by the federal government as part of an integrated national strategy in which financial regulators can
act as a central coordinator for a relevant financial sector action plan. Financial regulators, as advisors to the
government, have an important role in providing a feedback loop to the government to highlight the potential
impacts of nature-related financial losses to the financial sector and the economy. Thus, this report can be
a catalyst to initiate discussions and synchronize existing efforts by relevant government agencies to better
model and quantify the value of ecosystem services in Malaysia.
Malaysia’s financial sector regulators could build on their ongoing climate change initiatives to deepen
the understanding of nature-related financial risks, aiming to address them in a more comprehensive
manner. While the discussion on nature-related financial risks is still at a nascent stage, efforts to address such
risks are within the existing mandate of BNM to the extent that they pose a threat to its ability to preserve
Malaysia’s financial stability. Although this report is exploratory and its analyses have limitations, the risks
presented in its findings, Malaysia’s status as a megadiverse country, and the impact of the recent flood event,9
provide motivation for BNM to continue building its internal capacity for analysis and facilitate wider awareness
of these issues as initial steps. Moreover, BNM could help contribute towards knowledge development
and regulatory discourse on nature-related financial risks in the region and globally, bringing the valuable
perspective of a megadiverse developing country.
Subsequently, BNM could develop further actions related to nature-related financial risks that are
cohesive and integrated within its existing climate change strategy. These might include: (1) national
policy discussion and direction on nature-related risks, (2) further development of nature-related financial risks
methodologies and analyses, (3) progress of ongoing climate change initiatives and determined linkages with
nature-related financial risks, and (4) incorporation of evolving practices and standards from the global financial
regulatory and supervisory community.
Key areas for actions to manage nature-related financial risks include, (1) raising awareness
and policy discourse, (2) enhancing capacity building of relevant stakeholders, (3) enhancing
macroeconomic surveillance capacity and risk identification, and (4) developing regulatory and
supervisory requirements. Figure 4 depicts recommended actions that could be considered by BNM (and
relevant stakeholders such as ministries with responsibility for environmental issues, state-level agencies, and
financial institutions) and the level of policy intervention intensity, recognizing the need for prioritization in this
challenging pandemic period.
The December 2021 flood event, which displaced around 125,000 people across ten states, was linked to extreme weather patterns that became more likely
with climate change. Public opinion in one state suggests deforestation worsened flood conditions. As at 2 January 2022, the government had allocated
RM1.2 billion (USD335 million) in financial aid and other forms of relief for the flood victims.
9
14 An Exploration of Nature-Related Financial Risks in Malaysia
Executive Summary
Figure 4: Possible actions to address challenges of nature-related financial risks
Source: WB. Note: CCPT = Climate Change and Principle-based Taxonomy; VBIAF = Value-based Intermediation Financing and Investment Impact Assessment
Framework; ASEAN = Association of Southeast Asian Nations.
Raising
awareness,
stakeholder
engagement
and policy
discourse on
understanding
nature-related
financial risks
• Disseminate report findings
with relevant governmental
and non-governmental
stakeholders, relevant
regulators and supervised
financial institutions.
• Contribute to knowledge
programs that raise
awareness on nature-related
financial risks.
• Advocate and work closely
with government to include
considerations of nature-
related financial risks
in relevant policies and
investment decisions.
• Encourage and support
the government towards
developing a cohesive
national strategy to
address nature-related risks
alongside climate change.
Enhancing
capacity
building
of relevant
stakeholders
• Expand existing capacity
building and stakeholder
engagement programs
under the Joint Committee
on Climate Change (JC3)
to include nature-related
financial risks.
• Collaborate with key
knowledge partners to build
understanding and tools for
nature-related financial risks.
• Support development of
incentives and instruments
to mobilize private finance
for the protection and
management of biodiversity
and ecosystem services.
• Provide financial sector
perspectives to government
to expand existing
government grants/funds
related to climate change to
encompass goals relevant
to protection of biodiversity
and ecosystem services.
Enhancing
macroeconomic
surveillance
capacity and risk
identification
• Enhance technical capacity
in understanding nature-
related financial risks by
identifying transmission
channels and interacting
factors between climate and
nature-related risks.
• Incorporate a basic concept
of nature-related financial
risks in existing plans for a
surveillance framework on
climate risks where both
risks have strong synergies
(ex: deforestation, disaster
resilience).
• Improving existing data
collection relevant to nature-
related risks at a granular
level, including for non-credit
products (e.g., insurance)
and leveraging ongoing work
under the JC3.
• Consider nature-related
financial risks as part of high-
level reference scenarios
for Malaysia, towards
developing stress testing
plans for nature-related risks
alongside climate change.
• Consider supervisory deep
dives at select banks that
are deemed at higher risk,
for example due to their
financing activities in (future)
protected areas.
Developing
regulatory and
supervisory
requirements
• Enhance existing guidance
on nature-related risks
in relevant taxonomies
and frameworks (CCPT,
VBIAF, ASEAN taxonomy)
by synthesizing relevant
findings of this report.
• Signal expectations for
supervised institutions
to understand the most
relevant nature-related
financial risks faced by their
institution.
• Enhance climate-related
regulatory guidance on risk
management, governance,
and disclosures with specific
aspects of nature-related
financial risks.
• Communicate regulatory and
supervisory expectations
on managing and disclosing
nature-related financial risks
along with risks of climate
change for supervised
institutions.
• Develop a monitoring
system for new credit to be
compliant with climate and
nature-related regulations,
including checking whether
business activities will take
place in (future) protected
areas.
Public
awareness/
Policy
discourse
Capacity
building
Policy
adoption
Less intensive More intensive
Policy intervention
15An Exploration of Nature-Related Financial Risks in Malaysia
Biodiversity, Nature,
and Banking in
Malaysia
CHAPTER 1
16 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
Globally, ecosystem health and biodiversity are gaining increasing attention as key challenges for
environmental sustainability.10 Biodiversity is declining faster than at any time in human history, with one-
quarter of species globally threatened and around one million species facing extinction (Intergovernmental
Science Policy Platform on Biodiversity and Ecosystem Services (IPBES)11 2019). The World Economic Forum
(WEF), in its Global Risks Report 2021, cited biodiversity loss as one of top global risks society faces (WEF
2021). Biodiversity - the diversity among living organisms - strongly contributes to the generation of ecosystem
services and ensures ecosystem functioning.12
Other threats such as land and sea-use change, pollution, direct exploitation of organisms, climate
change, and invasive alien species also put ecosystems at risk and these drivers of nature loss are
largely the result of human economic activities (IPBES 2019). This is an essential issue as ecosystem
services make human life possible by providing essential benefits from ecosystems such as regulating services
(such as regulation of floods, droughts, and land degradation), provisioning services (such as crops, fresh water,
aquaculture, and timber), supporting services (such as photosynthesis, nutrient cycle, water cycle), and cultural
services (such as recreational and other non-material benefits).13
The decline in global wildlife populations coupled with the massive degradation of oceans, forests,
freshwater bodies, and other ecosystems undermines nature’s productivity, resilience, and adaptability.
Fourteen of the 18 ecosystem services categories that the IPBES defines have declined since 1970 (IPBES 2019).
This underpins broad consensus that humanity overstretches its pressure on nature (Steffen et al. 2015; IPBES
2019; Dasgupta 2021). Estimates show that 1.6 earths would be required to maintain the world’s current living
standards with the current economic systems (Dasgupta 2021).
A continuous excessive use of ecosystems beyond their regenerative rate could trigger abrupt,
nonlinear, and systemic change in the health of entire ecosystems, if certain ecological thresholds are
passed (Lenton 2013; Dasgupta 2021). This has a direct bearing on future economic performance; furthermore,
socio-economic impacts can be particularly severe if ecosystems collapse. To illustrate this point: more than
half the world’s total GDP is moderately or highly dependent on nature and its services; with construction,
agriculture, and food and beverages being the three sectors that depend most on nature (WEF, 2020). Recently,
the devastating effects of the COVID-19 pandemic have provided an important example of what could become
a more frequent event due to deforestation, land-use change, and species exploitation (Platto et al. 2021;
IPBES 2020). As such, biodiversity and nature loss fuel risks and uncertainties for our economies and wellbeing
(Dasgupta 2021; Folke et al. 2021).
This report investigates the exposure of the banking sector to a broad range of nature-related risks to
the financial sector. Exposure is defined here as the fraction of outstanding loans to highly vulnerable sectors
(i.e., highly dependent or highly impacting sectors on nature) in the economy, or in other words the maximum
possible loss in those sectors. Nature-related risks encompass risks that relate to ecosystem services, natural
assets (such as water and forests), and biodiversity. It thereby covers a large share of the environmental risk
dimension in the ESG framework for sustainable development. Thus, the scope of risks that are covered in this
report are termed “nature-related risks”, as outlined in Figure 5.
Biodiversity is defined in the United Nations Convention on Biological Diversity (1992) as the “variability among living organisms from all sources, including
terrestrial, marine and other aquatic ecosystems, and the ecological complexes of which they are part; this includes diversity within species, between species,
and of ecosystems”.
The IPBES is an independent intergovernmental body established by States to strengthen the science-policy interface for biodiversity and ecosystem services
for the conservation and sustainable use of biodiversity, long-term human well-being, and sustainable development (https://ipbes.net/about).
https://www.fao.org/ecosystem-services-biodiversity/en/
To emphasize the interconnectedness of biodiversity and ecosystem services this report applies a more holistic terminology of ‘nature’ and ‘nature-related
risks.’
10
11
12
13
17An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
Figure 5: Scope of nature-related financial risks within the environmental, social, and
governance framework
Sustainable Development
Environmental Social Governance
Other
Environmental
Biodiversity
“Climate”
“Nature”
“Sustainable”
Climate Change
Adaptation & Mitigation
Source: WB
Nature-related risks are sometimes interrelated with climate-related risks, sharing common drivers
through human activities. Climate- and nature-related risks are interconnected (Lade et al. 2021) as for
instance, climate-induced flooding, wildfires, and cyclones accelerate habitat and biodiversity loss. At the same
time, forests, mangroves, and peatlands are natural carbon sinks, capturing and storing carbon dioxide (CO2)
while also providing protection from extreme weather events. Protecting and restoring those ecosystems can
thereby mitigate climate change and prevent its worst impacts (Poertner et al. 2021).
Nevertheless, nature-related risks are often more localized and multidimensional than climate-related
risks, posing some challenges for policy design.14 Yet, explicitly considering climate-nature interactions in
policy designs provides opportunities to maximize co-benefits, while minimizing trade-offs and compounding
risks for the economy and the financial sector (Poertner et al. 2021). Moreover, methodologies used for the
assessment of climate-related risks may be tailored to assess nature-related risks as well, including scenario
analysis and stress testing.
This multidimensionality, for instance, is one reason why there is no single high-level metric to assess the footprint of economic activity such as tons of CO2
equivalent for nature, nor a global goal equivalent to keeping warming well below 2°C and pursuing efforts to limit the temperature increase to 1.5°C above
pre-industrial levels (Power et al. 2022).
14
18 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
Figure 6: Overall assets per bank type
Source: Based on publicly available BNM data (BNM 2021)
This total includes all bank categories except for DFIs.
https://www.bnm.gov.my/-/monthly-highlights-and-statistics-in-november-2021)
https://www.bnm.gov.my/-/3q-gdp-2021
15
16
17
Malaysia has a large, well-developed banking sector. Total assets15 in March 2021 were RM 3,016 billion
(USD 754 billion or about 224 percent of 2020 GDP) (Figure 6). Government securities (20 percent) and loans
and advances (60 percent) make up the bulk of Malaysian banks’ balance sheets, with differences across bank
types. BNM is the principal regulator and supervisor of the Malaysian banking sector, which as the central bank
for Malaysia, is mandated to promote monetary and financial stability conducive to the sustainable growth of
the Malaysian economy.
The Malaysian banking sector has shown resilience through the COVID-19 crisis. Capital buffers were
adequate with regulatory capital to risk-weighted assets at 18.2 percent as of September 2021. Reported non-
performing loans to total gross loans ratio were 1.5 percent as of October 2021, one of the lowest compared
to Association of Southeast Asian Nations (ASEAN) countries, although extended forbearance measures
remained in effect for many individuals and firms. The systemwide liquidity coverage ratio was 153 percent
as of October 2021, well above the Basel III regulatory minimum of 100 percent.16 The contraction by 4.5
percent of the Malaysian economy in the third quarter of 2021 was a risk factor to financial stability. However,
the Malaysian economy is expected to improve following the normalization of economic activities after the
COVID-19 pandemic, which would relax pressures on financial markets.17
Commercial Banks (RM2,063bn)
Cash and Cash Equivalents
Balances in Current Account with Bank Negara Malaysia
Other Deposits Placed and Reverse Repos
Statutory Deposits with Bank Negara Malaysia
Investment Account Due from Designated Financial Institutions
Negotiable Instrument Deposits Held
Treasury Bills
Government Securities
Other Securities
Loans and Advances
Other Assets
Islamic Banks (RM903bn)
B
an
k
Ty
p
e
Assets by bank type March 2021
0 20 40
Assets in % of Total
60 80 100
Investment Banks (RM50bn)
1.1 The Malaysian Banking Sector
19An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
Comparing Malaysian banks’ commercial sector lending with sectoral GDP data shows that capital intensive sectors such as construction have a higher lending
share in banks’ portfolios (15 percent) compared to their contribution to GDP (4 percent). Other sectors are relatively underrepresented, this may be because
they have limited access to lending or are less capital intensive (e.g., agriculture has a lending share of 4 percent vs. a GDP share of 8 percent). Furthermore,
some sectors might be dominated by large firms (e.g., oil and gas), which are capital intensive but acquire the bulk of their financing from capital markets.
This has implications for the analysis as it only considers impacts and dependencies of sectors that have outstanding loans with the Malaysian banking sector.
Household loans are the largest share of Malaysian banks’ lending portfolio. 40 percent of commercial sectoral lending goes to corporates, micro, small, and
medium enterprises and others.
18
19
Finance provision to the real economy in Malaysia concentrates around loan financing, with a dominant
role for the Malaysian banking sector. Seventy-four percent of outstanding net financing in December 2020
was provided by loans from banks and DFIs. Corporate bonds are a growing financing instrument, representing
the remaining 26 percent of outstanding net financing. Nevertheless, the banking sector (and specifically loan
financing) remains the dominant source of financing. For commercial lending, the wholesale and retail trade
sector constitutes the largest share of Malaysian banks’ commercial loans outstanding balance, at slightly more
than 16 percent (Figure 6). Manufacturing is the second largest lending exposure (16 percent), followed by
construction (15 percent), and real estate (14 percent). This reflects the high importance of manufacturing and
construction sectors in the Malaysian economy. The agricultural sector (4 percent) and especially the mining
sector (1 percent) constitute only a small share of Malaysian banks’ commercial loans portfolio (Figure 7).18
The following analysis considers Malaysian banks’ commercial sector lending portfolio, which represents a
significant share of Malaysian banks’ lending.19
Figure 7: Overall commercial lending of Malaysian banks by sector, as of December 2020
Source: Based on unpublished BNM data
Wholesale and Retail Trade 16.14%Other Sectors 15.66%
Manufacturing 15.51%
Construction 15.12% Real Estate Activities 14.11%
Financial and Insurance/ Takaful Activities 10.09%
Agriculture, Forestry and Fishing 4.39%
Transportation and Storage 3.38%
Accommodation and Food Service 2.61%
Electricity Supply 1.49%
Mining and Quarrying 1.04%
Water Supply & Co 0.45%
Lending by sector
20 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
‘Supra’ State covers production activities that are beyond the center of predominant economic interest for any state.20
Figure 8: Commercial lending by Malaysian banks by state, as of December 2020
Commercial lending by Malaysian banks is heterogeneously distributed among states (Figure 8),
reflecting the population and economic centers of the country. Over 60 percent of commercial lending
goes to Kuala Lumpur and Selangor, having a strong manufacturing, service, and real estate sector and
contributing the largest share of Malaysian GDP (Figure 9). Johor with its strong oil palm sector (10 percent),
Sarawak (6 percent), and Pulau Pinang (5 percent) also receive considerable lending shares. The other Malaysian
states share the remaining 17 percent of banks’ lending, with Perlis having the lowest share of only 0.1 percent
of total lending.
Source: Based on unpublished BNM data
Figure 9: Projected GDP per sector by state level contribution (percent, 2019)
State100%
80%
60%
40%
20%
0%
Agriculture Construction GDP at
purchasers
prices
Import
duties
Manufacturing Mining and
quarrying
Services
Johor
Kedah
Kelantan
Melaka
Negeri Sembilan
Pahang
Perak
Perlis
Pulau Pinang
Sabah
Sarawak
Selangor
Supra
Terengganu
W.P. Kuala Lumpur
W.P. Labuan
Source: Based on Department of statistics Malaysia (DOSM 2021) data20
Sabah
Sarawak
Selangor
Kuala Lumpur
Putrajaya
Labuan
Pahang
Perak
Melaka
Pulau Pinang
Negeri
Sembilan
Terengganu
Kelantan
Kedah
Perlis
Johor
30
20
10
0
%
O
ve
ra
ll
Le
nd
in
g
21An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
The sample of commercial loans outstanding by Malaysian banks represents 90 percent of the total
commercial loan portfolio. The sample portfolio data, as of December 2020, totaled RM 733 billion
(USD 183 billion). The largest bank type, with about 68 percent share of banking sector assets, are 26
commercial banks, which account for about 66 percent of the lending sample, followed by 16 Islamic banks.21
Islamic banks cover about 30 percent of banking sector assets and about 31 percent of the lending sample.
Investment banks are the third bank category, consisting of 10 domestically owned banks22 that account for
about 2 percent of total banking sector assets and 0.4 percent of the sample. Additionally, 9 DFIs23 play a role in
commercial lending in Malaysia, accounting for about 2 percent of the analyzed lending portfolio in this report.
Malaysia’s biological diversity is among the richest in the world. Spread across the three regions of
Peninsular Malaysia, Sabah, and Sarawak, Malaysia’s terrestrial, coastal, and marine habitats harbor a wide
variety of floral and faunal communities. The country’s forest cover extends to around 59 percent of the total
land area (MyBIS 2015).24 This includes extensive tropical peatlands, which cover more than 7 percent of
Malaysia’s total land area, and whose unique wet, acidic, and low-nutrient conditions harbor species of plants
and animals not found in other tropical forests (MyBIS 2016). These peatlands also store more than 9 gigatons
(Gt) of carbon (almost the size of annual global carbon emissions),25 more than twice the 4 Gt carbon that is
stored in the rest of Malaysia’s forest vegetation (Page and Rieley 2018). Malaysia’s vast shoreline has more than
half a million hectares of mangroves, with five mangrove areas designated as Ramsar sites – an international
network of wetlands recognized, among other things, for their importance to conservation of global biological
diversity (Ramsar 2010). Together, these and other natural habitats nurture more than 15,000 species of vascular
plants, 307 known species of mammals, 785 species of birds, 2,068 species of freshwater and marine animals,
150,000 species of invertebrates, and more than 612 species of hard corals in the country (MyBIS 2015). This
rich variety of life has placed Malaysia, a country with only 0.2 percent of the world’s land mass, as one of 17
megadiverse countries in the world.26
Malaysia’s rich biodiversity, and the natural ecosystems it supports, sustain the country’s economy.
Natural resources such as oil, timber, and fish, and the provision of ecosystem services such as healthy soils,
clean water, pollination, and a stable climate, strongly influence the productivity of various sectors of the
economy. Many sectors rely directly on natural resources and ecosystem services for a range of factors within
their production processes including inputs to production, inputs to research and development, business
operations, and assimilation of waste in these sectors (WEF 2020).27 A sector is highly reliant on an ecosystem
service if any disruption in this service can prevent the production processes, and thus directly impact the
financial viability of the businesses in these sectors (Box 1) (NCFA and UN-WCMC 2018).
https://www.bnm.gov.my/web/guest/islamic-banks: Eight commercial banks have domestic ownership while 18 banks have foreign ownership. Of the 16
Islamic banks, 11 are domestically owned and 5 are foreign owned.
https://www.bnm.gov.my/web/guest/investment-banks
6 DFIs regulated under the DFI Act and 3 DFIs not regulated under the DFI Act (https://www.bnm.gov.my/-/akta-institusi- kewangan-pembangunan-2002-
act-618-)
https://data.worldbank.org/indicator/AG.LND.FRST.ZS?locations=MY
Note that global carbon dioxide emissions were 36.7 Gt in 2019 (Ritchie and Roser 2020), this corresponds to carbon emissions of 10 Gt in 2019.
https://www.biodiversitya-z.org/content/megadiverse-countries
Natural genetic diversity plays a particularly key role in pharmaceutical and biomedical research.
21
22
23
24
25
26
27
1.2 Malaysia, a Biodiversity Hotspot
22 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
The recent Changing Wealth of Nations report by the WB (2021) shows that while human and produced capital in Malaysia have grown, natural capital has
declined. Specifically, forests, mangroves, and fisheries-based wealth in Malaysia has declined, while protected areas’, cropland, and pastureland wealth has
increased.
See the Appendix Section A4 for a more detailed analysis on the current stage of drivers for nature and biodiversity loss in Malaysia as defined by the IPBES
(2019).
28
29
Sectors that are highly reliant on an ecosystem service include agriculture, fishing and forestry,
construction, electricity, water utilities, and food, beverages, and tobacco sectors. Furthermore, there
are other sectors which are moderately reliant on nature, meaning they have a limited dependency on ecosystem
services within their direct operations. However, those sectors often rely on inputs from sectors with high direct
nature dependencies and are thus indirectly dependent on its ecosystem services. This includes manufacturing,
transport, chemicals and materials, aviation, travel and tourism, real estate, mining and metals, retail, consumer
goods and lifestyle, oil and gas, and automotive sectors (WEF 2020). This supports the claim by the Dasgupta
report (2021), that the entire economy is embedded in nature and as such reliant on a functioning biosphere.
Malaysia experienced strong economic growth in recent decades; yet this economic growth has come
at the cost of a significant loss of biodiversity and natural capital in the country.28 The country’s
high levels of economic growth in the last two decades have led to an exponential rise in demand for natural
resources, which in turn has amplified key drivers of nature and biodiversity loss in Malaysia. These include
habitat loss and fragmentation, pollution, unsustainable resource extraction and usage, and climate change.29
23An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
Materiality of potential dependencies
To assess the importance of the contribution an ecosystem service makes to a production process,
and the materiality of the impact if this service is disrupted, two aspects can be considered:
1. How significant is the loss of functionality in the production process if the ecosystem service is
disrupted?
a. Limited loss of functionality: the production process can continue as is or with minor
modifications.
b. Moderate loss of functionality: the production process can continue only with important
modifications (e.g., slower production or use of substitutes).
c. Severe loss of functionality: Disruption in the service provision prevents the production process.
BOX 1
Assessing materiality of an ecosystem service
for a business
24 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
Source: Natural Capital Finance Alliance (2021)
2. How significant is the financial loss due to the loss of functionality in the production process?
a. Limited financial loss: Disruption to the production process doesn’t materially affect the
company’s profits.
b. Moderate financial loss: Disruption to the production process materially affects the company’s
profits.
c. Severe financial loss: There is a reasonable possibility that disruption in the production process
will affect the financial viability of the company.
The materiality assessment reflects both these considerations. A very high materiality rating means
that the loss of functionality is severe and that the expected financial impact is severe as well.
Materiality of potential impacts on ecosystem services
To assess the importance of a potential impact of a production process on natural capital, the
following three aspects were considered:
1. How frequently might the impact occur?
• High: The impact and its resulting effects on natural capital are expected to occur continuously
throughout the project life cycle.
• Medium: The impact and its resulting effects on natural capital are expected to occur regularly
throughout the project life cycle (i.e., from several times per year to several times per month).
• Low: The impact and its resulting effects on natural capital are expected to occur only a small
number of times in the project life cycle (e.g., only during construction/set-up).
2. How quickly might the impact start to affect natural capital?
• <1 year: The impact and its resulting effects on natural capital will occur within one year of the
start of the production process.
• 1-3 years: The impact and its resulting effects on natural capital will occur between one and
three years after the start of the production process.
• >3 years: The impact and its resulting effects on natural capital will occur more than three years
after the start of the production process.
3. How severe might the impact be?
• High: The impact and its resulting effects are expected to cause major, irreparable, and long-
lasting damage to natural capital.
• Medium: The impact and its resulting effects are expected to cause significant and lasting
damage to natural capital.
• Low: The impact and its resulting effects are expected to cause minor, reparable, and temporary
damage to natural capital.
25An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
Major environmental challenges exist with respect to deforestation, pollution, and water management.
Figure 10 shows results from the Yale University Environmental Performance Index for Malaysia for the years
2010 (orange) and 2020 (blue).30 Malaysian environmental performance showed improvements in areas like
environmental health, air quality, agriculture, climate change, and sanitation and drinking water, though
arguably starting from a low environmental performance base. In contrast, pollution emissions and, more
notably, ecosystem services and biodiversity and habitat indicators show a deterioration over the past decade.
Those findings have also been confirmed in interviews with different stakeholders from academia,
the government, and non-governmental organizations (NGOs).31 Interview partners expressed concerns
especially with respect to Malaysian forest management, water pollution, and species loss. Furthermore,
governance related issues were frequently mentioned as a driver of nature and biodiversity loss. These issues
stem mainly from the contention between the federal and state governments’ jurisdiction over land and forest
matters.32
Figure 10: Malaysian environmental performance across several indicators in 2010 and 2020
Sources: Based on the Yale Environmental Performance Index
Note: Scores are normalized to 100, with 100 being the target to reach.
Figure 3 compares environmental indicators between 2010 and 2020 that are scaled to 100. Hence, the graph also provides an indication of the current level
of environmental quality in Malaysia, with 100 being perfectly healthy ecosystems.
Appendix Section A5 contains details on interview insights.
https://www.wwf.org.my/?18445/STATE-GOVERNMENT-HAS-JURISDICTION-OVER-FOREST-AND-LAND-MATTERS; https://www.malaysianbar.org.my/article/
news/legal-and-general-news/legal-news/challenges-in-implementing-and-enforcing-environmental-protection-measures-in-malaysia-by-ainul-jaria-bt-
maidin
30
31
32
Environmental Performance Index
Environmental Health
Air Quality
Sanitation & Drinking Water
Waste Management
Biodiversity & Habitat
Ecosystem Services
Fisheries
Climate Change
Pollution Emissions
Agriculture
Water Resources
0 20 40 60 80 100
2020
2010
26 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
Environmental degradation can push an ecosystem to a “tipping point” beyond which it will shift to a new state or collapse entirely. Such a collapse would lead
to a large-scale, abrupt decline in ecosystem services.
See Johnson et al. (2021) “The Economic Case for Nature - A global Earth-economy model to assess development policy pathways”. The model developed
by the WB in collaboration with the University of Minnesota and Purdue University assesses a scenario of partial ecosystem service collapse—a 90 percent
reduction in the flow of the following ecosystem services: wild pollination, marine fisheries, and provision of timber from native forests on real economic activity
to 2030.
The CGE model utilized in the study accounts for a broad range of direct and indirect substitution effects. Under the tipping point scenario, global GDP
declines relative to the business-as-usual (BAU) scenario. With less income in the rest of the world, demand for Malaysian exports declines and hence leading
to a decline in domestic production in Malaysia relative to BAU. In addition, relative to East Asia and the Pacific, the adverse impacts of ecosystems collapse in
Malaysia’s forestry and fisheries are much larger, which would cause a larger decline in Malaysia’s GDP relative to the rest of East Asia and the Pacific.
The model used in the analysis does not offer precise predictions about what the global economy or any given country’s economy will look like in the future.
Rather, the scenarios described in this report illustrate the direction and range of possible outcomes of select biophysical scenarios and policy responses. The
estimations presented are conservative, due to the limited range of ecosystem services considered, as well as other limitations (for further details please see
Johnson et al. 2021).
33
34
35
36
Both nature preservation policies and nature loss can have impacts on the economy and hence can
be sources of financial risks to Malaysian banks. A recent WB (Johnson et al. 2021) study analyzes the
economic impacts from degrading ecosystem services. In an adverse scenario of partial ecosystem collapse,
economic losses could mount up to 3.4 percent of GDP in East Asia and the Pacific region in 2030.33,34 For
Malaysia specifically, the effects of such a scenario are estimated to be higher than the region’s average,
projected at 6 percent of GDP loss by 2030 (Figure 11), driven by decline in export demand and adverse
impacts of the collapse of forestry and fisheries ecosystem services.35
Figure 11: Change in 2030 real GDP under a partial ecosystem collapse scenario (compared
with a no-tipping-point scenario)36
b) Change in percentage termsa) Change in monetary terms (US$ billions)
0-5-10-15-20-25-1000 -500 0
Sub-Saharan Africa
South Asia
North America
Middle East and North Africa
Latin America and Caribbean
Europe and Central Asia
East Asia and Paci�c
Madagascar
Angola+DRC
Ethiopia
Rest of SS Africa
Nigeria
South Africa
Bangladesh
Pakistan
Rest of S Asia
India
Canada
United States
Egypt, Arab Rep.
Morocco
Rest of M East N Africa
Rest of S America
Brazil
Central America
Argentina
Colombia
Mexico
Rest of C Asia
Turkey
Other Europe
Poland
Russian Federation
European Union
Indonesia
Vietnam
Philippines
Malaysia
Rest of SE Asia
China
Korea, Rep.
Rest of E Asia
Oceania
Japan
Source: Johnson et al. (2021)
27An Exploration of Nature-Related Financial Risks in Malaysia
28 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
https://ukcop26.org/glasgow-leaders-declaration-on-forests-and-land-use/
https://www.bnm.gov.my/climatechange
https://www.nst.com.my/opinion/letters/2021/10/738332/corporate-role-biodiversity-conservation
37
38
39
The Malaysian government has taken several policy actions on biodiversity, with additional initiatives
by the private sector.
• Its National Policy on Biodiversity 2016-2025 serves as its guide for biodiversity management and
complement to Malaysia’s commitment to the United Nations Convention on Biological Diversity and
the Sustainable Development Goals. The policy is part of Malaysia’s agenda to promote sustainability
and mentions that Malaysia is committed to conserve its biological diversity, promote its sustainable use,
and ensure the fair and equitable sharing of benefits arising from the utilization of biological resources. A
National Biological Diversity Roundtable group was created in 2019 to advise the minister on the direction
and strategy of implementing the National Biodiversity Policy.
• Malaysia also signed the Glasgow Leaders’ Declaration on Forests and Land Use at the 26th United Nations
(UN) Climate Change Conference of the Parties, a commitment to halt and reverse forest loss and land
degradation by 2030.37
Malaysia’s financial regulators have demonstrated their leadership in driving the sustainability and
climate change agenda in the financial sector by deploying several initiatives that aim to address
climate related risks and sustainable finance practices.38
• In 2019, BNM and the Securities Commission of Malaysia formed the JC3 to pursue collaborative actions
for building climate resilience within the Malaysian financial sector. JC3 initiatives encompass aspects of
risk management, governance and disclosure, product and innovation, capacity building and stakeholder
engagement, and data.
• Since its formation, BNM has finalized the issuance of a principle-based taxonomy – Climate Change and
Principle-based Taxonomy (CCPT), that is intended to facilitate the financial institutions’ categorization
of economic activities against climate objectives and promote the transition to a low-carbon economy.
BNM has also collaborated with Islamic financial institutions under the Value-based Intermediation (VBI)
Community of Practitioners to publish guidance documents on credit risk management practices to help financial
institutions evaluate financing and investment activities against ESG criteria. The CCPT and VBI guidance
documents refer to biodiversity risk as an element of managing environmental risks. In December 2021, BNM
issued the Reference Guide on Climate Risk Management and Scenario Analysis for public consultation. The
JC3 members also supported the proposal for financial institutions to make mandatory Task Force for Climate-
related Financial Disclosure (TCFD)-aligned climate-related financial risk disclosures from 2024.
Private sector initiatives around biodiversity are also developing. In February 2020, an interim working
group consisting of members from the private sector, academia, research institutes, and NGOs was formed with
the mandate to establish the Malaysia Platform for Business and Biodiversity. This is envisioned as a platform
for the private sector to discuss, share, and collaborate on issues related to biodiversity conservation and its
mainstreaming, particularly to support the implementation of the National Policy on Biological Diversity.39
29An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
One of the main roles of the financial system is to allocate capital (both equity and debt) to productive activities. When risks are not adequately understood
and priced in, this could lead to an overallocation of capital to sectors that is not in line with sustainability objectives. Further, it hinders adequate mitigation
actions to prevent or limit financial impacts of such risks.
Subsequent exposure analysis of this report focuses on direct dependencies only.
40
41
Financial institutions’ relationship with nature is twofold, often referred to as a “double materiality”
(European Commission 2019, Oman and Svartzman 2021). On the one hand, the activities that are being
financed can either contribute to or deteriorate the value of ecosystem services in Malaysia. On the other hand,
ongoing biodiversity loss could have negative economic and financial implications for Malaysian firms and the
financial sector (NGFS 2021, World Bank Group 2021b). Globally, nature-related risks are becoming increasingly
likely, whereas precise timing and magnitude are difficult to predict (Kedward et. al. 2020). Malaysia could
be particularly exposed to those risks, given its status as a megadiverse country and its high dependence
of economic activity on ecosystem service provision (see section above for details). Better identification,
assessment, and management of nature-related financial risks can help align capital allocation with sustainability
goals.40 Even though some nature-related risks may be gradual trends, these could turn into abrupt financial
risks when financial sector participants reprice assets based on changed future expectations and better data.
The degradation of biodiversity and natural ecosystems could lead to physical and transition risks
that could transmit through the economy. This could potentially pose a risk for the financial system (Figure
12), with reinforcing macroeconomic feedback effects (Dunz and Power 2021). Physical risk could emerge from
the loss of ecosystem services that firms are depending on. Such dependencies could be direct (e.g., fisheries
decline for the aquaculture sector) or indirect via supply chain impacts and relative price changes (e.g., higher
food prices).41 Physical risk could either be triggered through ‘slow-onset’ loss of ecosystem services (e.g.,
reduced agricultural yields) or ‘sudden-onset’ events like the triggering of an ecological regime shift (e.g.,
eutrophication of a lake).
1.3 Nature-Related Financial Risks
30 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
See Appendix Section A3 for details on reputational risk.
The impacts of Malaysian companies on biodiversity and nature may also expose them to liability risk. Such risks may materialize for companies through
litigation or other legal avenues outside courtrooms such as regulatory fines and enforcement. Physical risk could pose liability risk to companies as they
might be deemed responsible for a loss or injury associated with nature loss and may be required to pay compensation to the affected parties. Nature-related
transition risk could pose liability risk as firms continuously contributing to nature loss could be sued. Liability risk can materialize for banks through various
avenues – direct impacts as defendants in litigation, and indirect second order impacts through credit, investment, and underwriting risk stemming from their
exposure to the affected companies, as well as third order indirect impacts through systemic risks if nature-related liability risk is of a sufficient magnitude
across sectors or geographies (Barker et al. 2020).
42
43
Figure 12: From nature-related risks to financial risks
Source: WB based on van Toor et al. 2020 and Svartzman et al. 2021
Sudden changes in policy, technology, and consumer preferences in response to nature loss can have a
substantial impact on the economic, financial, and reputational42 position of firms and their financing
banks with large impacts on biodiversity and ecosystems. Business operations may have an impact on
biodiversity and ecosystem services via excessive natural resources extraction, disposal of waste, or land-use
change. If firms do not adapt timely and banks do not adjust their lending portfolio, nature-related financial
transition risk could materialize following sudden changes in policy, technology, and consumer preferences.
Those pressures on companies could stem from domestic changes as well as changes in important export
markets for Malaysia such as the European Union (EU).
Physical and transition risks can directly disrupt production processes or indirectly materialize across
value chains of businesses (second- and third-order effects), thus impacting their ability to generate
profits and repay debts. The degree of nature-related risk emergence, however, depends on the availability
of substitutes for those depleted ecosystem services as well as the ability of firms and banks to adapt timely. If
not anticipated and no action is taken, the sectors with high negative impacts on biodiversity may see abrupt
write-downs in their asset valuations (stranded assets) as the economies transition to more sustainable pathways
and higher liability claims (liability risk)43 arising from impacts and dependencies on biodiversity. For financial
institutions, this adverse impact on the profitability of businesses they lend to may translate into market, credit,
liquidity, and operational risks (Figure 12).
Nature
Financial
system
Physical risk
• Loss of Ecosystem Services
creating
» ‘slow-onset’ loss
» ‘sudden-onset’ events
• Interactions with other
ecological issues
(e.g., climate change)
Dependency
Macroeconomic
deterioration
Impact Revised lending
conditions
Economy
Economic risks
• Supply chain disruptions
• Raw material price volatility
• Limited substitutability of
essential ecosystem services
• Productivity changes
(e.g., agriculture)
• Changing demand and costs
• Stranded assets
• Relocation of activities
• Legal liabilities
• Lower asset value
Financial risks
• Credit risk
(e.g., losses on corporate
loans)
• Underwriting risk
(e.g., inaccurate risk
assessment)
• Market risk
(e.g., losses on shares and
bonds)
• Operational risk
(e.g., liability risks, legal
costs, reputational damage)
• Liquidity risk
(e.g., refinancing risk)
Transition and reputation risk
• Policy and regulation change
• Change in demand – including
from international buyers
• Change in technology
Liability risk
• Lawsuits from harmed
communities
• Fines from regulators
31An Exploration of Nature-Related Financial Risks in Malaysia
Exposure
Assessment
CHAPTER 2
32 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
A detailed description of the underlying methodology in this report can be found in Appendix Section A1.
https://encore.naturalcapital.finance/en/explore
Box 1 provides an overview of the core assumptions of ENCORE with respect to materiality of ecosystem services for businesses.
One could argue, however, that absent more detailed information on the production process of Malaysian firms, this approach is conservative as it caps the
exposure towards one ecosystem service to its relative share of the entire lending portfolio.
44
45
46
47
This report investigates the exposure in the commercial loan book of Malaysian banks using a
combination of sectoral and spatial analyses.44
1. First, it investigates banking sector exposures to economic sectors by using the ENCORE biodiversity
tool. Following the work of other central banks, the analysis is focused on relationships between economic
sectors and ecosystem services with high or very high dependencies, as the degradation of those
ecosystem services is likely to have a strong detrimental impact on firms’ business processes (physical
risk).
2. Second, exposures of banks to sectors that have a negative impact on ecosystem services and that could
hence be subject to transition risk in case of unanticipated policy introduction and consumer preference
change are mapped.
3. Third, spatial exposure of banks’ commercial property purchase lending to areas that may become
protected in the future are analyzed.
4. Fourth, a first non-exhaustive set of nature-related risk scenarios for Malaysia (see Figure 26) are explored.
These are based on interviews (the conclusions of which are summarized in Appendix Section A5),
datasets such as ENCORE and the WB Terrestrial Biodiversity Indicators, and reports from Malaysian
stakeholders which are summarized in Appendix Section A4. For most analyses results are obtained for
individual banks, however outcomes are reported at the bank segment level to ensure confidentiality of
respective bank’s exposures.
The analysis on ecosystem dependency and impact is conducted by using ENCORE (Natural Capital
Finance Alliance 2021).45 ENCORE is a database that maps sector-based impacts and dependencies on
ecosystem services for sectors of the economy.46 This allows a detailed assessment of the interactions of the
economy with the natural environment and thus an exposure analysis of Malaysian banking sectors’ lending
portfolio to potential nature-related physical and transition risks. The overall commercial loans outstanding
in the sample stood at RM 733 billion (USD 183 billion) as of December 2020. The analysis follows closely the
approach proposed by the Dutch Central Bank (DNB) (van Toor et al. 2020), consisting of several steps of data
reclassification and remapping. Reclassification and remapping are needed to align sector classification of the
lending data with sector classification used in ENCORE. Following the DNB approach, the focus of the analysis
is on relationships between economic sectors and ecosystem services with high or very high dependencies only,
as the degradation of those ecosystem services is likely to have a strong detrimental impact on firms’ business
processes. Likewise, only linkages of economic sectors and drivers of environmental change with a high or
very high impact to assess transition risk exposure are considered. The reclassification allows assessment of
the nature-related physical and transition risk exposure of the Malaysian banks’ commercial lending portfolio.
ENCORE is a global tool and thereby subject to some caveats. Ecosystem service dependencies and the
state of natural assets differ by country and require a geographical context to refine the assessment provided
by ENCORE. ENCORE focuses on direct nature-related impacts and dependencies for the various sectors of
the economy. Thus, ENCORE can only give a comprehensive view on the key first-order nature-related impacts
and dependencies at the level of sectors of the economy. Furthermore, the currently applied equal weighting
approach in the case of multiple sector or ecosystem service linkages influences the exposure results.47
33An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
This section estimates the risks that Malaysian banks may be exposed to from the loss in ecosystem
services (physical risk). Multiple sectors of the economy depend directly or indirectly on ecosystem services.
The resilience of these ecosystem services, in turn, is contingent upon a thriving biodiversity. Biodiversity
loss, driven by unsustainable business processes, could thus lead to a degradation of the ecosystem services
it sustains. In turn, negative impacts on the financial position of companies that depend on these ecosystem
services could emerge, with negative financial implications for banks financing them.
Fifty-four percent of the commercial lending portfolio of Malaysian banks is to sectors which are highly
or very highly dependent on one or several ecosystem services (Figure 13). This amounted to RM 398 billion
(USD 94 billion) lent to these sectors as of December 2020.48 Most of these ecosystem service dependencies
concentrate around a few economic sectors, with real estate and construction activities constituting about
42 percent of all sectors’ dependencies (Figure 14).49 Real estate activities strongly depend on surface water
provision. Construction activities are especially vulnerable to climate physical risk, thus depending on climate
regulation (chronic temperature increase) and flood and storm protection (acute climate physical risk). Wholesale
trade is also strongly dependent on ecosystem services due to its reliance on climate regulation provision.
Agricultural activities make up about 8 percent of sectors’ dependencies on ecosystem services, whereas they
depend on a multitude of different ecosystem services such as disease control and maintenance of nursery
habitats. This makes agriculture especially vulnerable to a multitude of ecosystem service deteriorations.
Figure 13: The financial sector and ecosystem services dependencies per Malaysian ringgit
invested (in million RM)
Source: BNM (unpublished data), ENCORE, WB calculations
This sectoral analysis covers approximately 90 percent of the total corporate loan portfolio of Malaysian banks.
The oil and gas sector that is relatively important for the Malaysian economy does not show up prominently in this analysis as oil and gas companies receive
large shares of their financing from capital markets.
48
49
2.1 Dependency on Ecosystem Services
Real estate activities
Leisure facility provision
Processed food and drink production
Construction materials production
Hotels and resorts provision
Tyre and rubber production
Life science, pharma and biotech manufacture
Life science, pharma and biotech tools and services
Production of forest and wood-based products
Catalytic cracking, fractional distillation and crystallization
Natural �bre production
Synthetic �bre production
Alcoholic fermentation and distilling
Tobacco production
Nuclear and thermal power stations
Iron extraction
Geothermal energy production
Mining
Construction
Marine ports and services
Distribution
Water services (e.g. waste water, treatment and distribution)
Cruise line provision
Large-scale livestock (beef and dairy)
Small-scale livestock (beef and dairy)
Telecommunication and wireless services
Integrated oil and gas
Large-scale forestry
Small-scale forestry
Hydropower production
Solar energy provision
Wind energy provision
Saltwater wild-caught �sh
Freshwater wild-caught �sh
Marine transportation
Airport services
Infrastructure maintenance contracts
Large-scale irrigated arable crops
Small-scale irrigated arable crops
Electric/nuclear power transmission and distribution
Large-scale rainfed arable crops
Small-scale rainfed arable crops
Aquaculture
Oil and gas transportation
Gas distribution
Railway transportation
Fibre-optic cable installation (marine)
Biomass energy production
Production of paper products
Production of leisure or personal products
Commercial Banks
Surface water
Ground water
Climate regulation
Flood and storm protection
Water �ow maintenance
Water quality
Maintain nursery habitats
Fibres and other materials
Pollination
Soil quality
Disease control
Pest control
Animal-based energy
Mass stabilisation and erosion control
Buffering and attenuation of mass �ows
Islamic Banks
Investment Banks
DFIs
Real estate activities
Leisure facility provision
Processed food and drink production
Construction materials production
Hotels and resorts provision
Tyre and rubber production
Life science, pharma and biotech manufacture
Life science, pharma and biotech tools and services
Production of forest and wood-based products
Catalytic cracking, fractional distillation and crystallization
Natural �bre production
Synthetic �bre production
Alcoholic fermentation and distilling
Tobacco production
Nuclear and thermal power stations
Iron extraction
Geothermal energy production
Mining
Construction
Marine ports and services
Distribution
Water services (e.g. waste water, treatment and distribution)
Cruise line provision
Large-scale livestock (beef and dairy)
Small-scale livestock (beef and dairy)
Telecommunication and wireless services
Integrated oil and gas
Large-scale forestry
Small-scale forestry
Hydropower production
Solar energy provision
Wind energy provision
Saltwater wild-caught �sh
Freshwater wild-caught �sh
Marine transportation
Airport services
Infrastructure maintenance contracts
Large-scale irrigated arable crops
Small-scale irrigated arable crops
Electric/nuclear power transmission and distribution
Large-scale rainfed arable crops
Small-scale rainfed arable crops
Aquaculture
Oil and gas transportation
Gas distribution
Railway transportation
Fibre-optic cable installation (marine)
Biomass energy production
Production of paper products
Production of leisure or personal products
Commercial Banks
Surface water
Ground water
Climate regulation
Flood and storm protection
Water �ow maintenance
Water quality
Maintain nursery habitats
Fibres and other materials
Pollination
Soil quality
Disease control
Pest control
Animal-based energy
Mass stabilisation and erosion control
Buffering and attenuation of mass �ows
Islamic Banks
Investment Banks
DFIs
34 An Exploration of Nature-Related Financial Risks in Malaysia
34
An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 — Exposure Assessment
2.1 Dependency on Ecosystem Services
This section estimates the risks that Malaysian banks may be exposed to from the loss in ecosystem
services (physical risk). Multiple sectors of the economy depend directly or indirectly on ecosystem services.
The resilience of these ecosystem services, in turn, is contingent upon a thriving biodiversity. Biodiversity
loss, driven by unsustainable business processes, could thus lead to a degradation of the ecosystem services
it sustains. In turn, negative impacts on the financial position of companies that depend on these ecosystem
services could emerge, with negative financial implications for banks financing them.
Fifty-four percent of the commercial lending portfolio of Malaysian banks is to sectors which are highly
or very highly dependent on one or several ecosystem services (Figure 13). This amounted to RM 398 billion
(USD 94 billion) lent to these sectors as of December 2020.48 Most of these ecosystem service dependencies
concentrate around a few economic sectors, with real estate and construction activities constituting about
42 percent of all sectors’ dependencies (Figure 14).” Real estate activities strongly depend on surface water
provision. Construction activities are especially vulnerable to climate physical risk, thus depending on climate
regulation (chronic temperature increase) and flood and storm protection (acute climate physical risk). Wholesale
trade is also strongly dependent on ecosystem services due to its reliance on climate regulation provision.
Agricultural activities make up about 8 percent of sectors’ dependencies on ecosystem services, whereas they
depend on a multitude of different ecosystem services such as disease control and maintenance of nursery
habitats. This makes agriculture especially vulnerable to a multitude of ecosystem service deteriorations.
Figure 13: The financial sector and ecosystem services dependencies per Malaysian ringgit
invested (in million RM)
Real estate activities
Leisure facility provision
Processed food and drink production
Construction materials production
Hotels and resorts provision
Tyre and rubber production
cite science, pharma and biotech manufacture
=roduction o leisure or ersonal products
.ife science, harma andnbiotech tools and services
=rodi.ictiori o forest and woodrbased pro ucts
catalytic cracking fractional distillation and crystallization
atural fibre ro ction
?I'Ofi|‘.lCt‘lO _o pape products
:ynt et_lc ibre pro Vucilon . _ 4
Acohollc fermentation and distilling
Tab cco pr duction ,
Nuc ear an thermal power stations
lron extraction
Geothermal energy production
Mining
Surface water
aim was. I
Commercial Banks
Climate regulation
Construction
Marine ports and services
Flood and storm protection I
Water {low maintenance 1
water quality —
Maintain nursery habitats —
Distribution
water services (e.g. waste water, treatment and distribution)
Cruise line provision
.arge-scale livestock (beef and dairy)
ntegrated oil and gas
qarge-scale fores ry ,
.Y . . ‘ ' ?
Sollar El'lel'gy|dPl’OVlSl|'K‘)V1{_ h P°lll"a"°"
I I - I - -
\£\?inl%fer?e|r\g,l pr°r?i‘fi§ion '5 5°" quallw —
ma -sca e orestry— , _ ~ :
Small-scale liyestock (beef an’d’dairy)_~~ es, Dlsease Comwl
Telecommunication and wireless services \‘\ \ _ \ pest comm; :
Freshwater wild-caught fish * e
Marine transportation
Airport services ,
infrastructure niaintenance contracts
Large-scale Irrigated arable crops 2
Fibres and other materials 1
Islamic Banks
T Animalrbasedienergy
2 Investment Banks
Z DF|s
} kit/lass,stabilisation and erosion control 2
giomass energy P,9duc,i°.-./ I Buffering and attenuation of mass flows 2
Small-scale irrigated arable cm s
Electric/nuclear ower transmission and distribution
l.arge—scale rain ed arable crops
Aquaculture _
Oi and gas transportation
srnall-scale rainied arable crops
Gas rl u on ,
Ra: way transportation
Fibre—aptic cable installation (marine)
Source: BNM (unpublished data), ENCORE, WB calculations
48 This sectoral analysis covers approximately 90 percent of the total corporate loan portfolio of Malaysian banks.
49 The oil and gas sector that is relatively important for the Malaysian economy does not show up prominently in this analysis as oil and gas companies receive
large shares of their financing from capital markets.
Chapter 2 - Exposure Assessment
It should be noted that the indicated dependencies per bank level rely on sectoral global averages from the ENCORE database. Ecosystem service dependency
might differ depending on project design and should ultimately be assessed on a project level. For instance, a real estate investment that incorporates a
passive house standard (i.e. a green building standard) might be far less dependent on ecosystem services such as water compared to conventional real estate
projects.
50
Figure 14: Relative commercial lending exposure to sectors with high or very high dependencies
(physical risk)
Source: BNM (unpublished data), ENCORE, WB calculations
Note: Sectors according to the Statistical Classification of Activities in the European Community (NACE)
Real estate activities
Construction of buildings
Wholesale trade, except of motor vehicles and motorcycles
Crops and animal production, hunting and related service activities
Manufacture of food products
Accommodation
Retail trade, except of motor vehicles and motorcycles
Wholesale and retail trade and repair of motor vehicles and motorcycles
Warehousing and support activities for transportation
Others
26.6%
15.4%
9.0% 7.7%
5.7%
4.2%
4.1%
2.1%
2.1%
23.2%
Among all ecosystem services, Malaysian banks depend most strongly on individual ecosystems
which provide surface water (30 percent), ground water (14 percent), flood and storm protection (16
percent), and climate regulation (26 percent) (Figure 15). Of every RM per loan, almost half depends highly
or very highly on these four ecosystem services. For instance, Ulu Muda forest complex, covering 7 forest
reserves, is an important water catchment forest not only for Kedah (96 percent of its water supply), but also the
neighboring states of Penang and Perlis (80 percent and 50 percent of water supply respectively) (Sharma 2016,
Ramasamy 2017). Flood and storm protection is becoming increasingly important as climate change grows.
For example, floods have already had a substantial impact in Malaysia, with the recent Klang Valley and East
Coast floods. The high dependence on climate regulation – long-term carbon storage in natural assets such as
soils, vegetable biomass, and the oceans, as well as the role of vegetation to modify temperatures, humidity,
and wind speeds at local levels – indicates the strong relevance of natural asset intactness moderating climate
change impacts. This shows how climate- and nature-related risks are interacting, with large potential for co-
benefits from policy, regulation, and investment.
These dependencies of Malaysian banks on ecosystem services vary widely across the types of banks
and across individual banks within the same category.50 Ecosystem service dependency varies across bank
types, with commercial banks (54 percent) and Islamic banks (55 percent) showing the highest dependency.
Both bank types are specifically dependent on climate regulation and surface water, indicating their large
exposure towards real estate activities and wholesale sectors. DFIs (46 percent) show a relatively strong
dependency on flood and storm protection, indicating the importance of infrastructure and agricultural sectors
in their loan portfolio. Dependencies on ecosystem services vary across individual banks, even within the same
bank type (Figure 16). Investment banks have the lowest exposure to ecosystem service dependent sectors on
average (40 percent), with a high variability across peers. While the overall categories of commercial banks and
Islamic banks have the highest dependency on ecosystem services in their loan portfolios, for individual banks
dependency can be as low as 10 percent. Those dependencies are often driven by a specific lending focus in
banks’ portfolios, with agriculture, real estate, and construction lending showing high dependencies.
35An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
Figure 15: Dependency of the commercial lending portfolio to individual ecosystem services
(percentage)
Source: BNM (unpublished data), ENCORE, WB calculations
Figure 16: Unweighted share of commercial lending portfolio with high or very high
dependencies on ecosystem services by type of bank
Surface water
E
co
sy
st
em
S
er
vi
ce
Climate regulation
Flood and storm protection
Ground water
Water �ow maintenance
Soil quality
Mass stabilization and erosion control
Disease control
Buffering and attenuation of mass �ows
Pest control
Pollination
Water quality
Animal-based energy
Fibers and other materials
Maintain nursery habitats
Very high dependency
0 20 40 60 80 100
High dependency
Share of Total Credit to Economic Sectors in %
Other
80
70
60
50
40
30
20
10
0
Islamic Banks Development Finance Institutions Investment Banks Commercial Banks
P
er
ce
nt
ag
e
Bank Type
Source: BNM (unpublished data), ENCORE, WB calculations
36 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
Nature-related financial transition risk could emerge for Malaysian banks through the financing of
companies that have negative impacts on biodiversity and ecosystem services, as these companies
could face regulatory or reputational implications. A transition to conserve and restore biodiversity may
expose companies, and the banks financing them, to potential disruptions and shocks (see Section 1.3 for
details). Regulatory and reputational issues could emerge for entire sectors, posing sectoral transition risk.
For example, in 2019, Norway’s USD 1 trillion Government Pension Fund Global, revealed that since 2012, the
Fund had divested from 33 palm oil companies over deforestation risks.51,52 This included Malaysia’s Sime Darby
Plantation, the world’s largest oil palm planter by land size. The Fund also announced that it was asking banks
in Indonesia, Malaysia, and Brazil to adopt No Deforestation criteria for their loans to the agricultural sector
(Norges Bank 2019). The analysis of impacts on ecosystem services follows the same methodology as for the
dependency of ecosystem service assessment.
Eighty-seven percent of the commercial loan portfolio analyzed are channeled to sectors which highly
or very highly impact various natural assets and ecosystem services (Figure 17). This represented RM 639
billion (USD 151 billion) of commercial loans outstanding to these sectors as of December 2020. Malaysian banks
could face high risk to changes in regulations, technologies, and consumer preferences driven by concern over
these environmental impacts. This further emphasizes the importance for the financial sector to start taking
actions to mitigate such transition risk.
https://www.nbim.no/en/the-fund/investments/holdings-as-at-31.12.2018/
https://www.regnskog.no/en/news/norways-government-pension-fund-acts-against-deforestation-divests-major-agricultural-companies
51
52
2.2 Impacts on Ecosystem Services
Figure 17: The environmental impact of financial sector lending per Malaysian ringgit
invested (in million RM)
Source: BNM (unpublished data), ENCORE, WB calculations
Commercial Banks
Real estate activities
Infrastructure holdings
Construction
GHG emissions
Solid waste
Water use
Terrestrial ecosystem use
Water pollutants
Soil pollutants
Disturbances
Non-GHG air pollutants
Freshwater ecosystem use
Marine ecosystem use
Other resource use
Distribution
Islamic Banks
Investment Banks
DFIs
Commercial Banks
Real estate activities
Infrastructure holdings
Construction
GHG emissions
Solid waste
Water use
Terrestrial ecosystem use
Water pollutants
Soil pollutants
Disturbances
Non-GHG air pollutants
Freshwater ecosystem use
Marine ecosystem use
Other resource use
Distribution
Islamic Banks
Investment Banks
DFIs
37An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
Figure 18: Relative commercial lending exposure to NACE sectors with high or very high
impacts
Source: Based on unpublished BNM data and ENCORE data
Real estate activities
Wholesale trade, except of motor vehicles and motorcycles
Construction of buildings
Civil engineering
Retail trade, except of motor vehicles and motorcycles
Crops and animal production, hunting and related service activities
Manufacture of food products
Others
43.0%
16.6%
11.2%
9.6%
6.1%
5.1%
4.8%
3.5%
The impacts considered here are classified as high or very high impacts. 53
Yet, the commercial lending portfolio of Malaysian banks that highly or very highly drive impacts, are
mainly accounted by six sectors which are responsible for over half of those impacts. This is both due
to the size of lending exposure and the sectoral characteristics. Those sectors include real estate activities (17
percent), wholesale trade (11 percent), construction of buildings (10 percent), civil engineering (6 percent), retail
trade (5 percent), and crops and animal production (5 percent) (Figure 18). Drivers of environmental impact,
such as excessive water use, in turn affect the underlying natural assets, such as species, water, and habitat.
The banking sector could be particularly exposed to these drivers of environmental impacts given that
Malaysia is a megadiverse country and the structure of its economy largely comprises production
activities that are closely tied to natural assets and ecosystems. However, as becomes evident, the
sectoral impacts on natural assets and ecosystem services are less concentrated than sectoral dependencies
on ecosystem service provision. This indicates the wide range of economic activities that have a negative
impact on nature and the scope of the challenge to reduce those impacts.
Among all impact drivers, the ones individually impacted the most53 through commercial lending by
Malaysian banks are GHG emissions (61 percent), water use (56 percent), and terrestrial ecosystem
use (43 percent) (Figure 19). Of every RM of lending by the banks, about 40 cents are in sectors that highly
or very highly impact these three impact drivers. This indicates the strong exposure of the natural assets that
are most severely impacted by those impact drivers. GHG emissions are a main driver of impact on ecosystem
services by contributing to climate change, which highlights the interlinkage between climate-related and
nature-related risks. It further highlights the relevance of marine and terrestrial protected areas to lower
impacts, and helps to maintain key ecosystem service provision in Malaysia. Enforcement of existing protected
areas and the creation of new areas could pose significant nature transition risk to the Malaysian banking sector.
38 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
Figure 19: Impact of the commercial lending portfolio on impact drivers from firms’ business
activities (in percentage)
Source: BNM (unpublished data), ENCORE, WB calculations
GHG emissions
Im
p
ac
t
d
ri
ve
rs
Water use
Terrestrial ecosystem use
Solid waste
Soil pollutants
Disturbances
Non-GHG air pollutants
Water pollutants
Freshwater ecosystem use
Marine ecosystem use
Other resource use
Very high
0 20 40 60 80 100
High
Share of Total Credit to Economic Sectors in %
Other
39An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
The impacts of Malaysian banks on natural assets and ecosystem services are generally high but vary
across types of banks and individual banks.54 Impact drivers vary strongly across individual banks (Figure
20), depending on their lending focus. Banks that have a large exposure towards real estate activities and
infrastructure projects, for instance, contribute to the deterioration of natural assets and ecosystem services
via GHG emissions, terrestrial ecosystem use, and water-related impacts (i.e., water use and water pollutants).
This partially explains why DFIs have a relatively high impact on natural assets and ecosystem services in their
loan portfolio (95 percent), followed by Islamic banks (89 percent). There is a relatively low variability in impact
among DFIs and Islamic banks, indicating a homogenous impact in their lending activities amongst peers (e.g.,
DFIs usually lend to sectors with high impacts on nature such as infrastructure and agriculture55). Investment
banks show the lowest impact on average; but it is still 70 percent. Additionally, there is high variability across
the group.
Figure 20: Unweighted share of commercial lending portfolio with high or very high impact
drivers from firms’ activities on natural assets and ecosystem services by type of bank
Source: BNM (unpublished data), ENCORE, WB calculations
100
90
80
70
60
50
40
30
Islamic Banks Development Finance Institutions Investment Banks Commercial Banks
Pe
rc
en
ta
g
e
Bank Type
It should be noted, however, that the indicated impacts per bank level rely on sectoral global averages from the ENCORE database. Ecosystem service
impacts might differ depending on project design and should ultimately be assessed on a project level. For instance, a civil engineering project that includes
a comprehensive environmental impact assessment in the planning phase might be far less impacting on ecosystem services compared to conventional real
estate projects.
Note that impact might vary with projects and only global averages are considered here. For example, a sustainable agriculture project with no fertilizer and
pesticide use and space for species that is financed by a DFI might actually create a nature-positive impact.
54
55
40 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
The upstream palm oil sector is often linked with deforestation, making it particularly susceptible
to transition risk. The sector is particularly relevant for Malaysia as it contributed to 2.7 percent of
the country’s GDP in 2019 and is its biggest agricultural export (DOSM 2021). However, shifts in public
perception and increased investor pressure have led to an increased focus on reducing the use of
commodities with negative environmental impact within the supply chains and production processes
of companies. The environmental concerns linked to palm oil have triggered major regulatory and
market movements, such as the EU’s 2019 Renewable Energy Directive, which requires that by 2030,
no crop sourced from recently deforested areas or peatlands can be used to produce biofuels.56
These considerations linked to negative environmental impacts of the palm oil sector in Malaysia
can be a source of transition risk to companies and the financial institutions linked to them. Already,
there have been tentative signs of transition risk impacting companies’ stock price performance.
While crude palm oil prices rose 42 percent year to year in November 2021, the FBM KLCI Plantation
Index slipped 3.8 percent during the corresponding period. This was partly attributed to the “steep
ESG discount attached to plantation stock valuations” amid “deforestation, fire and haze, and labor
concerns”.57
The Malaysian government has enacted policy measures to boost the share of sustainability
certified palm oil58, aiming to mitigate such transition risk. It has enforced mandatory sustainability
standards under the Malaysia Sustainable Palm Oil (MSPO) scheme, which mandate all oil palm
plantations to be certified for sustainability (Malaysia Palm Oil Board, Government of Malaysia). As of
end-2020, 88 percent of the total oil palm planted area in Malaysia, equivalent to 5.2 million hectares,
has been MSPO certified.59 Meanwhile, 21 percent of the planted area has also been certified under
the internationally recognized Roundtable on Sustainable Palm Oil.60 There is also a proposal to cap
the area of oil palm plantations to 6.5 million hectares by 2023, whereas the area recorded in 2018
was 5.8 million hectares.61
BOX 2
Case Study – Transition risk for Malaysia’s
palm oil sector
https://ec.europa.eu/commission/presscorner/detail/en/MEMO_19_1656
CPO Price Rally Marred by ESG Concerns, Public Invest Research Sector Update November 8, 2011
https://www.eco-business.com/news/what-is-sustainable-palm-oil/
https://mspotrace.org.my/Home
https://rspo.org/news-and-events/news/press-release-positive-growth-for-sustainable-palm-oil
https://www.thestar.com.my/business/business-news/2021/01/05/malaysia-committed-to-cap-total-oil-palm-planted-area-at-65m-hectares
56
57
58
59
60
61
Figure 21: High resolution Malaysia industrial and smallholder oil palm map for 2019
Source: Adrià et al. 2021, WB calculations
Sabah
Sarawak
Selangor
Kuala Lumpur
Putrajaya
Labuan
Pahang
Perak
Melaka
Pulau Pinang
Negeri
Sembilan
Terengganu
Kelantan
Kedah
Perlis
Johor
Industrial oil palm plantations Smallholder oil palm plantations Other land cover
41An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
Malaysian banks could also be exposed to spatial biodiversity transition risk by financing companies
that operate in nature and biodiversity-relevant areas. To protect those sites, the government could
introduce new protective policy measures that would restrict or even impede business operations in those
locations. Companies could face relocation costs or a need to adjust business models, potentially weakening
their financial position. Consequently, transition risk for the Malaysian banking sector could emerge.
Ambitious global nature conservation targets would require Malaysia to significantly increase its
protected area scope (currently at about 13 percent of its land area [UNEP-WCMC 2021]), posing a
potential risk for firms that currently operate in to-be protected areas. Recent research shows that more
ambitious and urgent steps are needed to stop the rapid decline in biodiversity (IPBES 2019). Thus, a target of
30 percent protection of the Earth’s land and sea area by 2030 (“30x30” goal) is currently being discussed62 and
was officially put forward at the UN Convention on Biological Diversity in October 2021 in Kunming, as part of
the ‘Kunming Declaration’ (2021).63 This would mean a significant step-up compared to the 2010 declared Aichi
Biodiversity Targets, which aim for 17 percent of terrestrial and 10 percent of maritime area protection across
the globe (currently at 15 percent globally [Lewis et al. 2019]).
Current non-protected KBA could serve as a proxy for areas that could become protected if Malaysia
follows the targets of the ‘Kunming Declaration’. Protecting currently non-protected KBA would increase
the share of terrestrial protected areas (Figure 22, panel a and b) of total land area from 13 percent (UNEP-
WCMC 2021)64 to about 24 percent. However, KBA relevance is not equally distributed across Malaysian states
(Figure 23). States such as Perak, Pahang, Kedah, and Selangor are biodiversity hotspots, with KBA making up
almost 50 percent of Perak’s land area. While Malaysia has seen ambitious efforts in stepping-up protected
areas since the 2000s (UNEP-WCMC 2021), a large share of KBA in Malaysian states is currently non-protected
(see light blue bars in Figure 23 as a share of dark blue bars). As such, firms currently operating in those regions
could be restricted, with implications for their financing banks.
For the spatial transition risk analysis, postal code-based lending data65 for commercial non-
residential and residential property purchases (excluding household loans) are mapped to KBA. KBA
could potentially be designated as protected in the future and it is thus relevant to see banks’ financial exposure
to those areas. This report refers to the gap between the protected areas and KBA as “currently non-protected
KBA” and is intended to provide a proxy for areas that could become protected in the future. The sample has
loans outstanding and the location of loan utilization as of December 2020 and covers about 5 percent of the
overall commercial lending data sample.
The Malaysian banking sector has RM 329 million (USD 78 million) in lending exposure to firms
that are active in currently non-protected KBA, although limitations in the analysis, such as data
restrictions, suggest this could be a conservative estimate. Figure 24 shows the geographical distribution
of Malaysian banks’ commercial residential and non-residential property lending that occurs in currently non-
protected KBA.
Malaysia is also currently considering protecting at least 30% of terrestrial areas and inland waters and 15% of coastal and marine areas through an effectively
managed and ecologically representative system of protected areas and other effective area-based conservation measures by 2030.
Due to COVID-19, the final negotiations on the Kunming Declaration will not take place until May 2022.
Terrestrial protected areas are as of 2016, marine protected areas as of 2022.
Data correspond to the location of loan utilization i.e., where the economic activity is undertaken.
62
63
64
65
2.3 Activities in Key Biodiversity Areas
42 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
Figure 22: Protected areas in Malaysia
Source: UNEP-WCMC 2021, WB calculations
Malaysia
W.P. Putrajaya
W.P. Labuan
W.P. Kuala Lumpur
Terengganu
Selangor
Sarawak
Sabah
Pulau Pinang
Perlis
Perak
Pahang
Negeri Sembilan
Melaka
Kelantan
Kedah
Johor
St
at
e
% of total state area
0 5 10 15 20 25
Protected area share within Malaysian States
a) Protected terrestrial area share of total state area as of 2016, by state in Malaysia (percent)
b) Protected area (state parks, wildlife reserves, forest reserves) in Malaysia (terrestrial and marine)
Sabah
Sarawak
Selangor
Kuala Lumpur
Putrajaya
Labuan
Pahang
Perak
Melaka
Pulau Pinang
Negeri
Sembilan
Terengganu
Kelantan
Kedah
Perlis
Johor
State park Wildlife reserve Forest Reserve
43An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
Figure 23: Protected and non-protected KBA as a share of Malaysian States area (percent of
total state area)
Malaysia
W.P. Putrajaya
W.P. Labuan
W.P. Kuala Lumpur
Terengganu
Selangor
Sarawak
Sabah
Pulau Pinang
Perlis
Perak
Pahang
Negeri Sembilan
Melaka
Kelantan
Share of protected KBA
Share of non-protected KBA
Kedah
Johor
St
at
e
% of total state area
Key biodiversity area share within Malaysian States
0 10 20 30 40
Source: Statistical Office Malaysia, IBAT (BirdLife International Partnership, Alliance for Zero Extinction), WB calculations
The share of commercial lending to non-protected KBA of overall commercial lending is relatively
small, which could be explained by three reasons. First, the geospatial resolution of available financial data
only covers residential and non-residential property lending, constituting only a share of 5 percent of overall
commercial lending in our sample. Further, the matching process would benefit from geospatial files that
could provide the full extent of postal code level territories. Second, sectors that are most likely to be active
in those areas include agriculture and mining, only constituting about 5 percent of overall commercial lending
of Malaysian banks (Figure 7). Third, the states with the highest shares of non-protected KBA such as Perak,
Kedah, and Sarawak only make up about 3 percent, 2 percent, and 6 percent respectively of state-level lending
by Malaysian banks (Figure 8), whereas the bulk of the lending of over 60 percent goes to just two states that
have limited KBA in their state area (Kuala Lumpur) or no lending that would occur in KBA (Selangor).
KBA are in areas that are relatively untouched by economic activity as strong economic activity in
those areas would have deteriorated biodiversity and as such impacted their status as KBA. This could
point to the fact that first-order spatial transition risk might not be as problematic for the Malaysian banking
sector but instead second-order dependencies for firms that depend on the primary inputs from agriculture
and mining, such as manufacturing and construction firms, could be indirectly impacted by spatial transition
risk.66 Figure 25 supports this claim as the net balance of potential provision of ecosystem services and use of
ecosystem services for each district in Malaysia differ strongly across the country. The coastal urban areas of
An analysis of upstream and downstream input dependence for selected countries has been conducted by Cahen-Fourot et al. (2020) and Cahen-Fourot et
al. (2021)
66
44 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
https://data.humdata.org/67
Figure 24: Commercial residential and non-residential purchase lending exposure by Postal
Code area of Malaysian banks to non-protected KBA
Source: Statistical Office Malaysia, IBAT, BirdLife International Partnership, Alliance for Zero Extinction, BNM (unpublished data), Humanitarian Data Exchange
2021,67 WB calculations
Figure 25: Net ecosystem service use (potential vs. realized services index) per district in
Malaysia. Model results from the Co$tingNature version 3 policy support system
Source: Mulligan, M. (2021), Humanitarian Data Exchange 2021, WB calculations
Sabah
Sarawak
Selangor
Kuala Lumpur
Putrajaya
Labuan
Pahang
Perak
Melaka
Pulau Pinang
Negeri
Sembilan
Terengganu
Kelantan
Kedah
Perlis
Johor
Non-protected key biodiversity areas Protected key biodiversity areas Currently protected areas Financial exposure
0.6
0.4
0.2
0.0
-0.2
-0.4
-0.6
R
el
at
iv
e
to
ta
l p
ot
en
ti
al
s
er
vi
ce
s
in
d
ex
Peninsular Malaysia’s west coast with its strong manufacturing, services, and construction sectors (Figure 9) are
net consumers of ecosystem services. The protected areas in Perak, Pahang, Sarawak, and Sabah, in contrast,
are net providers of ecosystem services.
45An Exploration of Nature-Related Financial Risks in Malaysia
46 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
To assess nature-related financial risks for prudential purposes, there is a need to go beyond exposure
analysis and identify those risk scenarios that can materially affect banks’ balance sheets. The
scenarios should provide a coherent narrative for adverse events that produce severe economic and financial
damage while at the same describing a set of plausible futures. In practice, macroprudential authorities and
micro prudential supervisors often work with scenarios that have yearly probabilities of occurring between 1 in
10 to 1 in 1,000 years, to reflect that distributions of event occurrences might shift with growing climate change
or nature-related risks.
In contrast to climate-related scenarios, however, nature-related risks are less well understood and to
a higher degree multidimensional.68 For example, ENCORE identifies 21 different ecosystem services and
27 different drivers of environmental change. This poses challenges for the development of nature-related
financial risk scenarios and more research is needed on this matter.
A preliminary set of scenarios were developed for this report based on ENCORE, stakeholder interviews,
and an explorative analysis of drivers of nature-related financial risk scenarios in Malaysia.69 The
scenarios capture current banking sector exposure in case of adverse events, such as floods or storms, far-
reaching ecosystem service deterioration, or sudden policy changes, that could affect a combination of different
ecosystem services and thus a multitude of economic sectors. The analysis above considered Malaysian banking
sector exposure to nature risks in sectors and individual or entire ecosystem services. The scenarios for this
section are not projections of business-as-usual, but rather state the current financial exposure if identified
ecosystem services defaulted.
The identification of 21 physical and 7 transition risk scenarios shows the range of the banking sector’s
commercial loans portfolio exposure. Exposure ranges from 44 percent (reduced ecosystem services due
to continued high resource use, pollution, and urban sprawl) to 0.5 percent (species decline due to excessive
hunting) (Figure 26). Scenarios with the highest banking sector exposure are those that would affect a wide
range of sectors, such as a general deterioration of ecosystem services for example due to high resource
use, pollution, and urban sprawl (44 percent) or high rates of deforestation (30 percent). Exposure was also
high regarding scenarios that could affect firms’ costs and business models in multiple sectors, for example
sudden and unexpected climate policy introduction (38 percent), regulatory restriction of water pollution (17
percent), and sudden increase in the price of water (removal of subsidies / market dynamics) (17 percent). Some
physical risk scenarios were only expected to directly affect a few sectors with banking sector exposure. These
included reduced agricultural yields and water pollution due to intense agri- and aquaculture (2.5 percent),
animal disease outbreak (0.8 percent), and severe reduction in available fish stock (0.7 percent).
Sectors that are exposed in almost every physical and transition risk scenario are the agricultural,
forestry, and fishing sectors as they have a high and direct dependence on multiple ecosystem services.
Further, the electricity sector would be affected in multiple scenarios as it is highly dependent on regulating
ecosystem services such as flood and storm protection and climate regulation. Drivers that could lead to the
most severe scenarios in terms of Malaysian banking sector loan exposure are land- and sea use change,
Nature-related risks are often interconnected (e.g., soil erosion, groundwater depletion, biodiversity loss), caused by multiple anthropogenic drivers (e.g.,
intensive agriculture, deforestation, pollution), while acting on multiple scales (from local ecosystems to planetary processes), while interacting with climate
change (Kedward et al. 2020).
See Appendix Section A4 and A5 for details. Appendix Section A4 provides a high-level analysis of the five core drivers of biodiversity and nature loss,
land- and sea-use change, extensive natural resource use and exploitation, climate change, pollution, and invasive species spread (IBPES 2019), as well as
governance and policy uncertainty related issues in the context of Malaysia. Appendix Section A5 describes core findings of the interviews in detail.
68
69
2.4 Physical and Transition Risk Scenarios
47An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
Figure 26: Identified nature-related financial risk scenarios by banking sector exposure
Source: ENCORE, BNM, interviews, WB calculations.
Note: Dark blue scenarios are nature-related financial transition risk scenarios, light blue scenarios are nature-related financial physical risk scenarios. Exposure
amounts are based on the share of corporate loans to economic sectors that could be directly affected in the scenario under consideration.
Reduced ecosystem services due to resource overuse, pollution and urban sprawl
Sudden and unexpected climate policy introduction
Ecosystem services deterioration due to deforestation
Regulatory restriction of water pollution
Sudden increase in the price of water
Severe reduction in available timber
Increase in sea surface temperature
Changed ocean current and circulation
Severe �ooding occurrence
Severe storm occurrence
Extension of protected areas
Increased ocean acidi�cation
Regulatory restriction of non-sustainable pesticides
Regulatory restriction of non-sustainable fertilizers
Lower clean water availability due to continously high water pollution
Lower water availability for other ecosystem services
Severe drought occurrence
Reduced agricultural yields and water pollution
Atmospheric pollution causing deterioration of ecosystem services
Unmanaged waste disposal and soil pollution affecting habitats
Severe wild�re occurrence
Species decline due to excessive hunting
Invasive species sprawl
Animal disease outbreak
Species decline due to genetic modi�cation
Severe reduction in available �sh stock
Pest outbreak
Regulatory / market backlash against non-sustainable forestry
N
at
ur
e-
re
la
te
d
�
na
nc
ia
l r
is
k
sc
en
ar
io
Share of total commercial loans outstanding (%)
0 20 40
natural resource use and exploitation, and climate change. Further, governance is an important scenario driver,
especially with respect to transition risk.
Within the environmental risk dimension of the ESG framework on sustainability, nature-related risks
complement and partly overlap with those risks associated with climate change. For example, this study
found that two important nature-related risk factors to which Malaysian banks have exposure are: (1) imposition
of more stringent climate policies and (2) efforts to preserve nature’s function as a store of CO2. However, there
are highly relevant risk factors not directly related to climate change – including extensive water use, land use,
and pollution other than GHGs.
This report restricts itself to a ‘possibility range’ of nature-related risk scenarios. The reported scenarios
are not projections of a business-as-usual scenario. They constitute a range of possible nature-risk scenarios for
Malaysia. The materialization and degree of risk depends on vulnerability, likelihood of occurrence, and indirect
impacts, which require further research. In general, the likelihood and financial consequences of specific nature-
related risk scenarios are challenging to determine given the complexity, non-linearity, and endogeneity of
causal relationships (Svartzman et al. 2021; NGFS 2021; Kedward et al. 2020). Likelihood of occurrence would
depend on the current conditions of scenario relevant aspects such as natural assets or policy regulation as
well as an uncertainty range, considering nature and policy related factors as well as shared socioeconomic
pathways.70 There exists a wide range of models that could assess impacts of scenarios of drivers of biodiversity
and ecosystem service-related issues (Kim et al. 2018; Lade et al. 2021; Schaphoff et al. 2018) but important
knowledge gaps specifically with respect to economic and financial impacts remain (IPBES 2016). Studies on
nature-related risks from diverse countries can help fill these gaps (See Box 3).
See O’Neill et al. (2014) for discussion of shared socioeconomic pathways and their use.70
48 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
Central banks around the world are increasingly beginning to investigate biodiversity and
other nature-related impacts and dependencies of financial systems. Initial studies by central
banks including the Netherlands (van Toor et al. 2020), France (Svartzman et al. 2021), and
Brazil (Calice et al. 2021) were recently published. In each country, the studies indicate material
exposures to risks resulting from biodiversity loss.
Results from these countries are not necessarily directly comparable to those of Malaysia
but are described here as additional context. This is due to differences in: 1) economic
structures, 2) level of biodiversity (Brazil is classified as megadiverse like Malaysia but France
and the Netherlands are not), 3) study scope and methodologies applied (only Malaysia looks at
transition risk from ENCORE drivers of environmental impacts), and 4) scope of data used for
the analysis (each study relied on the ENCORE database for data on ecosystem services, but in
the Netherlands this covered not only banks’ corporate loan portfolio, as in Malaysia, but also
other parts of the financial system).
• The Netherlands: Van Toor et al. (2020) find that financial institutions have material
exposures to risks resulting from biodiversity loss and that the sector finances companies
that have an impact on biodiversity. Dutch financial institutions have provided EUR 510
billion in finance (36 percent of the portfolio of investments by Dutch financial institutions)
to companies that are highly or very highly dependent on one or more ecosystem services.
Financial institutions also have exposure of EUR 28 billion to companies operating in areas
that are protected or that might come under protection and EUR 96 billion of investments in,
or loans to, companies involved in environmental controversies with negative consequences
for ecosystem services or biodiversity.
• France: Svartzman et al. (2021) also find substantial exposures to biodiversity risks in its
estimates of dependencies and impacts of the French financial system on biodiversity. 42
percent of the value of securities held by French financial institutions comes from issuers that
are highly or very highly dependent on one or more ecosystem services. The accumulated
terrestrial biodiversity footprint of these securities is comparable to the loss of at least
130,000 km² of “pristine” nature, which corresponds to the complete artificialization of 24
percent of the area of metropolitan France.
• Brazil: Results in Calice et al. (2021) also suggest that exposures to biodiversity loss
and related economic costs are material. 46 percent of Brazilian banks’ non-financial
corporate loan portfolio is concentrated in sectors highly or very highly dependent on
one or more ecosystem service. Output losses associated with the collapse in ecosystem
services could translate into a cumulative long-term increase in corporate non-performing
loans of 9 percentage points. 15 percent of Brazilian banks’ corporate loan portfolio is to
firms potentially operating in protected areas, which could increase to 25 percent should
conservation gaps close, and 38 percent should all priority areas become protected. Finally,
7 percent of corporate loans are to firms with recorded environmental controversies.
BOX 3
Context for nature-related risks to the
financial sector: Findings from the Netherlands,
France, and Brazil
49An Exploration of Nature-Related Financial Risks in Malaysia
Potential Actions to
Address Nature-Related
Financial Risks
CHAPTER 3
50 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 3 - Potential Actions to Address Nature-related Financial Risks
Based on the initial assessment on nature-related financial risks to the financial sector in Malaysia
and the exposures identified, further steps could be considered by financial sector regulators and
supervisors in Malaysia in tandem with its ongoing climate change initiatives to effectively manage
nature-related financial risks. Although the discussion on nature-related financial risks is still at a nascent
stage compared to climate-related financial risks, BNM, as part of its mandate to promote monetary and financial
stability conducive to the sustainable growth of the Malaysian economy, could take a proactive approach
to gradually build its internal regulatory and supervisory capacity in identifying, assessing, monitoring, and
managing nature-related financial risks.
Efforts to address nature-related financial risks could follow a similar roadmap as used to address
climate-related financial risks, where BNM has adopted a phased strategy. Initial efforts could focus
first on increasing awareness of nature-related financial risks and capacity building. Later efforts could enhance
existing regulatory and supervisory measures, in line with the evolving global regulatory and supervisory good
practices, to which BNM could also help contribute knowledge development and regulatory discourse on
nature-related financial risks in the region and globally – as part of bodies such as the NGFS.
Four domains where actions could be undertaken are: (1) Raising awareness, stakeholder engagement, and
policy discourse on understanding nature-related financial risks, (2) Enhancing capacity building of relevant
stakeholders, (3) Strengthening macroeconomic surveillance capacity and risk identification, and (4) Developing
regulatory and supervisory requirements, described in further detail below.71 Actions are categorized according
to intensity of effort, recognizing that resources are scarce in any central bank and trade-offs will need to be
made in allocating resources to nature-related risks, particularly relevant during this COVID-19 period.
While this report focuses on actions that are largely in the domain or sphere of influence of BNM as
a central bank, it recognizes that national governments bear primary responsibility and have broader
tools to address biodiversity loss and climate change in an integrated manner. Additional actions could
be considered by other Malaysian authorities as the country moves towards a net-zero economy. For instance,
the Ministry of Environment and Water could better coordinate alignment between upcoming climate policies,
such as the Long-term Low Emissions Development Strategy, with the action plans and targets of the National
Policy on Biological Diversity. Delineating nature-positive low carbon pathways would be an important step to
avoid potentially negative trade-offs from climate mitigation strategies that could have detrimental impacts on
biodiversity and ecosystem health (e.g., poorly designed low-carbon infrastructure or energy projects). Such
broader efforts to promote integrated approaches to nature-related risks would lend greater impetus and
impact to financial sector actions.
1. Raising awareness, stakeholder engagement, and policy
discourse on understanding nature-related financial risks:
• Socialize key themes from this report with key stakeholders: As part of the broader discourse in
Malaysia on nature and biodiversity, and in parallel with other efforts to support climate action, BNM could
socialize findings of this report with government agency stakeholders such as the Ministry of Environment
and Water and the Ministry of Energy and Natural Resources. BNM could also encourage engagement of
state-level agencies and the broader community of non-government and financial sector professionals,
including its supervised financial institutions.
See also the recent World Bank report (2021c) for more universal recommendations on nature-related actions.71
51An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 3 - Potential Actions to Address Nature-related Financial Risks
• Contribute to knowledge programs that raise awareness of nature-related financial risks: BNM could
share its understanding of nature-related financial risks within knowledge programs on climate change
and other relevant themes as part of its efforts to address emerging risks.
• Advocate and work closely with the government to ensure nature-related financial risks are
considered in relevant policies and investment decisions. Complementary actions could include
encouraging the public and private sector to consider the value and price of ecosystem services and
relevant policies in investment decisions. Natural capital accounting (as, for instance, proposed by the UN
System of Environmental Economic Accounting)72 provides a more comprehensive stocktake of a country’s
natural wealth (WB 2021a). It can support government, regulators, and private sector participants to better
manage natural assets and inform investment and development decisions for conservation, restoration,
and sustainable use of nature.
• Encourage and support the government towards developing a cohesive national strategy to
address nature-related risks along with climate change: Plans to address nature-related financial risks
for the wider financial sector should be designed to leverage synergies with ongoing efforts for climate
change. Coordinated efforts would support timely and smooth implementation and support effective
prioritization amidst multiple competing priorities. It would also avoid unintended consequences such as
detracting efforts from ongoing climate change implementation.
2. Enhancing capacity building of relevant stakeholders:
• Expand capacity building and stakeholder engagement with key working groups for the financial
sector: Existing capacity building and stakeholder engagement programs under the JC3 could be
leveraged and expanded to include increased awareness of nature-related risks with other stakeholders.
• Collaborate with key knowledge partners to build understanding and tools for nature-related
financial risks. Further collaboration with conservation organizations, ecologists, and interdisciplinary
academic researchers can help to strengthen understanding and tools for assessing nature-related risks.
• Support development of incentives and instruments to mobilize private finance for the protection
and management of biodiversity and ecosystem services. A key challenge is to attract private finance
for the conservation of nature, particularly when financial returns to investment are low. Along with other
stakeholders, BNM could support the development of short-term financial incentives for companies to
implement their sustainability strategies or to drive nature-smart investments73 and disseminate relevant
information on borrowers, incentives, and instruments for greater mobilization of private finance for
protection and management of biodiversity and ecosystem services (see Box 4).
• Provide financial sector perspectives to government to expand existing government grants/funds
related to climate change to encompass goals relevant to protection of biodiversity and ecosystem
services: Over time, BNM and other stakeholders could advocate expanding existing funds for mitigating
the impacts of climate change to encompass goals that reduce nature-related risks. In addition, DFIs have
https://seea.un.org/
A range of instruments to encourage private finance, including the sustainability linked loan tying interest rates to a company’s reduction of biodiversity impact
and associated risk and incentives to bridge the gap between public and private financing, are discussed in the World Bank report, Mobilizing Private Finance
for Nature (2020).
72
73
52 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 3 - Potential Actions to Address Nature-related Financial Risks
One of the key issues hampering protection of nature in Malaysia has been the lack of
funds available for habitat and species conservation activities. State governors are often
landowners of key areas but have traditionally been reliant on revenues from natural resource
extraction practices such as timber harvesting, mining, and agricultural development that can
be detrimental to ecosystems.
Governments and regulators can help harness the power of the financial sector to mobilize
private finance at a scale to protect nature. The 2021 WB Report on Mobilizing Private Finance
for Nature highlighted a set of ideas including: (1) environmental fiscal reforms: using reforms as
part of COVID-19 crisis recovery plans, reforming agricultural subsidies and land ownership with
detrimental impacts, (2) national data provision: supporting the integration of nature-related
criteria in financial decisions by adopting national capital accounting practices and providing
relevant data as a public good, (3) establishing a task force for nature-related financial disclosure
(TNFD) (discussed in Box 5) to provide a framework for reporting and risk assessment, (4)
identifying companies with the greatest negative impact on nature, and v) providing catalytic
capital from multilateral development banks and government to funds and other financial
instruments to finance nature.
Financial incentives can help drive the transition to a nature-smart economy. For example, in
2019, Bunge, one of the world’s largest agricultural producers, took out its first sustainability-
linked loan. The interest rate was tied to the company reducing its biodiversity impact and
associated risks, namely increasing traceability for its main agricultural commodities, and
adopting sustainable practices across its wider soybean and palm oil supply chain. These
instruments have the potential to help drive the transition to a nature-smart economy by offering
short-term financial incentives for companies to implement their sustainability strategies.
Enabling financial infrastructure can also help green finance. In 2020, the Central Bank of
Brazil launched the sustainability pillar of its strategic plan which included the creation of a
Sustainable Rural Credit Bureau. This will be associated with the rural credit information system
and contain information on farmers’ sustainable practices as part of efforts to mitigate social,
environmental, and climate risks in the financial system. Rural credit beneficiaries can make
information registered in the new system (replacing its existing rural credit and agricultural
operations system) available to any interested party. Several of the 270 data fields collect and
verify information on the environmental and sustainability practices of each operation. A set
of parameters associated with the sustainability of rural projects will be prepared, which will
allow agricultural policy makers to assess the possibility of granting additional incentives to the
financing of these projects (Banco Central Do Brasil 2021).
BOX 4
Mobilizing private finance for nature
a mandate to support national development objectives and may show substantial exposure to nature-
related financial risks. Given their proximity to government and status as regulated entities, their funding
could also be leveraged to mobilize private capital towards green finance and provide a demonstration
effect of how sustainable finance could be mainstreamed within their own operations.
53An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 3 - Potential Actions to Address Nature-related Financial Risks
3. Strengthening macroeconomic surveillance capacity and risk
identification
• Improve understanding of interacting factors between climate and nature-related financial risks: In
the near-term, BNM could consider further developing its understanding of relevant scenarios, transmission
channels, and modelling methodologies, while continuing to monitor exposures to nature-related risks
periodically. This work could be informed by the developing global discourse on nature-related financial
risks, and could also influence it, given Malaysia’s relatively unique status as a megadiverse country with
high dependence on its ecosystem services.
• Incorporate a basic concept of nature-related financial risks in existing plans for a surveillance
framework on climate risks: This element could be incorporated where both risks have strong synergies,
such as deforestation and disaster resilience, without requiring an additional surveillance framework
related to nature-related risks.
• Improve data collection relevant to managing nature-related financial risks: Stronger collaboration
and coordination amongst interdisciplinary stakeholders such as ministries, regulators, the private sector,
and academics and experts from economic and natural sciences disciplines can help to fill gaps in
data needed to manage both climate and nature-related risks and support sharing of proprietary data,
particularly at local levels. Specifically, this could focus on building capacity to provide data on economic
impacts under different nature-related physical and transition risk scenarios (parallel to similar efforts
on climate-related risks). This could help identify the risks and opportunities that are most relevant for
Malaysia and complement the global data obtained from ENCORE. Government authorities could also
establish centralized environmental databases (e.g., forest cover and protected area maps, emissions
data, water stress maps, etc.) that are accessible and frequently updated as a public good to support
wider monitoring efforts. This process could also leverage ongoing work by the JC3 subcommittee
on data needs, which has undertaken a stakeholder consultation process to identify and prioritize the
collection of climate data for uses such as exposure quantification, investment and lending decisions, and
macroeconomic and financial stability modeling. Indicators on biodiversity are among the data that could
be considered for prioritized collection. Building these data over time, not only for the banking sector,
but also for non-bank financial institutions exposed to nature-related risks (e.g., insurance/takaful) could
provide a clearer picture of nature-related risks in the financial system.
• Consider nature-related financial risks as part of high-level reference scenarios for Malaysia: In the
medium to long term, Malaysia could develop stress testing for nature-related scenarios alongside those
being developed to examine climate-related risks.
• Consider supervisory deep dives at select banks that are deemed at higher risk: These supervisory
efforts could look at banks whose data indicates a greater level of risk, for example those who are financing
activities in (future) protected areas.
54 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 3 - Potential Actions to Address Nature-related Financial Risks
4. Enhancing regulatory and supervisory guidance related to
nature-related financial risks
• Enhance existing guidance in relevant taxonomies and frameworks to include findings on nature-
related financial risks: BNM could expand guidance for biodiversity or nature-related aspects in its CCPT
(BNM 2021) and Value-based Intermediation and Impact Assessment Framework (VBIAF) (BNM 2019) to
include more prominent considerations of nature-related financial risks. The CCPT adopts the principle
of ’do no significant harm to the environment‘, which means that an economic activity must protect
healthy ecosystems and biodiversity in order to satisfy the principle’s assessment criteria. Similarly, the
ASEAN Taxonomy for Sustainable Finance has also recognized the protection of healthy ecosystems
and biodiversity as a key environmental objective in its consultative draft. Guidance could be expanded,
for example by incorporating the concepts of drivers of environmental impacts and dependencies on
ecosystem services in the assessment process.
• Signal expectations for supervised financial institutions to understand the most relevant nature-
related financial risks faced by their institution: Based on the findings of this study, BNM could facilitate
further analysis and deep dives on potential risk exposures that stand out or indicate baseline practices
that could be adopted by financial institutions to identify high exposures to nature-related financial risks.
• Enhance climate-related regulatory guidance on risk management and voluntary disclosures with
specific aspects of nature-related financial risks: BNM could also consider efforts to enhance regulatory
guidance on climate-related disclosures with voluntary disclosure guidance on nature-related financial
risks, such as those being piloted by the TNFD (described in Box 5).
• Communicate regulatory and supervisory expectations on managing nature-related financial risk
along with climate change risks for supervised institutions: In the longer term, as diagnostics mature
and international guidance develops, regulatory and supervisory expectations and requirements could
be formulated in line with evolving good practices. For institutions that have high exposures to vulnerable
sectors or regions, BNM could communicate additional expectations and include consideration of nature-
related financial risks as part of the supervisory process.
• Develop a monitoring system for new credit to be compliant with climate and nature-related
regulations: Such a system could include mechanisms for checking whether business activities will take
place in (future) protected areas. As described in Box 4, Brazil is developing a Sustainable Rural Credit
Bureau which will be associated with the rural credit information system and contain information on
farmers’ sustainable practices as part of efforts to mitigate social, environmental, and climate risks in the
financial system.
55An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 3 - Potential Actions to Address Nature-related Financial Risks
Following the global push for companies to disclose their climate-related risks and
opportunities, momentum has recently been building behind the nature-related disclosure
agenda. The TCFD four pillars framework has become the most used framework globally for
corporations and other organizations disclosure on climate criteria. A TNFD was formally launched
in June 2021 with the mandate to build a similar framework for nature. The mission of the TNFD
is, “to develop and deliver a risk management and disclosure framework for organizations to
report and act on evolving nature-related risks, which aims to support a shift in global financial
flows away from nature-negative outcomes and toward nature-positive outcomes.”
The TNFD has committed to working closely together with standard setting and disclosure
mechanism bodies to promote global consistency for nature-related reporting, building upon
the structure and foundation of the TCFD. The TNFD aspires to ensure the two frameworks
will be comprehensive in their coverage of climate and nature-related financial risks, and
complementary in their usability and adoption by market participants. The G7 Finance Ministers
and G20 Sustainable Finance Roadmap have endorsed the TNFD, and the governments of
Switzerland, the United Kingdom (UK), France, the Netherlands, and Australia are its funding
partners.
The TNFD will go through five phases of work from 2021 to 2023: Build, Test, Consult,
Disseminate, and Uptake. According to its website, “The TNFD will not create a new disclosure
standard, but rather establish and promote the adoption of an integrated risk management and
disclosure framework that aggregates the best tools and materials.” The TNFD is taking an open
innovation approach similar to the iterative innovation models used in the technology sector.
The TNFD aims to share the initial high-level architecture of the framework shortly, to enable
early pilot testing and consultation, and then evolve and develop the framework further with
feedback from the market and relevant experts, given the complexity and urgency of the task
of tackling nature-related risks. A beta version of the framework will be released in March 2022.
The most explicit biodiversity disclosure requirements to date have been imposed by France.
Article 173-VI of France’s Energy Transition and Green Growth Law, which went into effect in
January 2016, requires investors to disclose how they factor ESG criteria and carbon-related
aspects into their investment policies. The French Parliament amended Article 173 to require
the disclosure of biodiversity impacts starting in 2021 (Ernst and Young 2017). This prompted
French investors to start to develop better data on nature-related impacts and dependencies
(Mirova 2020). Other European governments are following suit, including the UK, which
pledged in its Green Finance Strategy (2019), to “work with international partners to catalyze
market-led action on enhancing nature-related financial disclosures” (Her Majesty’s Treasury
UK Government 2019). The DNB’s June 2020 report on risks to the financial sector from
biodiversity loss calls for the development of a biodiversity risk disclosure framework (van Toor
et al. 2020). The EU Taxonomy of Sustainable Activities also creates pressure for disclosure.
Conservation and restoration of biodiversity and ecosystems is one of the categories of the
taxonomy. Additionally, all investments under the taxonomy are required to ‘do no harm’ under
its six categories of environmental objectives (European Commission 2020).
BOX 5
Nature-related disclosure developments
Source: Prepared by World Bank and TNFD secretariat staff
56 An Exploration of Nature-Related Financial Risks in Malaysia
57An Exploration of Nature-Related Financial Risks in Malaysia
Conclusions
CHAPTER 4
58 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 4 - Conclusions
4.1 Key Findings
This report provides a first assessment of nature-related financial risks for the Malaysian banking
sector, examining their lending exposure to businesses which depend on and impact nature and its
ecosystem services. Nature-related financial risks for Malaysian banks are examined using a conventional risk
management approach which focuses on risk identification, risk assessment, and risk mitigation with a focus
on exposures to sectors at risk. Better understanding of nature-related risks is key to align capital allocation,
including loan origination, with Malaysian and global sustainability goals. Better understanding of nature-
related financial risks is also important for prudential supervision, to identify any emerging risks on the books
of banks and other financial institutions.
Nature-related risks in Malaysia center around the deterioration of natural assets and ecosystems
tied to water use, climate regulation, GHG emissions, and deforestation, which could have implications
for the Malaysian banking sector.
• About 54 percent of Malaysian banks’ commercial lending portfolio could currently be exposed to
physical risk, being highly or very highly dependent on well-functioning ecosystem services. Dependency
on surface water (29 percent), climate regulation (26 percent), and flood and storm protection (16 percent)
stand out specifically. At the same time, current banks’ lending portfolio allocation is also exposed to
significant transition risk, if the government introduced unexpected nature-related policies or if consumer
preferences were to change (both domestically and abroad).
• About 87 percent of Malaysian banks’ commercial lending portfolio could currently be exposed to sectors
that strongly impact ecosystem services, thus facing a higher level of transition risk. The strongest impact
drivers in this analysis were GHG emissions (61 percent of total lending portfolio), water use (55 percent),
and terrestrial ecosystem use (43 percent).
Findings suggest substantial differences between individual banks in their exposure to sectors that
depend highly on ecosystem services and that highly impact natural assets and ecosystem services.
Those differences can be explained by different target sectors of lending which individual banks lend to;
construction lending, for instance, is strongly dependent on surface water, climate regulation and flood and
storm protection, and generally has strong environmental impacts via terrestrial ecosystem use, freshwater use,
and GHG emissions. For ecosystem services, exposures to one or more highly or very highly dependent sectors
range between 5 and 83 percent of the total commercial loan portfolio for individual banks. For environmental
change, exposures to highly or very highly contributing sectors range between 28 and 100 percent. This
indicates a necessity for more in-depth analysis of individual banks’ portfolio composition and assessment of
respective implications for financial stability.
Transition risk exposure from lending in potentially to-be-protected areas seems currently limited to
less than 1 percent of outstanding loans in our sample, although limitations in the analysis, such as
data restrictions, suggest this could be a conservative estimate. The analysis shows that most Malaysian
bank loans are in areas that are already well developed. Less than one percent of Malaysian banks’ commercial
lending portfolio (RM 329 million, USD 78 million) is estimated to go to firms in currently non-protected KBA.
However, due to data limitations, this may be a somewhat conservative estimate and exposures may be higher.
There may also be an important role for more indirect exposures through supply chain linkages among firms
in and outside protected areas. Also, it could be important to monitor new loan origination practices towards
both currently protected areas and areas that may become protected in the future.
59An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 4 - Conclusions
This report develops a first set of twenty-one nature-related physical and seven transition risk
scenarios, using ENCORE and stakeholder interviews, that show potentially high but heterogenous
banking sector exposure. This serves as a ‘possibility range’ of potential nature-related risk scenarios
and related banking sector exposure, given data and knowledge gaps in assessing likelihood and financial
consequences. Scenarios with the highest banking sector exposure are those that would affect a wide range of
sectors such as a general deterioration of ecosystem services:
• Reduced ecosystem services due to continued high resource use, pollution, and urban sprawl: 44 percent
of Malaysian banking sector’s commercial lending portfolio
• Ecosystem service deterioration due to continued high rates of deforestation: 30 percent
• Policies that could affect firms’ costs and business models in multiple sectors (sudden and unexpected
climate policy introduction): 38 percent.
The agricultural, forestry, and fishing sectors are exposed to almost every physical and transition risk
scenario as they have a high and direct dependence on multiple ecosystem services. Some physical risk
scenarios are expected to directly affect only a few sectors, which constrain banking sector exposure.74
This analysis indicates that the financial sector has an indirect, yet important, two-way relationship
with nature. Recent research by the WB shows that significant benefits could emerge from aligning policy
responses to the nature and biodiversity crisis, including economic stimulus as well as climate change mitigation
and adaptation (Johnson et al. 2021). Banks’ lending behavior is an important determinant of the effectiveness
of policies and of the degree to which nature-related risks could emerge. Their financing impacts the drivers
of environmental change while being dependent on nature and its ecosystem services, constituting a double
materiality (European Commission 2019, Oman and Svartzman 2021).
Thus, banks’ lending behavior has an impact on their financial physical, transition, and liability risk
exposures. By aligning their lending exposure to sectors and activities that benefit nature or do no harm, banks
could in turn lower their risk exposure. In some cases, this could even increase economic and financial returns.
For example, a WB study (2017) indicates that reducing overfishing and overcapacity by 40 percent, could result
in more fish eventually being caught, allowing the recovery of more than USD 80 billion in “sunken billions” (loss
of potential economic rents in global fisheries) while rebuilding the global fish stock.
Those scenarios include amongst others “Reduced agricultural yields and water pollution due to intense agri- and aquaculture” (2.5 percent), “Animal disease
outbreak” (0.8 percent), and “Severe reduction in available fish stock (0.7 percent).
74
The findings of this report could inform and facilitate further policy discussions to better understand
the impacts of nature-related financial risks on the financial sector and economy. BNM, as financial
regulator, could act as a central coordinator for a financial sector action plan, working closely with multiple
stakeholders and in line with the government’s national biodiversity strategy. Further actions related to nature-
related financial risks could be developed that are cohesive and integrated within its existing climate change
strategy. These would consider: (1) national policy discussion and direction on nature-related risks, (2) further
4.2 Potential Actions to Address Challenges
of Nature-Related Financial Risks
60 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 4 - Conclusions
At the local level understanding is more advanced. 75
The exposure analysis conducted in this report is a step towards a fully-fledged nature stress-test.
However, addressing certain limitations and knowledge gaps would require further research across multiple
stakeholders from natural science, finance, the economy, and society. The analysis in this report can provide
initial insights and a general understanding of potential risks that might become more likely in the future
and that supervisors should consider within their financial stability mandate. More research is necessary to
further refine exposure estimates from the ENCORE tool. A better understanding is needed of economic and
financial vulnerabilities, scenario analysis needs to be refined, and methodologies are required to account for
the economic and societal relevance of sectors beyond GDP and the share of financial exposure.
While it is understood that some activities negatively affect nature and its ecosystem services (Oliver
et al. 2015, Folke et al. 2016), it is unclear when and how this could result in severe economic and
financial losses.75 Like in a Jenga game, where it is the players’ goal to remove a block from a tower in each
round without making the tower fall, the ongoing pressure on nature reduces its resilience, threatening collapse.
Cascading and feedback effects from interactions between different ecosystems could thereby amplify human
impacts (Lade et al. 2020). Sudden shocks to ecosystem services could lead to strong economic and financial
risks. They could also result in high-risk materialization, especially if economic vulnerability is high, if substitutes
for economic production are expensive or non-existent, and damage to nature is irreversible.
Beyond direct impacts, such as for the agricultural sector, indirect impacts could emerge via supply
chains that could result in even larger economic and financial risks for the economy. Information is
needed on the potential economic and societal relevance of certain sectors beyond their GDP share or direct
financial sector exposure. Agriculture for instance constitutes a relatively small share of GDP and even smaller
share of Malaysian banks’ lending; yet strongly reduced agricultural yields could have severe social implications
on food security, and food imports might not be able to compensate for the decline. Social implications like this
could emerge from the collapse of ecosystem services and could become a critical risk to the macroeconomy.
The reported scenarios should be considered as a range of possible nature-related financial risk
scenarios for Malaysia, whereas the materialization and degree of risk depends on vulnerability,
likelihood of occurrence, and indirect impacts. The scenarios are not projections of a business-as-usual
4.3 Areas for Future Exploration
development of nature-related financial risk methodologies and analyses, (3) progress of ongoing climate
change initiatives and determined linkages with nature-related financial risks, and (4) evolving practices and
standards from the global financial regulatory and supervisory community.
Key areas for actions to manage nature-related financial risks include, (1) raising awareness
and policy discourse, (2) enhancing capacity building of relevant stakeholders, (3) enhancing
macroeconomic surveillance capacity and risk identification, and (4) developing regulatory and
supervisory requirements. Section 3 and Figure 4 in this report depict recommended actions that could be
considered by BNM (and relevant stakeholders such as ministries with responsibility for environmental issues,
state-level agencies, and financial institutions) in more detail. Recommended actions differ by the level of
policy intervention intensity, recognizing the need for prioritization in this challenging pandemic period.
61An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 4 - Conclusions
scenario, but rather state the current financial exposure if the affected ecosystem services of this range of
identified scenarios defaulted. Indeed, the likelihood and financial consequences of specific nature-related
risk scenarios are challenging to determine given the complexity, non-linearity, and endogeneity of causal
relationships (Svartzman et al. 2021; NGFS 2021; Kedward et al. 2020). Yet, an analysis of the main drivers of
nature-related risks, such as land- and sea use change, nature use and exploitation, climate change, pollution,
invasive species, governance, and policy uncertainty, indicates potential sources for nature-related financial
risk scenarios.
Several areas merit further analysis to support the identification and assessment of nature-related
financial risks. Global nature and biodiversity work programs are progressing but started later than similar
work on climate-related financial risks, and are both broader in scope and more complex in their causal
relationships.76 Information is lacking on the likelihood and severity of adverse scenarios related to biodiversity
loss as well as their economic and financial impact. The analysis in this report could also be complemented by
the development of a comprehensive set of scenarios to be used in assessing nature-related financial risks and
a better understanding of how scenarios lead to adverse economic and financial outcomes (e.g., transmission
channels). Additionally, the development of models to understand the quantitative impact of scenarios and
transmission channels on financial institutions, including banks and non-bank financial institutions, would
enhance the knowledge of future risks to the financial system due to nature-related risks.
For example, ENCORE identifies 21 different ecosystem services and 27 different drivers of environmental change. The likelihood of the occurrence of a
specific scenario is challenging to determine given the complexity, non-linearity, and endogeneity of nature-related risks (Svartzman et al. 2021, Kedward et
al. 2020, NGFS 2021).
76
62 An Exploration of Nature-Related Financial Risks in Malaysia
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67An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
68 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
The physical and sectoral transition risk exposure analysis presented in this report is conducted
by using the ENCORE biodiversity tool.77 ENCORE is a database that maps sector-based impacts and
dependencies on ecosystem services for sectors of the economy. Box 1 in the main text outlines ENCORE’s
assumptions regarding the materiality of ecosystem services for businesses, both with respect to dependencies
and impacts. ENCORE thus allows a detailed assessment of the interactions of the economy with the natural
environment and thus an exposure analysis of the Malaysian banking sectors’ commercial loan portfolio to
potential nature-related physical and transition risks. ENCORE’s database consists of 86 business processes
and 21 ecosystem services (see Appendix Table A4), such as clean and reliable supplies of water, carbon
sequestration, and pollination. It further contains 11 impact drivers on nature and ecosystem services, such as
terrestrial ecosystem use and GHG emissions (See Appendix Table A5).
Data on outstanding commercial loans (unpublished) for the analysis was provided by BNM. The data
covers 61 Malaysian banks (26 commercial banks, 16 Islamic banks, 10 investment banks, and 9 DFIs [6 regulated
under the DFI Act and 3 not]) at the end of December 2020. The loan data is given at NACE Revision 2 at the
4-digit level. The commercial loans outstanding in the sample stands at RM 733 billion representing 90 percent
of the total commercial loans portfolio. Table A1 summarizes the data sets that inform the analysis in this report.
A.1 Methodology
https://encore.naturalcapital.finance/en/explore77
Table A1: Underlying data for analysis in this report
Type of Analysis Data sources
Dependencies on Ecosystem Services • ENCORE (Natural Capital Finance Alliance 2021)
• BNM commercial loans data
Impacts on Ecosystem Services • ENCORE (Natural Capital Finance Alliance 2021)
• BNM commercial loans data
Activities in key biodiversity areas • Key biodiversity areas (IBAT)
• Protected Areas (UNEP-WCMC 2021)
• BNM postal-code based lending data for
commercial non-residential and residential property
purchase.
Physical and transition risk scenarios • ENCORE (Natural Capital Finance Alliance 2021)
• BNM commercial loans data
• Interviews
• Additional reports and biophysical datasets
Source: World Bank
69An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
The analysis follows closely the approach proposed by DNB (van Toor et al. 2020), consisting of several
steps of data reclassification and remapping (Figure A1). Reclassification and remapping are needed
to align sector classification of the lending data with sector classification used in ENCORE. Additionally,
we extend the DNB analysis that focused on nature-related sectoral physical risk, by also assessing banks’
portfolio impacts on ecosystem services and natural assets. As such we can also examine sectoral transition
risk exposure of Malaysian banks, using a similar methodology. First, we reclassify the banks’ lending data from
NACE Revision 2 at the 2-digit level to business processes which are used in ENCORE. For the mapping we rely
on the reclassification typology by DNB, as ENCORE only provides sectoral mapping from economic sectors
given at the Global Industry Classification Standard to business processes. As several sectors could be linked
to more than one business process, weights need to be assigned. We follow the DNB approach in assigning
equal weighting according to the number of business processes. For instance, A2 “forestry and logging” would
map to both, “large-scale forestry” and “small-scale forestry” and we assign each of the business processes a
weight of 50 percent of lending that goes to “forestry and logging” (see Table A2).
NACE REV2 Sector Business Process Weight
A2 – Forestry and logging
Large-scale forestry 0.5
Small-scale forestry 0.5
Following the DNB approach, we focus the analysis on relationships between economic sectors and
ecosystem services with high or very high dependencies only, as the degradation of those ecosystem
services is likely to have a strong detrimental impact on firms’ business processes. Likewise, we only
consider linkages of economic sectors and drivers of environmental change with a high or very high impact.
Second, we map business processes to dependencies on ecosystem services (physical risk) or impact
drivers on nature loss (transition risk). Several business processes depend highly or very highly on more
than one ecosystem service or affect nature highly or very highly via more than one impact driver. In those
cases, we use equal weighting according to the number of ecosystem services for sectors. For example, for
business processes (e.g., processed food and drink production) that highly or very highly depend on two
ecosystem services such as surface water supply and climate regulation, for one RM of lending, half is allocated
to surface water supply and half for climate regulation (Table A3). For assessing the exposure of Malaysian
banks to individual ecosystem services (Figure 13 and Figure 17), an unweighted approach is applied. This
attributes one RM for every RM of lending to the respective ecosystem service. This approach, however, does
not allow us to add different ecosystem service dependencies in banks’ portfolios as the sum would exceed
the original portfolio size.
Table A2: Weighting example for mapping economic sectors to business process
Source: World Bank
70 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
Table A3: Weighting example for mapping business processes to ecosystem services
Business Process Ecosystem Service
Weight
Unweighted Weighted
Processed food and drink
production
Surface water 1 0.5
Ground water 1 0.5
Source: World Bank
The reclassification allows us to map sectoral lending (NACE) to business processes in ENCORE
which again are linked to ecosystem service dependencies (physical risk) or impact drivers (transition
risk). Those, in turn, further affect natural assets such as species, habitats, and water. We show the nature-
related physical and transition exposures of the Malaysian banks’ commercial lending portfolio in the following
subsections with respect to natural asset dependencies and impacts and ecosystem service dependencies
and impacts, most exposed economic sectors in Malaysian banks’ commercial lending portfolio, and the
distribution exposure to impacts and dependencies amongst individual banks.
Figure A1: Practical steps to assess sectoral physical and transition risk exposure
Reclassifying
and mapping data
Setting weights
for relative
importance of
ecosystem services
Adjusting data
structure to assess
and plot exposure
on several levels
1.
2. 3.
Source: World Bank
ENCORE is a global tool and thereby subject to several caveats. Ecosystem service dependencies and
the state of the natural assets differ by country and require a geographical and sectoral context to refine the
assessment provided by ENCORE. For instance, the dependency of construction sectors on flood and storm
protection as an ecosystem service might depend on the prevalence of floods and storms in the specific country
context. As such a global average, as applied by ENCORE, could over- or underestimate the dependency and
impacts of specifics sectors. Furthermore, ENCORE focuses on direct nature-related impacts and dependencies
for the various sectors of the economy. Thus, ENCORE can give a comprehensive view on the key first-order
nature-related impacts and dependencies at the level of sectors of the economy. Estimates provided in the
previous sections should however be considered as conservative, as the ENCORE tool only includes direct
reliance of sectors on ecosystem services, whereas indirect dependencies that could stem from downstream
supply chains are not captured. Furthermore, the currently applied equal weighting approach in case of multiple
sector- or ecosystem service linkages, strongly influences the exposure results.78 Additional analysis is needed
to contextualize and refine the analysis with respect to substitutability and adaptability options that could
inform those weights by incorporating country specifics (see Table A2 and A3). The ENCORE analysis could
be complementary to assessments of other key biodiversity-specific indicators at the local level and develop
One could argue, however, that in absence of more detailed information on the production process of Malaysian firms, this approach is conservative as it caps
the exposure towards one ecosystem service to its relative share of the entire lending portfolio.
78
71An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
an understanding of the cross-sectoral linkages of upstream and downstream value chains amongst different
sectors. This combined approach could inform potential nature-related vulnerabilities of economic sectors of
the Malaysian economy, that could become sources of financial risk for the Malaysian banking sector.
The analysis in this report depicts the exposure of Malaysian banks to sectors that are potentially
exposed to nature-related physical and transition risks. However, the analysis does not provide information
on the potential economic and societal relevance of certain sectors. Agriculture for instance constitutes a
relatively small share of GDP and even smaller share in Malaysian banks’ lending; yet strongly reduced
agricultural yields could have severe social implications on food security, and food imports could potentially
not compensate for the decline. Social implications like this could emerge from ecosystem service collapse and
could become a critical risk to the macroeconomy, but go beyond the scope of this analysis.
For the analysis of activities in KBA, we map postal code based lending data for commercial non-
residential and residential property purchases (excluding household loans) to KBA (Figure A2). KBA
could potentially be designated as protected in the future and it is thus relevant to see banks’ financial
exposure to those areas. We use the IBAT, developed by the UN Environment Program World Conservation
Monitoring Centre, International Union for Conservation of Nature, Conservation International, and Birdlife
International, to compare the currently protected areas in Malaysia with KBA79 that are not yet protected.
The gap between the protected areas and KBA we call “currently non-protected KBA” and is intended to
provide a proxy for areas that could become protected in the future. For Malaysia as a whole, protecting
those currently non-protected KBA would increase the share of protected areas of total land area to about 24
percent. However, KBA relevance is not equally distributed across Malaysian states (Figure 23). States such as
Perak, Pahang, Kedah, and Selangor are biodiversity hotspots, with KBA making almost up to 50 percent of
Perak’s land area for instance. While Malaysia has seen ambitious efforts in stepping-up protected areas since
the 2000s (UNEP-WCMC 2021), a large share of KBA in Malaysian states is currently non-protected (see light
blue bars in Figure 23 as a share of dark blue bars). As such, firms currently operating in those regions could be
restricted, with implications for their financing banks.
For the analysis we use (unpublished) postal code level commercial non-residential and residential
property purchase lending data (excluding households) of Malaysian banks, provided by BNM. The
sample comprises loans outstanding and the location of loan utilization as of December 2020 and covers about
5 percent of the overall commercial lending data sample. In the absence of geospatial datasets that could
provide a postal code level resolution of areas in Malaysia, we rely on a workaround by assigning each postal
code (at its centroid) a longitude and latitude coordinate80 that we transform into a coordinate reference system,
in this case the WGS8481 format. During that exercise, some lending contracts had to be dropped, however,
as no coordinates existed for the respective postal code in our dataset. We then compare if those postal
code coordinates lie within the currently non-protected KBA areas to assess the financial lending exposure
of Malaysian banks in those areas. This approach has limitations,82 resulting in the below reported spatial
exposures being conservative estimates.
KBA are defined to be sites that contribute significantly to maintain global biodiversity, in terrestrial and maritime sites (IBAT, 2021).
This exercise was conducted manually using the dataset provided at https://www.back4app.com/database/back4app/zip-codes-all-countries-in-the-world/
malaysia-zip-code
The WGS84 is a widely used coordinate reference system in geospatial mapping, often used in cartography, geodesy, and satellite navigation including GPS.
It would benefit from the availability of postal code level shapefiles for Malaysia.
79
80
81
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72 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
See Appendix Section 4 and 5 for details. 83
Figure A2: Practical steps to assess activities in Key Biodiversity Areas
Source: World Bank
Reclassifying
and mapping data
Assessing share
of protected and
non-protected KBA
per state
Matching
datasets to assess
spatial transition
risk exposure
1.
2. 3.
We also explore a first non-exhaustive set of nature-related risk scenarios for Malaysia (see Table A1).
This is based on interviews (the conclusions of which are summarized in Section A5), datasets such as ENCORE
and the WB Terrestrial Biodiversity Indicators, and publicly and non-publicly available reports from Malaysian
stakeholders.83 They are, however, not projections of a business-as-usual scenario, but rather state the financial
exposure if the affected ecosystem services of this range of identified scenarios would default. Similar to the
University of Cambridge Institute for Sustainability Leadership (2021) scenario classification, we categorize
scenarios according to types of risk, driver of risk, and sectors, natural assets, and ecosystem services where
the risk scenario would originate. Scenario types can be classified as posing physical risk (e.g., the depletion of
fisheries) or transition risk (e.g., the creation of new protected areas). Transition risk scenarios can entail policies
aiming to protect biodiversity (regulatory risk), technological changes, and changes in consumer preferences
(including reputational risk).
Both risk scenario types can have either local or nation-wide direct impact. Indirect impacts, which are
not covered here, could induce spillovers to previously not directly affected regions. For physical risk scenarios,
ENCORE provides affected natural assets and ecosystem services. This serves as a basis for assessing banking
sector exposure to economic sectors that highly or very highly depend on those ecosystem services. It should
be noted, however, that ENCORE only captures direct impacts from dependencies, whereas indirect impacts
that could stem from supply chains or macroeconomic and financial feedback effects are not covered. Further,
only impacts via affected ecosystem exposure are considered. For instance, typhoons might destroy production
facilities and houses, however, this analysis only captures the exposure of the banking sector to firms that might
be faced with deteriorated ecosystem services after a severe typhoon. Sectors that are likely to face a direct
transition risk exposure are either classified according to ENCORE (e.g., in case of water regulation risks),
according to the climate-policy relevant sector classification (Battiston et al. 2017) in case of a climate policy
scenario, or with respect to informed and conservative author judgement (e.g., pesticide and fertilizer scenario).
Given the novelty of the topic some data limitations exist. Those limitations include 1) bank lending data
beyond non-financial corporations (e.g., households and financial sector institutions), 2) additional financial
instruments such as equity, bonds, and sukuks, 3) data on financial exposure of other financial institutions than
banks such as insurance companies or pension funds, 4) a higher financial data coverage of location specific
lending and investments, 5) higher granularity of spatial data ideally at asset level, and 6) input-output data for
capturing indirect financial exposure of economic sectors (e.g., manufacturing via mining).
73An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
A.2 ENCORE Definitions
Table A4: List of ecosystem services included in the ENCORE database with their description
No. Ecosystem Service Ecosystem service description
1 Animal-based energy Physical labor is provided by domesticated or commercial species,
including oxen, horses, donkeys, goats, and elephants. These can
be grouped as draught animals, pack animals, and mounts.
2 Bio-remediation Bio-remediation is a natural process whereby living organisms
such as micro-organisms, plants, algae, and some animals degrade,
reduce, and/or detoxify contaminants.
3 Buffering and attenuation of
mass flows
Buffering and attenuation of mass flows allows the transport and
storage of sediment by rivers, lakes, and seas.
4 Climate regulation Global climate regulation is provided by nature through the long-
term storage of carbon dioxide in soils, vegetable biomass, and
the oceans. At a regional level, the climate is regulated by ocean
currents and winds while, at local and micro-levels, vegetation can
modify temperatures, humidity, and wind speeds.
5 Dilution by atmosphere and
ecosystems
Water, both fresh and saline, and the atmosphere can dilute the
gases, fluids, and solid waste produced by human activity.
6 Disease control Ecosystems play important roles in regulation of diseases for
human populations as well as for wild and domesticated flora and
fauna.
7 Fibers and other materials Fibers and other materials from plants, algae, and animals are
directly used or processed for a variety of purposes. This includes
wood, timber, and fibers which are not further processed, as well
as material for production, such as cellulose, cotton, and dyes, and
plant, animal, and algal material for fodder and fertilizer use.
8 Filtration Filtering, sequestering, storing, and accumulating pollutants is
carried out by a range of organisms including, algae, animals,
microorganisms, and vascular and non-vascular plants.
9 Flood and storm protection Flood and storm protection is provided by the sheltering, buffering,
and attenuating effects of natural and planted vegetation.
10 Genetic materials Genetic material is understood to be deoxyribonucleic acid (DNA)
and all biota including plants, animals, and algae.
11 Ground water Groundwater is water stored underground in aquifers made of
permeable rocks, soil, and sand. The water that contributes to
groundwater sources originates from rainfall, snow melts, and
water flow from natural freshwater resources.
12 Maintain nursery habitats Nurseries are habitats that make a significantly high contribution
to the reproduction of individuals from a particular species,
where juveniles occur at higher densities, avoid predation more
successfully, or grow faster than in other habitats.
13 Mass stabilization and erosion
control
Mass stabilization and erosion control is delivered through
vegetation cover protected and stabilizing terrestrial, coastal, and
marine ecosystems, coastal wetlands, and dunes. Vegetation on
slopes also prevents avalanches and landslides, and mangroves,
sea grass, and macroalgae provide erosion protection of coasts and
sediments.
74 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
No. Ecosystem Service Ecosystem service description
14 Mediation of sensory impacts Vegetation is the main (natural) barrier used to reduce noise and
light pollution, limiting the impact it can have on human health and
the environment.
15 Pest control Pest control and invasive alien species management is provided
through direct introduction and maintenance of populations of the
predators of the pest or the invasive species, landscaping areas to
encourage habitats for pest reduction, and the manufacture of a
family of natural biocides based on natural toxins to pests.
16 Pollination Pollination services are provided by three main mechanisms:
animals, water, and wind. Most plants depend to some extent on
animals that act as vectors, or pollinators, to perform the transfer
of pollen.
17 Soil quality Soil quality is provided through weathering processes, which
maintain bio-geochemical conditions of soils including fertility
and soil structure, and decomposition and fixing processes, which
enables nitrogen fixing, nitrification, and mineralization of dead
organic material.
18 Surface water Surface water is provided through freshwater resources from
collected precipitation and water flow from natural sources.
19 Ventilation Ventilation provided by natural or planted vegetation is vital for
good indoor air quality and without it there are long term health
implications for building occupants due to the build-up of volatile
organic compounds, airborne bacteria, and molds.
20 Water flow maintenance The hydrological cycle, also called water cycle or hydrologic
cycle, is the system that enables circulation of water through the
Earth’s atmosphere, land, and oceans. The hydrological cycle is
responsible for recharge of groundwater sources (i.e. aquifers) and
maintenance of surface water flows.
21 Water quality Water quality is provided by maintaining the chemical condition
of freshwaters, including rivers, streams, lakes, and ground water
sources, and salt waters to ensure favorable living conditions for
biota.
Source: ENCORE, Natural Capital Finance Alliance 2021
75An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
Table A5: List of impact drivers included in the ENCORE database with their description
No. Impact Drivers Description
1 Disturbances Examples include decibels and duration of noise, lumens and
duration of light, at site of impact.
2 Freshwater ecosystem use Examples include area of wetland, ponds, lakes, streams, rivers, or
peatland necessary to provide ecosystem services such as water
purification, fish spawning, areas of infrastructure necessary to use
rivers and lakes such as bridges, dams, and flood barriers, etc.
3 GHG emissions Examples include volume of carbon dioxide (CO2), methane
(CH4), nitrous oxide (N2O), Sulphur hexafluoride (SF6),
Hydrofluorocarbons, (HFCs) and perfluorocarbons (PFCs), etc.
4 Marine ecosystem use Examples include area of aquaculture by type, area of seabed
mining by type, etc.
5 Non-GHG air pollutants Examples include volume of fine particulate matter (PM2.5) and
coarse particulate matter (PM10), Volatile Organic Compounds,
mono-nitrogen oxides (NO and NO2, commonly referred to as
NOx), Sulphur dioxide (SO2), Carbon monoxide (CO), etc.
6 Other resource use Examples include volume of mineral extracted, volume of wild-
caught fish by species, number of wild-caught mammals by
species, etc.
7 Soil pollutants Examples include volume of waste matter discharged and retained
in soil over a given period.
8 Solid waste Examples include volume of waste by classification (i.e.,
nonhazardous, hazardous, and radioactive), by specific material
constituents (e.g., lead, plastic), or by disposal method (e.g., landfill,
incineration, recycling, specialist processing).
9 Terrestrial ecosystem use Examples include area of agriculture by type, area of forest
plantation by type, area of open cast mine by type, etc.
10 Water pollutants Examples include volume discharged to receiving water body of
nutrients (e.g., nitrates and phosphates) or other substances (e.g.,
heavy metals and chemicals).
11 Water use Examples include volume of groundwater consumed, volume of
surface water consumed, etc.
Source: ENCORE, Natural Capital Finance Alliance 2021
76 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
Table A6: List of drivers of environmental change included in the ENCORE database with
their description
No. Driver of environmental
change
Description
1 Diseases Harmful pathogens and microbes that are originally found within
the ecosystem(s) in question, but have become “out-of-balance” or
“released” directly or indirectly due to human activities.
2 Droughts Periods in which rainfall falls below the normal range of variation.
3 Earthquakes Earthquakes manifest themselves by shaking and displacing or
disrupting the ground. They may also cause associated events such as
tsunamis, landslides, or even volcanic activity.
4 Fire Suppression or increase in fire frequency and/or intensity outside of its
natural range of variation.
5 Flooding Extreme precipitation events leading to the submergence of dry land.
6 Landslides Landslide events leading to geological changes.
7 Habitat modification Major changes in habitat composition and location, for example
deforestation.
8 Human modification of
genetic material
Human altered or transported organisms or genes.
9 Human movement Migration by people from one place to another with the intentions of
settling, permanently or temporarily in a new location.
10 Industrial or domestic
activities
Non-agricultural human activities including non-consumptive use of
resources.
11 Industrial or domestic
construction
Process of constructing a building or infrastructure for industrial or
domestic purposes.
12 Intensive agriculture and
aquaculture
Threats from farming and ranching as a result of agricultural expansion
and intensification, including silviculture, mariculture, and aquaculture
(includes the impacts of any fencing around farmed areas).
13 Invasive species Harmful plants, animals, pathogens, and other microbes not originally
found within the ecosystem(s) in question and directly or indirectly
introduced and spread into it by human activities.
14 Ocean acidification Changes to the ocean chemistry which occurs when carbon dioxide is
absorbed from the atmosphere and reacts with seawater to produce
acid.
15 Ocean current and
circulation
Large scale movement of waters in the ocean basins.
16 Overfishing The harvesting of aquatic wild animals or plants at a rate that is
greater than their capacity for regeneration. Harvesting can occur for
commercial, recreation, subsistence, research, or cultural purposes, or
for control/persecution reasons; accidental mortality/bycatch are also
included.
17 Overharvesting The harvesting of plants, fungi, trees, and other woody vegetation,
and other non-timber/non-animal products at a rate that is greater
than their capacity for regeneration. The harvesting can occur for
commercial, recreation, subsistence, research or cultural purposes, or
for control reasons.
18 Overhunting The killing or trapping of terrestrial wild animals or animal products at
a rate that is greater than their capacity for regeneration. The killing or
trapping can occur for commercial, recreation, subsistence, research,
or cultural purposes, or for control/persecution reasons; includes
accidental mortality/bycatch.
77An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
No. Driver of environmental
change
Description
19 Pests Harmful plants or animals that are originally found within the
ecosystem(s) in question, but have become “out-of-balance” or
“released” directly or indirectly due to human activities.
20 Pollution Threats arising from the introduction of contaminants into the natural
environment.
21 Population changes Changes in species populations over time and space.
22 Sea level rise Increase in global mean sea level as a result of an increase in the volume
of water in the world’s oceans or heat dilation.
23 Sea surface temperature Periods in which sea surface temperatures exceed or go below the
normal range of variation.
24 Storms Extreme precipitation and/or wind events.
25 Volcanoes Volcanic events which may lead to changes in natural capital assets.
26 Water abstraction Changing water flow patterns from their natural range of variation due
to human activities.
27 Weather conditions Weather conditions outside of the natural range of variation.
Source: ENCORE, Natural Capital Finance Alliance 2021
A.3 Reputational Risk
Malaysian banks could also be exposed to reputational risk arising from financing companies whose
operations negatively impact the country’s biodiversity and the ecosystem services it sustains. The
UEBT Biodiversity Barometer (UEBT 2020), an annual survey on biodiversity awareness which has surveyed more
than 74,000 people since 2009, shows that consumer awareness of biodiversity has increased consistently over
the last decade (see Figure A3) (UEBR 2020). This trend is likely to continue as policymakers are increasingly
seeking to harness the power of civil society in reversing the biodiversity loss and its impact on ecosystems,
species, and people. For instance, the first target of Malaysia’s National Policy on Biological Diversity 2016-2025
is to raise the awareness of biodiversity among Malaysians and the steps they can take to conserve and use it
sustainably (MyBIS 2016). Reputation loss could translate into lower revenues and profits for firms engaging in
controversial activities as customers might prefer more sustainable products. Most controversies with respect
to biodiversity and land-use are related to agricultural products as shown by the MSCI ESG Controversies
database (see Figure A4),84 of which 7 are recorded for Malaysia, all with respect to biodiversity loss and
land-use change (see Figure A5). Banks that finance controversial firms could also lose reputation themselves,
impacting banks’ customer and investors’ relations.85 Both firm and banks’ reputation loss, could pose financial
risks for Malaysian banks (NGFS 2021).
The MSCI ESG Controversies database records the instances of negative environmental impact resulting from a company’s product or operations. See https://
www.msci.com/documents/1296102/1636401/ESG_Controversies_Factsheet.pdf/4dfb3240-b5ed-0770-62c8-159c2ff785a0 for the methodology.
The annual fossil fuel finance report by a group of NGOs, which states fossil fuel financing activities of the largest banks globally and receives a lot attention,
is an example of potential reputational concerns with respect to climate change (RAN et al. 2021).
84
85
78 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
Figure A3: Awareness of biodiversity among surveyed individuals in the UEBT Biodiversity
Barometer
Source: Based on UEBT Biodiversity Barometer
Figure A4: Number of controversies globally as reported in MSCI ESG Controversy Database
Source: Based on MSCI ESG Controversy Database
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2009 2012 2015 2020
0 2 4 6 8 10 12
Other Sectors
Diversi�ed Chemicals
Electric Utilities
Steel
Construction & Engineering
Multi-Sector Holdings
Paper Products
Trading Companies & Distributors
Fertilizers & Agricultural Chemicals
Diversi�ed Metals & Mining
Independent Power Producers
Packaged Foods & Meats
Gold
Agricultural Products
Red Orange Yellow
79An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
A.4 Drivers of Nature-Related Financial Risk
Scenarios in Malaysia
This section provides an overview of relevant data regarding the drivers of nature-related financial
risk scenarios in Malaysia. The IPBES (2019) identifies five main drivers of biodiversity and nature loss,
namely land- and sea use change, natural resource use and exploitation, climate change, pollution, and invasive
species. Furthermore, governance and policy uncertainty can drive transition risk scenarios as well as physical
risk scenarios. The following subsections shed a light on selected aspects of those different drivers of nature-
related financial risks based on insights from stakeholder interviews as well as global and local nature and
biodiversity datasets for Malaysia. This is intended to provide an initial assessment of the risk materiality of
nature-related financial risks for the Malaysian banking sector.
A.4.1 Land and Sea Use Change
Land use change in Malaysia strongly impacts forest and peatland cover in Malaysia. Between 2000
and 2019, large areas around the coast of Sarawak, Johor, and Pahang saw significant losses in rain forest
(Figure A6)86 often cleared to set up oil palm plantations (Figure 21). In three decades between 1975 and 2005,
Malaysia lost 4.6 million hectares of forest cover, a 20 percent reduction of forest land (Wicke et al. 2011).
According to Global Forest Watch, Malaysia lost 29% of its tree cover between 2001 and 2020, releasing 4.82Gt of CO2e emissions (Global annual CO2
emissions stand at 33Gt in 2021 according to the International Energy Agency, 2021).
86
Figure A5: Number of controversies linked to biodiversity and land use for different sectors in
Malaysia as reported in MSCI ESG Controversy Database
Source: Based on MSCI ESG Controversy Database
Red Orange Yellow
0 1 2 3 4 5 6
Casinos & Gaming
Construction & Engineering
Agricultural Products
80 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
https://www.worldwildlife.org/stories/endangered-species-threatened-by-unsustainable-palm-oil-production
https://www.100jutapokok.gov.my/
The MSA compares the actual abundance of native species in an ecosystem with the theoretical ‘original state’ of that ecosystem without any disturbance from
human activities.
87
88
89
Further, between 1990 and 2005, about 55 percent expansion of palm oil, the biggest agricultural export of
Malaysia, came at the expense of the forests- mostly species-rich and carbon-rich tropical forests (Koh et al.
2008). This widespread replacement of natural forests with monoculture palm plantations has reduced the
overall plant diversity and threatened many animal species dependent on such forests including orangutans
and Bornean elephants.87 The growth in oil palm plantations has also been responsible for a considerable loss
of mangroves in Malaysia, estimated to be 2.8 percent of the total mangrove habitat area between 2000 and
2012 (Richards et al. 2016). This loss of mangroves may lead to a weakened natural protection against cyclones
and tsunamis (Alongi 2008). Certain regions, especially in Sarawak and Sabah, have been reforested thanks to
strong efforts of private and public initiatives in Malaysia with the 100 million tree-planting campaign expected
to provide another push.88 At the same time, forests are also an important habitat for species, thus supporting
biodiversity, which is typically lower in reforested areas as compared to primary forests (Cunningham et al.
2015). Agriculturally driven land-use change, especially when planting monocultures such as oil palms, could
increase the risk for agricultural productivity and stability, especially with respect to pollinator dependence
(Aizen et al. 2019).
Figure A6: Forest cover, forest loss, and forest gain between 2000 and 2019 in Malaysia
Source: Based on Hansen et al. 2015 and Humanitarian Data Exchange 2021
Malaysia is home to some of the world’s most important biodiversity hotspots, whereas ecosystems
and species are increasingly coming under pressure. Mean species abundance (MSA) is an indicator that
measures the local terrestrial biodiversity intactness, for which we use estimates from the GLOBIO model
(Schipper et al. 2019).89 MSA differs strongly across Malaysian regions. Regions with intact or protected
rainforest show high MSA, meaning that human pressures such as land use, road disturbance, fragmentation,
hunting, atmospheric nitrogen deposition, and climate change are limited. Also, a continued growth in the
quarrying of limestone has come at the cost of an excessive exploitation of karsts- biodiversity reservoirs that
can restock degraded environments (Clements et al, 2006). Limestone is a key ingredient in the production of
cement, of which Malaysia is the fifth largest exporter in the world (WITS 2021). Urban regions such as Kuala
Lumpur and regions that have a large cultivated agricultural sector such as palm oil (e.g., Johor) show low values
of MSA (Figure A7a), meaning that pressures on biodiversity are high.
Forest cover Forest loss (2000 - 2019) Forest gain (2000 - 2012)
81An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
Endangered species risk, stemming from the WB’s terrestrial biodiversity indicators, also differs across
regions. Regions in the North of Peninsular Malaysia show highest numbers of endangered species (Figure
A7b) because they host some of the most biodiverse rainforests, while at the same time facing strong land use
change pressures. Land conversion from forests to crop land or oil palm plantations has been particularly high in
those regions in recent years (growth in oil palm plantation area between 2018 and 2020 4 percent for Pahang,
8 percent for Kelantan, and 6 percent for Terengganu (MPOB 2021), see Figure 21 for a map of current extent of
oil palm plantations in Malaysia). The rainforests in Sarawak and Sabah on Borneo are still relatively untouched,
showing a high MSA and having a lower number of endangered species. Sabah also shows the largest state
area share that is currently protected (Figure 22a), followed by Pahang, with large areas of its rainforests in
the North being protected. In total about 13 percent of Malaysian state area is currently protected, according
to data from UNEP-WCMC (2021), falling potentially short of a 30x30 goal that is currently being discussed
internationally. The percentage of area protected varies across states, however. Some endangered species
hotspots, such as Kedah and Kelantan, currently show only limited area protection, indicating potential regions
that could see protected area expansion efforts in the future.
Figure A7:
a) Mean species abundance in 2015 by district in Malaysia
b) Number of endangered species 2019 by district in Malaysia
Source: Based on Schipper et al. 2019 (Globio), WB Terrestrial Biodiversity Indicators (2019), and Humanitarian Data Exchange 2021
0.7
0.6
0.5
0.4
0.3
16
14
12
10
8
6
4
82 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
Several nature-related financial physical and transition risk scenarios could be driven by land- and
sea use change and the accompanying loss in ecosystems and species (Table A7). Scenarios with
highest banking sector loan exposure are urban sprawl (44 percent) and deforestation (30 percent) by inducing
ecosystem service reduction. Further, reduced availability of timber (16 percent) as well as severe flooding
occurrence (10 percent) as trees and mangroves cannot provide flood and storm protection show a high
exposure of Malaysian banks. Further, transition risk scenarios such as an expansion of protected areas (8.4
percent) or stronger forestry regulation (0.7 percent) show a high potential risk exposure of the Malaysian
banking sector.
A.4.2 Natural Resource Use and Exploitation
Continuous overexploitation of renewable and non-renewable resources such as fisheries, timber, and
mineral extraction could drive certain nature-related financial risk scenarios. By 2030, six additional
inhabitants are expected in Malaysia, whereas the urbanization rate is expected to increase from 76 percent
in 2017 to 86 percent in 2050 (ERE Consulting Group, 2021). In the past, population growth and urbanization,
were accompanied by higher infrastructure needs and consumption levels, increasing the terrestrial footprint
in Malaysia (Figure A8). Mineral extraction is also expected to increase further in the next decade to support
the construction and industry sectors (ERE Consulting Group, 2021). Furthermore, Malaysia has experienced a
strong growth in non-metallic mineral extraction such as sand and gravel between 2015 and 2019. Silica sand
and sand, for instance, have significant impacts towards river morphology, as well as sensitive freshwater and
wetland ecosystems (ERE Consulting Group, 2021). As such, those activities would need to be accompanied
by careful measures for ecosystem and nature protection, to avoid the materialization of nature-related risk
scenarios such as “Reduced ecosystem services due to continued high resource use, pollution, and urban
sprawl”. Fish stock is already relatively stretched in Malaysia with a deteriorating trend that could eventually
lead to a fish stock collapse if current patterns continue.
Figure A8: Change in Malaysian terrestrial footprint between 2000 and 2013 by district.
Source: Based on UN Biodiversity Lab90, Venter et al. 2016, and Williams et al. 2020, Humanitarian Data Exchange 2021
Note: The terrestrial human footprint entails several granular and recent bottom-up survey information data sets to measure direct and indirect human pressures on
the environment (built environments, population density, electric infrastructure, crop lands and pasture lands, roads, railways, and navigable waterways). Footprint
scores range from 0-50, whereas here the net change between 2000 and 2013 is shown for Malaysia. A value of five thus means that the terrestrial human footprint
increased by a score of five between 2000 and 2013.
https://unbiodiversitylab.org/90
1
5
4
3
2
0
83An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
The nature-related financial risk exposure analysis shows a strong impact (about 15 percent) and
high dependency (about 30 percent) on water. Similarly, a water-related financial risk scenario, either due
to higher water pollution or stricter water regulation, shows a strong exposure of the Malaysian banking sector
with about 17 percent of its lending portfolio. Specifically, the real estate and construction sectors strongly
depend on the services provided by surface water, ground water, and water flow maintenance for operability.
In recent years, Malaysia water consumption levels have steadily increased, from 6.4 million liters per day in
2015 to 6.8 million liters per day in 2019 (ERE Consulting Group, 2021). The strong use and pollution of water
has implications for the water cycle that could potentially lead to an overall deterioration of its availability and
usability for ecosystem services provisioning. Population growth could further increase consumption levels and
growing climate change could impact currently stable irrigation patterns. In 2030, the World Resource Institute
Aqueduct model projects some districts in Malaysia to have a threefold water stress level compared to today
if no measures are taken (Figure A9). In response, the Malaysia government might increase water extraction
and storage facilities, which could again feed back onto ecosystems and biodiversity, especially freshwater
communities.
Nature-related financial physical risk scenarios that could specifically be susceptible to
overexploitation of resources are urban sprawl (potentially affecting 44 percent of Malaysian bank
lending) and deforestation (30 percent) by inducing ecosystem service reduction (Table A7). Further,
severe timber reduction (16 percent), reduced water availability (6 percent), and reduced agricultural yields
(2.5 percent) could pose financial risk exposure in case of continued overexploitation.
Figure A9: Aqueduct Malaysia water stress projections in 2030
Source: Based on WRI2021, Humanitarian Data Exchange 2021
3.0
2.5
2.0
1.5
C
ha
ng
e
in
w
at
er
s
tr
es
s
in
2
03
0
84 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
A.4.3 Climate Change
The rich vegetation in Malaysia also provides an important ecosystem service for climate regulation by
sequestering large amounts of carbon; however, forest loss and conversion of peatlands in the past 20
years has reduced this potential. The loss of 29 percent of Malaysia’s forest cover between 2000 and 2020
alone released 4.8Gt of CO2 equivalent (CO2e) emissions.91 Currently about 17 percent of Malaysian banking
sector’s lending portfolio depends on climate regulation, thus posing a strong financial risk if this ecosystem
service deteriorates. Especially the rainforests in Perak, Pahang, and Kelantan as well as on Borneo stand out as
storages for carbon with their large area shares of rainforests. Further, the peatland areas of Selangor, Pahang
and Sarawak are important sources for carbon storage (Page and Rieley 2018). Converted land for crops and oil
palm plantations, however, has less carbon storage potential (Figure A10), especially in states such as Johor and
the Southern districts of Pahang, that host some of the country’s largest oil palm plantation areas.
Figure A10: Vegetation carbon storage by district in Malaysia
Global annual CO2e emissions stand at 33Gt in 2021 according to International Energy Agency, 2021. CO2 emissions per capita in Malaysia increased from 5.2
tons CO2e in 2000 to 7.6 tons CO2e in 2018 (Climate Watch, 2020)
https://aries.integratedmodelling.org/aries-for-seea-explorer/
91
92
Source: Based on UN System of Environmental-Economic Accounting (SEEA) 202192 and Humanitarian Data Exchange 2021
225
200
175
150
125
100
75
50
25
0
Nature also plays an important role for flood and storm protection, on which more than 5 percent of
commercial lending in Malaysia depends. Especially sectors such as construction, telecommunication, and
electricity provision are sensitive to disruptions from extreme weather events, that could be moderated by
intact rainforests and mangroves. Mangroves, covering more than half a million hectares of vast shoreline in
Malaysia, offer protection from waves and tsunamis and can prevent shoreline erosion (Alongi, 2008). Flood and
storm protection become even more relevant with growing climate change as it is expected to lead to higher
intensity and frequency of extreme weather events such as flooding and cyclones (IPCC, 2021). According to
data by the ThinkHazard! Platform developed by the Global Facility for Disaster Reduction and Recovery, large
parts of Malaysia are especially prone to flooding risk, including river (Figure A11a) and urban flooding risk
(Figure A11b), potentially posing a risk to the financial sector. Coastal flooding (Figure A11c) is at high risk at
the Eastern Coast of Peninsular Malaysia and in South Sarawak. Already over the past decades, the frequency
and extremity of flood events have increased in Malaysia, with more expected given ongoing climate change
(World Bank Group/Asian Development Bank 2021). The northeastern coast of Peninsular Malaysia and the East
85An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
Figure A11:
a) River flood risk in Malaysia by district
b) Urban flood risk in Malaysia by district
c) Coastal flood risk in Malaysia by district
High Medium Low Very low No data
High Medium Low Very low No data
High Medium Low Very low No data
86 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
https://thinkhazard.org/en/report/153-malaysia93
A.4.4 Pollution
Pollution from run-off and pesticides from agriculture, untreated waste, industry and mining pollutants,
oil spills, and plastics is an ongoing issue in Malaysia (see Figure 10), posing increasing pressures on
the health of its ecosystems and a potential risk for the Malaysian banking sector. Malaysian banks
have a direct exposure between 2 and 44 percent of their loan portfolio to pollution related financial risk
scenarios. Ongoing pollution could thus pose a risk for the Malaysian financial sector, if certain tipping points
for ecosystem health (e.g., atmosphere, forests, freshwater) are crossed. Malaysia’s waste management systems
are currently inadequate for dealing with the amount of waste produced (Kaza et al., 2018), particularly plastic
waste (Chen et al. 2021). About 85 percent of solid waste is currently put into sanitary and unsanitary landfill
sites (Chen et al. 2021). Plastic is a particular issue, especially as Malaysia is the world’s largest plastic importer
since 2017 (Chen et al. 2021). Plastic waste is rarely recycled, but often burned illegally, resulting in the release
of toxic substances (Timbuong and Tang, 2019). The Malaysian government has introduced several policies
of Borneo are also strongly exposed to cyclone risk (Figure A11d). Climate change also impacts biodiversity
and ecosystems through regular coral bleaching occurrences, changes in ecosystem structure and function and
altered species distribution (ERE Consulting Group, 2021).
Nature-related financial physical risk scenarios that could specifically be susceptible to climate change
impacts are reduced ecosystem service (44 percent). This could be a slow but steady process (Table
A7). Climate change affects ecosystems either abruptly or chronically, which could deteriorate their ability to
sustain ecosystem services. As such climate change could drive nature-related financial risk scenarios such as
an increase in sea surface temperature (16 percent), changed ocean current and circulation (16 percent), severe
flooding occurrence (10 percent), severe cyclone occurrence (9 percent), and increased ocean acidification
(8 percent).
d) Cyclone risk in Malaysia by district
Source: Based on ThinkHazard! 2021,93 and Humanitarian Data Exchange 2021
High Medium Low Very low No data
87An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
to address this problem, such as issuance of plastic waste import permits; however, insufficient solid waste
management remains one of the main environmental problems in Malaysia (Moh and Manaf, 2017).
Water pollution in combination with increasing water consumption threatens freshwater abundance
in Malaysia. Main sources of water pollution in Malaysia are urban, agricultural, and forest land use (Camara et
al. 2019). Furthermore, aquaculture or fertilizer runoff can contribute to eutrophication which can lead to lower
species richness and biodiversity as it affects fish and other aquatic organisms (Er et al. 2018).
Air pollution has increased in Malaysia with industrial expansion that released many harmful particles
into the atmosphere (Usmani et al. 2020). Recently haze has also become a prevalent issue in Malaysia
stemming from forest fires in Malaysia and Indonesia, with significant effects on air quality (Mead et al., 2018).
Air pollution threatens ecosystems such as species and forests. However, it also poses a direct threat to humans,
with 6.4 million deaths in 2016 attributed to air pollution worldwide (WHO 2017) and strong human health
impacts in Malaysia (Qureshi et al. 2015).
Continuously high levels of pollution could eventually be a driver of nature-related financial risk
scenarios with a considerable potential risk exposure for Malaysian banks. Potential scenarios could
be a reduction in ecosystem services due to continued high resource use, pollution, and urban sprawl (44
percent), increased ocean acidification (8 percent), lower clean water availability due to continuously high-water
pollution (7.1 percent), unmanaged waste disposal and soil pollution strongly affecting productivity of habitats
(2.4 percent), and atmospheric pollution causing deterioration of ecosystem services (1.7 percent).
A.4.5 Invasive Species and Diseases
Invasive species are another IPBES identified driver of nature-related financial risk scenarios in
Malaysia. The spread of invasive alien species can have detrimental impacts for nature, humans, animals, and
plants, while also posing risks for the economy and financial sector. Globalization and accompanying trade
and tourism increase, as well as growing climate change, caused higher numbers of invasive species (MyBIS
2018). Malaysia Biodiversity Information System (MyBIS) provided in its 2018 list of invasive alien species an
overview of potential threats. For instance, S. molesta is a water plant that affects aquatic ecosystems by
weaving themselves into a thick, floating mat, which blocks oxygen and light from the water. As a result, this
pest could threaten cultivated aquatic crops and potentially clog irrigation and drinking water lines. Another
example is the red palm weevil disease, which strongly impacts the Malaysian coconut industry. Infected palms
need to be removed and replanted, causing high economic costs. Furthermore, some diseases such as foot
and mouth disease might directly affect animals, having a devastating impact on individual farmers and the
rural community. Malaysia is aware of the invasive species and disease threat and is developing strategies for
containing potential risks (MyBIS 2021), however, as the example of COVID-19 demonstrated, such diseases
can spread quickly around the globe. Sectors such as agriculture, forestry, and aquaculture could be strongly
impacted in such scenarios, exposing the Malaysian banking sector to potential financial risk.
Nature-related financial risk exposure of Malaysian banks to potential invasive species driven
scenarios such as invasive species sprawl (1 percent) and species decline due to human genetic
modification (0.7 percent) is relatively low. However, in a globalized world invasive species and diseases
could spread relatively quickly around the globe thus being a quite likely scenario.
88 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
A.4.6 Governance Issues
Governance challenges could be a driver of nature-related financial risk scenarios. Conflicting priorities
across national policies and the state development agenda as well as restricted capacity and capability of
enforcement and implementation could hinder effective policies to avoid physical risk materialization.
Furthermore, lack of clarity around accountability and responsibility could pose transition risk as an orderly
implementation of policies could be impeded. The implementation of strict forestry policies and regulation as a
scenario could for instance cause severe risks for Malaysian banks (0.7 percent) in case of an uncoordinated and
sudden implementation. The Malaysia 2020 Forestry Policy could serve as an example. This aims to regulate
forest management in the three major regions of Malaysia; yet it currently lacks an effective implementation
framework (ERE Consulting Group, 2021). Each region in Malaysia has its own administrative framework and
jurisdiction which hinder effective monitoring and cross-checking to ensure parity of efforts across different
regions. Sabah Forest Policy, for example, highlights specific land area commitments for conservation and
protected area management, while Peninsular Malaysia and Sarawak policies provide less detail. This could
result in unbalanced expectations and responsibilities to achieve the country’s target of preserving at least 50
percent of total forest cover spread across the three regions (ERE Consulting Group, 2021).
Governance issues can be a driver for several nature-related financial risk scenarios with a high
exposure of Malaysian banks. Those scenarios entail all transition risk scenarios such as “sudden and
unexpected climate policy introduction” (38 percent), “regulatory restriction of water pollution” (17 percent),
“sudden increase in the price of water (removal of subsidies / market dynamics) (17 percent)”, “extension
of protected areas” (8 percent), and regulatory restriction of non-sustainable pesticides and fertilizers” (7.4
percent) as the design, implementation, and enforcement of policies could be a significant driver of transition
risk. In contrast, orderly introduced policies might lead to lower transition risk as firms and banks can anticipate
potential policy implications.
A.4.7 Policy Uncertainty
Erratic and contradictory policy and regulatory signals by the government could increase policy
uncertainty. Policy uncertainty is another driver of nature-related financial risk scenarios as it can impede
firms from implementing transformative changes in business operations to reduce their nature impacts. Costly
and long-term strategies might not be pursued, which could increase physical risk likelihood as current highly
impacting business models are continued and transition risk, as no preparation has been conducted in case of
sudden nature-related policy introduction.
89An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
Engagements with local environmental specialists from government and non-governmental
organizations were conducted to get a more complete understanding of nature-related financial
risks impacting Malaysia’s financial system. Semi-structured interviews were conducted with several key
stakeholders including a government ministry, a government agency, two non-governmental organizations
and a research firm.94 The main objectives of the interviews were to obtain insights from the key stakeholders
on (1) the preliminary findings of the report, (2) potential policy changes that may impact transition risk, and (3)
relevant on-going research and initiatives that could further contribute to the analytical understanding of this
study. The feedback received from the stakeholders is broadly summarized as follows:
• At the policy level, focus on nature-related risks and their impacts to the economy and people is
garnering increased interest at the federal-level as well as at certain state-level where nature-
related businesses have a significant impact. While policies, including legislations and regulations
to manage nature-related resources can be considered comprehensive, policy implementation
coordination at the ministerial-level and state-level could be deemed fragmented and hence limiting
the implementation effectiveness. Malaysia’s recognition as a highly biodiverse country attracts strong
stakeholder activism and financial support by both local and international activists, which plays a critical
role in policy implementation oversight.
• Quantification and modelling of economic costs of nature-related loss to the economy and
people are limited. One of the key action plans under the National Biodiversity Action Plan 2016-2025,
is establishing the necessary tools and mechanisms to facilitate the recognition of the economic value
of biodiversity and ecosystem services. From the reported 456 studies that estimated economic values
86 percent of them are in relation to the forest ecosystem.95 Implementation of payment for ecosystem
services (PES) is also limited with one example being payment for watershed services implemented in the
state of Perak. In terms of scenario validation, nature and climate-related events are being monitored by
relevant ministries but are yet to be used in any economic modelling for policy decision-making purposes.
• Limited data availability and data sharing amongst key stakeholders may hamper the development
of a more robust multidisciplinary research program that is necessary for Malaysia’s capacity
building. Local nature-related data are mostly proprietary in nature generated by both public and private
actors. However, the availability of these data to the public differs greatly by type of ecosystems. For
example, data on forest ecosystems are more widely available compared to water services.
Based on the observations above, addressing nature-related financial risks may present unique
challenges to financial sector players, particularly with respect to understanding the complex and
multidisciplinary nature of the subject. Closer engagement with key stakeholders would be imperative to
facilitate meaningful progress in managing nature-related financial risks by the financial sector players.
Interviews were conducted with the Ministry of Energy and Natural Resources, the World Wildlife Fund, Forests and Finance, PE Research and Akademi Sains
Malaysia.
https://www.dosm.gov.my/v1/uploads/files/7_Publication/Technical_Paper/MyStats/2017/1(a)-2_Prof_Awang_Noor_Abd_Ghani.pdf
94
95
A.5 Interviews with Experts Focused on
Biodiversity in Malaysia
90 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
A.6 Full List of Explorative Nature-Related
Risk Scenarios
Table A7: List of possible nature-related financial physical and transition risk scenarios
Risk scenario Source Driver Type of
risk
Affected natural
assets
Affected ecosystem services/
economic sectors
Share
of total
lending
Number of
sectors affected
(unconditional)
Animal
disease
outbreak
ENCORE Overexploitation,
Changing use of
sea and land
Physical
risk
Species Animal-based energy, fibers and
other materials, pollination
0.80% 5
Severe
drought
occurrence
ENCORE Climate change,
Changing use of
sea and land
Physical
risk
Habitats, Soils
and sediments,
Species, Water
Buffering and attenuation of mass
flows, Fibers and other materials,
Mass stabilization and erosion
control, Soil quality, Animal-based
energy, Pollination, Water quality
3.70% 13
Severe
wildfire
occurrence
ENCORE Climate change,
Changing use of
sea and land
Physical
risk
Habitats, Soils and
sediments
Fibers and other materials, Mass
stabilization and erosion control
1.70% 7
Severe
flooding
occurrence
ENCORE Climate change,
Changing use of
sea and land
Physical
risk
Habitats, Land
geomorphology,
Soils and
sediments,
Species, Water
Buffering and attenuation of mass
flows, Fibers and other materials,
Flood and Storm protection, Mass
stabilization and erosion control,
Soil quality, Pollination,
9.60% 16
Pest outbreak ENCORE Overexploitation,
Changing use of
sea and land
Physical
risk
Species Fibers and other materials,
pollination
0.70% 5
Severe storm
occurrence
ENCORE Climate change,
Changing use of
sea and land
Physical
risk
Habitats, Soils
and sediments,
Species, Water
Buffering and attenuation of mass
flows, fibers and other materials,
flood and storm protection,
maintenance of nursery habitats,
mass stabilization and erosion
control, pollination, water quality,
Dilution by atmosphere and
ecosystems
9.40% 37
Ecosystem
service
deterioration
due to
continued
high rates of
deforestation
ENCORE Overexploitation,
Changing use of
sea and land
Physical
risk
Atmosphere,
Habitats, Land
geomorphology,
Minerals, Soils
and sediments,
Species, Water
Climate regulation, mediation of
sensory impacts, pollination, soil
quality, water flow maintenance,
bio-remediation, buffering and
attenuation of mass flows, fibers
and other materials, filtration,
flood and storm protection,
maintenance of nursery habitats,
pest control, water flow
maintenance, soil quality, disease
control, Ventilation, ground water
30.40% 42
Species
decline due
to human
genetic
modification
ENCORE Invasive non-
native species
Physical
risk
Species Fibers and other materials, Genetic
materials, Pollination
0.70% 5
Reduced
ecosystem
services due
to continued
high resource
use, pollution
and urban
sprawl
ENCORE Pollution,
Climate Change,
Overexploitation,
Change and sea
and land use
Physical
risk
Atmosphere,
Habitats, Land
geomorphology,
Ocean
geomorphology,
Soils and
sediments, Water
Dilution by atmosphere and
ecosystems, buffering and
attenuation of mass flows, Climate
regulation, flood and storm
protection, maintenance of nursery
habitats, mass stabilization and
erosion control, surface water
44.10% 49
91An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
Risk scenario Source Driver Type of
risk
Affected natural
assets
Affected ecosystem services/
economic sectors
Share
of total
lending
Number of
sectors affected
(unconditional)
Reduced
agricultural
yields
and water
pollution due
to intense
agri- and
aquaculture
ENCORE Overexploitation Physical
risk
Soils and
sediments,
Species, Water
Buffering and attenuation of
mass flows, soil quality, disease
control, fibers and other materials,
maintenance of nursery habitats,
pest control, pollination
2.50% 6
Invasive
species sprawl
ENCORE Invasive non-
native species
Physical
risk
Species, Water Bio-remediation, Fibers and other
materials, Maintenance of nursery
habitats, Pollination, Water quality
1% 10
Increased
ocean
acidification
ENCORE Climate change,
Pollution
Physical
risk
Habitats, species,
water
Flood and storm protection,
maintenance of nursery habitats,
mass stabilization and erosion
control, water quality
8% 19
Changed
ocean
current and
circulation
ENCORE Climate change Physical
risk
Habitats, water Climate regulation, maintenance
of nursery habitats, dilution by
atmosphere and ecosystems,
water quality
15.90% 26
Severe
reduction in
available fish
stock
ENCORE Overexploitation Physical
risk
Species Fibers and other materials,
maintenance of nursery habitats,
pollination
0.70% 5
Severe
reduction
in available
timber
ENCORE Overexploitation,
Changing use of
sea and land
Physical
risk
Soils and
sediments,
Species
Climate regulation, fibers and
other materials, pollination
16.20% 22
Species
decline due
to excessive
hunting
ENCORE Overexploitation Physical
risk
Species Pest control, pollination 1.70% 13
Atmospheric
pollution
causing
deterioration
of ecosystem
services
ENCORE Pollution, Climate
Change
Physical
risk
Atmosphere Mediation of sensory impacts,
pollination, soil quality, water flow
maintenance
2.40% 15
Unmanaged
waste
disposal and
soil pollution
strongly
affecting
productivity
of habitats
ENCORE Pollution Physical
risk
Habitat, species,
soils and
sediments
Bio-remediation, fibers and other
materials, filtration, maintenance
of nursery habitats, mediation of
sensory impacts, soil quality, water
flow maintenance, pollination,
water quality
2.40% 15
Lower
clean water
availability
due to
continuously
high water
pollution
ENCORE Pollution Physical
risk
Water Dilution by atmosphere and
ecosystems, ground water,
maintenance of nursery habitats,
mediation of sensory impacts,
pollination, soil quality, water flow
maintenance, water quality
7.10% 29
Increase in
sea surface
temperature
ENCORE Climate Change Physical
risk
Habitats, soils
and sediments,
species, water
Climate regulation, fibers and
other materials
16% 22
Lower water
availability
for other
ecosystem
services
ENCORE Pollution,
Climate Change,
Overexploitation,
Change and sea
and land use
Physical
risk
Water Ground water, water flow
maintenance, dilution by
atmosphere and ecosystem
6% 29
Regulatory
/ market
backlash
against non-
sustainable
forestry
Interviews Governance,
Policy
uncertainty,
Consumer
sentiments
Transition
risk
Forestry and logging, Manufacture
of wood and products of wood
and cork, except furniture;
manufacture of articles of straw
and plaiting materials, Manufacture
of furniture
0.70% 3
92 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
Risk scenario Source Driver Type of
risk
Affected natural
assets
Affected ecosystem services/
economic sectors
Share
of total
lending
Number of
sectors affected
(unconditional)
Extension of
protected
areas
Interviews Governance,
Policy
uncertainty
Transition
risk
Forestry and logging, Crops and
animal production, hunting and
related service activities, Fishing
and Aquaculture, Extraction of
crude petroleum and natural gas,
Mining of metal ores, Other mining
and quarrying, Mining Support
Service Activities, Manufacture
of food products, Manufacture
of beverages, Manufacture of
tobacco products, Manufacture
of wood and products of wood
and cork, except furniture;
manufacture of articles of straw
and plaiting materials, Manufacture
of furniture
8.40% 10
Regulatory
restriction
of non-
sustainable
pesticides
ENCORE Governance,
Policy
uncertainty
Transition
risk
Crops and animal production,
hunting and related service
activities, Fishing and Aquaculture,
Manufacture of food products,
Manufacture of beverages,
Manufacture of tobacco products,
Manufacture of chemicals and
chemical products
7.40% 6
Regulatory
restriction
of non-
sustainable
fertilizers
ENCORE Governance,
Policy
uncertainty
Transition
risk
Crops and animal production,
hunting and related service
activities, Fishing and Aquaculture,
Manufacture of food products,
Manufacture of beverages,
Manufacture of tobacco products,
Manufacture of chemicals and
chemical products
7.40% 6
Regulatory
restriction
of water
pollution
Interviews Governance,
Policy
uncertainty
Transition
risk
Manufacture of food products,
Crops and animal production,
hunting and related service
activities, Accommodation, Other
manufacturing, Manufacture of
rubber and plastic products,
Manufacture of fabricated metal
products, except machinery and
equipment, Manufacture of other
non-metallic mineral products,
Manufacture of wood and products
of wood and cork, except furniture;
manufacture of articles of straw
and plaiting materials, Manufacture
of textiles, Water transport,
Manufacture of paper and paper
products, Manufacture of basic
metals, Electricity, gas, steam and
air conditioning supply, Mining
support service activities, Mining
of metal ores, Water collection,
treatment and supply, Waste
collection, treatment and disposal
activities; materials recovery,
Manufacture of beverages,
Manufacture of chemicals and
chemical products, Other mining
and quarrying, Extraction of
crude petroleum and natural gas,
Forestry and logging, Manufacture
of wearing apparel, Manufacture
of tobacco products, Manufacture
of leather and related products,
Mining of coal and lignite, Fishing
and Aquaculture, Remediation
activities and other waste
management services, Sewerage
16.80% 29
93An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
Risk scenario Source Driver Type of
risk
Affected natural
assets
Affected ecosystem services/
economic sectors
Share
of total
lending
Number of
sectors affected
(unconditional)
Sudden and
unexpected
climate policy
introduction
ENCORE Governance,
Policy
uncertainty
Transition
risk
Crops and animal production,
hunting and related service
activities, Forestry and logging,
Fishing and Aquaculture, Mining
of coal and lignite, Extraction
of crude petroleum and natural
gas, Mining of metal ores,
Manufacture of beverages, Other
manufacturing, Manufacture of
furniture, Manufacture of other
transport equipment, Manufacture
of motor vehicles, trailers and
semi-trailers, Manufacture of
machinery and equipment
n.e.c., Manufacture of electrical
equipment, Manufacture of
computer, electronic and optical
products, Manufacture of basic
metals, Manufacture of other
non-metallic mineral products,
Manufacture of rubber and plastic
products, Manufacture of basic
pharmaceutical products and
pharmaceutical preparations,
Manufacture of textiles,
Manufacture of leather and related
products, Manufacture of paper
and paper products, Manufacture
of chemicals and chemical
products, Manufacture of coke
and refined petroleum products,
Manufacture of wearing apparel,
Mining support service activities,
Water collection, treatment and
supply, Electricity, gas, steam
and air conditioning supply,
Sewerage, Waste collection,
treatment and disposal activities;
materials recovery, Construction
of buildings, Civil engineering,
Wholesale and retail trade and
repair of motor vehicles and
motorcycles, Land transport
and transport via pipelines,
Water transport, Air transport,
Warehousing and support
activities for transportation,
Postal and courier activities,
Accommodation, Financial service
activities, except insurance and
pension funding, Insurance,
reinsurance and pension funding,
except compulsory social security,
Activities auxiliary to financial
services and insurance activities,
Real estate activities
37.60% 30
94 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
Risk scenario Source Driver Type of
risk
Affected natural
assets
Affected ecosystem services/
economic sectors
Share
of total
lending
Number of
sectors affected
(unconditional)
Sudden
increase in the
price of water
(removal of
subsidies
/ market
dynamics)
Interviews Governance,
Policy
uncertainty
Transition
risk
Manufacture of food products,
Crops and animal production,
hunting and related service
activities, Accommodation, Other
manufacturing, Manufacture of
rubber and plastic products,
Manufacture of fabricated metal
products, except machinery and
equipment, Manufacture of other
non-metallic mineral products,
Manufacture of wood and products
of wood and cork, except furniture;
manufacture of articles of straw
and plaiting materials, Manufacture
of textiles, Water transport,
Manufacture of paper and paper
products, Manufacture of basic
metals, Electricity, gas, steam and
air conditioning supply, Mining
support service activities, Mining
of metal ores, Water collection,
treatment and supply, Waste
collection, treatment and disposal
activities; materials recovery,
Manufacture of beverages,
Manufacture of chemicals and
chemical products, Other mining
and quarrying, Extraction of
crude petroleum and natural gas,
Forestry and logging, Manufacture
of wearing apparel, Manufacture
of tobacco products, Manufacture
of leather and related products,
Mining of coal and lignite, Fishing
and Aquaculture, Remediation
activities and other waste
management services, Sewerage
16.80% 29
95An Exploration of Nature-Related Financial Risks in Malaysia
CONNECT WITH US
wbg.org/Malaysia
@WorldBankMalaysia
@WB_AsiaPacific
http://bit.ly/WB_blogsMY
www.bnm.gov.my
@bnm.official
@banknegaramalaysia
@BNM_official
BNM Official
Bank Negara Malaysia
Title
Table of Contents
Acknowledgements
List of Figures
List of Boxes
Acronyms and Abbreviations
Executive Summary
ES.1 Introduction
ES.2 Key Findings
ES.3 Potential Actions to Address Challenges of Nature-Related Financial Risks
Chapter 1. Biodiversity, Nature, and Banking in Malaysia
1.1 The Malaysian Banking Sector
1.2 Malaysia, a Biodiversity Hotspot
1.3 Nature-Related Financial Risks
Chapter 2. Exposure Assessment
2.1 Dependency on Ecosystem Services
2.2 Impacts on Ecosystem Services
2.3 Activities in Key Biodiversity Areas
2.4 Physical and Transition Risk Scenarios
Chapter 3. Potential Actions to Address Nature-Related Financial Risks
Chapter 4. Conclusions
4.1 Key Findings
4.2 Potential Actions to Address Challenges of Nature-Related Financial Risks
4.3 Areas for Future Exploration
References
Appendix
A.1 Methodology
A.2 ENCORE Definitions
A.3 Reputational Risk
A.4 Drivers of Nature-Related Financial Risk Scenarios in Malaysia
A.4.1 Land and Sea Use Change
A.4.2 Natural Resource Use and Exploitation
A.4.3 Climate Change
A.4.4 Pollution
A.4.5 Invasive Species and Diseases
A.4.6 Governance Issues
A.4.7 Policy Uncertainty
A.5 Interviews with Experts Focused on Biodiversity in Malaysia
A.6 Full List of Explorative Nature-Related Risk Scenarios
| Press Release |
07 Mar 2022 | International Reserves of Bank Negara Malaysia as at 28 February 2022 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-28-february-2022 | https://www.bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf | null |
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International Reserves of Bank Negara Malaysia as at 28 February 2022
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For immediate release
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7 Mar 2022
The international reserves of Bank Negara Malaysia amounted to USD115.8 billion as at 28 February 2022. The reserves position is sufficient to finance 6.1 months of imports of goods and services[1], and is 1.2 times total short-term external debt.
[1] Under the previous import coverage measure, reserves is sufficient to finance 7.3 months of retained imports of goods (15 February 2022: 7.3 months). For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27, which can be accessed at bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf Related Assets
BNM Statement of Assets & Liabilities - 28 February 2022
Bank Negara Malaysia
7 March 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
Monthly Highlights
Headline inflation declined to 3.4% in March
March 2023
1
3.7 3.4
3.9 3.8
0.00
2.00
4.00
0.0
2.0
4.0
J
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2
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2
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A
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a
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-2
3
F
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b
-2
3
M
a
r-
2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation declined to 3.4% in March
(February: 3.7%) due mainly to lower inflation for
fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation moderated slightly to 3.8% during
the month (February: 3.9%), driven largely by
lower inflation for food away from home.
1
Robust growth in volume index driven by retail and motor vehicles
Index of Wholesale and Retail Trade
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded by 10.6% in February 2023
(January: 8.5%).
• The higher growth was driven mainly by retail
sales in non-specialised stores (e.g., department
stores) followed by continued strength in
purchases of motor vehicles amid the ongoing
fulfilment of backlog orders.
• On a month-on-month seasonally adjusted basis,
the index accelerated by 5.5% (January: 0.2%).
9.5 8.510.6
0
10
20
30
40
Feb-
22
Mar-
22
Apr-
22
May-
22
Jun-
22
Jul-
22
Aug-
22
Sep-
22
Oct-
22
Nov-
22
Dec-
22
Jan-
23
Feb-
23
ppt, %yoy
Motor vehicles Retail Wholesale
2.4
5.2
4.4
0
1
2
3
4
5
6
7
Mar-22 Jul-22 Nov-22 Mar-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Growth in credit to the private non-financial sector moderated
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
2.7 2.6 2.7 2.6
1.0 0.6 0.7 0.7
1.0
1.1 1.1 0.9
4.7 4.3 4.5 4.2
Dec-22 Jan-23 Feb-23 Mar-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Contribution to growth (ppt)
• Credit to the private non-financial sector grew by
4.2% as at end-March (February: 4.5%), attributed
to slower growth in credit to businesses (3.2%;
February: 3.7%).
• While growth in outstanding corporate bonds
moderated (4.4%; February : 5.5%), outstanding
business loan growth was sustained at 2.4%
(February: 2.4%). This was supported by the
continued growth in both working capital (2.2%;
February: 1.9%) and investment-related loans
(4.3%; February: 4.2%).
• Outstanding household loan growth remained
broadly stable (5.2%; February: 5.3%), supported
by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan
growth for the purchase of securities (-6.9%;
February: -3.3%).
Credit to the Private Non-Financial Sector1,2
Monthly Highlights
March 2023
Domestic financial market conditions remained orderly
Financial Market Performance in March 2023
Source: Bank Negara Malaysia, Bursa Malaysia
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
11.0
-2.1
-5.3
0.0
-2.2
1.7
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-10 -5 0 5 10 15
Mar-23
Feb-23
• In March, global financial markets were affected by
the emergence of banking sector stress in some
major economies. As spillovers were contained thus
far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds
improved.
• In line with the performance of regional currencies,
the ringgit appreciated by 1.7% against the US
dollar. Conditions in the domestic bond market
also remained stable.
• The FBM KLCI declined by 2.2% during the month.
2
Banks maintained strong liquidity and funding positions to support intermediation
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.9
157.4
0
40
80
120
160
70
75
80
85
90
95
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
increased slightly to 1.8% (February-23: 1.8%) and
1.2% (February-23: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory
reserves) continue to record a prudent level of
110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
%
1.8
1.2
1.7
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
157.4% (February-23: 152.7%).
• The aggregate loan-to-fund ratio remained stable at
81.9% (February-23: 81.6%).
PRESS RELEASE
Ref. No.: 04/23/05 EMBARGO: Not for publication or
broadcast before 1500 hours on
Friday, 28 April 2023
Monthly Highlights – March 2023
Headline inflation declined to 3.4% in March
• Headline inflation declined to 3.4% in March (February: 3.7%) due mainly
to lower inflation for fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation1 moderated slightly to 3.8% during the month
(February: 3.9%), driven largely by lower inflation for food away from
home.
Robust growth in volume index driven by retail and motor vehicles
• The Index of Wholesale and Retail Trade (IOWRT) expanded by 10.6%
in February 2023 (January: 8.5%).
• The higher growth was driven mainly by retail sales in non-specialised
stores (e.g., department stores) followed by continued strength in
purchases of motor vehicles amid the ongoing fulfilment of backlog
orders.
• On a month-on-month seasonally adjusted basis, the index accelerated
by 5.5% (January: 0.2%).
1 Core inflation is computed by excluding price-volatile and price-administered items.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth in credit to the private non-financial sector2,3 moderated
• Credit to the private non-financial sector grew by 4.2% as at end-March
(February: 4.5%), attributed to slower growth in credit to businesses
(3.2%; February: 3.7%).
• While growth in outstanding corporate bonds moderated (4.4%;
February: 5.5%), outstanding business loan growth was sustained at
2.4% (February: 2.4%). This was supported by the continued growth in
both working capital (2.2%; February: 1.9%) and investment-related
loans (4.3%; February: 4.2%).
• Outstanding household loan growth remained broadly stable (5.2%;
February: 5.3%), supported by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan growth for the purchase of
securities (-6.9%; February: -3.3%).
Domestic financial market conditions remained orderly
• In March, global financial markets were affected by the emergence of
banking sector stress in some major economies. As spillovers were
contained thus far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds improved.
• In line with the performance of regional currencies, the ringgit
appreciated by 1.7% against the US dollar. Conditions in the domestic
bond market also remained stable.
• The FBM KLCI declined by 2.2% during the month.
Banks maintained strong liquidity and funding positions to support
intermediation
• Banks continued to record healthy liquidity buffers with the aggregate
Liquidity Coverage Ratio at 157.4% (February: 152.7%).
2 Comprises loans to households and non-financial corporations from the banking system and development financial
institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
3 Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced
to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
• The aggregate loan-to-fund ratio remained stable at 81.9%
(February: 81.6%).
Asset quality in the banking system remained intact
• Overall gross and net impaired loans ratios increased slightly to 1.8%
(February: 1.8%) and 1.2% (February: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory reserves) continues to
record a prudent level of 110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
Bank Negara Malaysia
28 April 2023
20230428_BNM Monthly Highlights-March_en
Slide 1
Slide 2
20230428_BNM PR_Monthly Highlights-Mar 2023_eng
| Press Release |
03 Mar 2022 | Monetary Policy Statement | https://www.bnm.gov.my/-/monetary-policy-statement-03032022 | null | null |
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Monetary Policy Statement
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9
Monetary Policy Statement
Embargo :
For immediate release
Not for publication or broadcast before
1500 on
Thursday, 3 March 2022
3 Mar 2022
At its meeting today, the Monetary Policy Committee (MPC) of Bank Negara Malaysia decided to maintain the Overnight Policy Rate (OPR) at 1.75 percent.
The global economy continues to recover. Despite the recent moderation in economic activity due to the Omicron-driven COVID-19 resurgences, the overall recovery trajectory remains on track. Inflation in many economies remain elevated, due to both demand and supply factors. Going forward, more countries will transition to endemic management of COVID-19, hence supporting global growth prospects. The unfolding developments surrounding the military conflict in Ukraine, however, have emerged as a key risk to global growth and trade prospects, commodity prices and financial market conditions. The global growth outlook will also continue to be affected by developments surrounding COVID-19, risks of prolonged global supply disruptions, and heightened financial market volatility amid adjustments in monetary policy in major economies.
Despite the challenging environment, the Malaysian economy expanded by 3.1% in 2021. Looking ahead, the growth recovery will strengthen in 2022, driven by the expansion in global demand and higher private sector expenditure, amid improvements in the labour market and continued targeted policy support. The expected reopening of international borders would also provide further support to economic recovery. The economic impact from the recent increase in COVID-19 cases due to the Omicron variant is expected to be considerably less severe than previous waves in the absence of stringent restrictions. Risks to the growth outlook remain tilted to the downside due to external and domestic factors. These include a weaker-than-expected global growth, ongoing geopolitical conflicts, worsening supply chain disruptions, and developments surrounding COVID-19.
Headline inflation in 2022 is projected to remain moderate as the base effect from fuel inflation continues to dissipate. Underlying inflation, as measured by core inflation, is expected to normalise to around its long-term average as economic activity continues to pick up amid the environment of high input costs. Nevertheless, core inflation is expected to be modest, with the upside risk partly contained by the continued slack in the economy and labour market. The inflation outlook continues to be subject to global commodity price developments amid risks from prolonged supply-related disruptions.
The MPC considers the current stance of monetary policy to be appropriate and accommodative. Fiscal and financial measures will continue to provide support to economic activity. Amid the prevailing uncertainties, the stance of monetary policy will continue to be determined by new data and their implications on the overall outlook for domestic inflation and growth.
Bank Negara Malaysia
3 March 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
28 Feb 2022 | Monetary and Financial Developments in January 2022 | https://www.bnm.gov.my/-/monetary-and-financial-developments-in-january-2022 | https://www.bnm.gov.my/documents/20124/6292127/i_en.pdf | null |
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Monetary and Financial Developments in January 2022
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Monetary and Financial Developments in January 2022
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Not for publication or broadcast before
1500 on
Monday, 28 February 2022
28 Feb 2022
Headline inflation moderated to 2.3% in January 2022
Headline inflation moderated to 2.3% in January 2022 (December: 3.2%) due mainly to the lower contribution from fuel and electricity inflation. This was partly offset by higher food and non-alcoholic beverages inflation (3.6%; December: 3.2%).
Underlying inflation, as measured by core inflation, increased to 1.6% (December: 1.1%), driven mainly by food away from home, and repair and maintenance for personal transport.
Wholesale and retail trade growth moderated in December 2021
The Index of Wholesale and Retail Trade (IOWRT) expanded at a more moderate pace of 0.6% in December 2021 (November: 2.4%). The slower growth was recorded across all sub-components.
The index decelerated on a seasonally adjusted month-on-month basis (-0.4%; November: 1.2%). This reflected mainly slowing activities in the retail segments, amid rising price pressures faced by consumers in the last quarter of the year.
Sustained net financing growth amid continued support from bank lending
Net financing growth was sustained at 4.8% in January 2022, as outstanding loan growth increased (4.7%; December: 4.5%) amid some moderation in outstanding corporate bond growth (5.0%; December: 5.5%).
Outstanding household loans grew by 4.7% (December: 4.3%), in line with the higher growth in loan disbursements (21.3%; December: 7.4%), which outpaced the growth in loan repayments (6.0%; December: 1.2%).
Growth in outstanding business loans (5.3%; December: 5.0%) continued to be supported by working capital loans. By sector, it was mainly driven by the manufacturing and wholesale and retail trade sectors.
Financial markets driven by expectations of tighter global monetary conditions
Domestic financial market conditions tightened in January 2022 as MGS yields rose and the domestic equity market declined. This was driven mainly by firmer expectations for a faster pace of US monetary policy tightening and the corresponding broad strengthening in the US dollar.
During the month, despite marginal ringgit depreciation, Malaysia continued to record non-resident portfolio inflows into the equities and bond market. Importantly, despite the weaker financial market performance, financial market adjustments remained orderly amid sufficient trading liquidity.
Banking system capitalisation remains strong
Banks remain well-capitalised to withstand potential stress and continue supporting credit flows to the economy.
Capital ratios rose slightly in January 2022 due to recognition of year-end profits. This was partially offset by valuation adjustments on available-for-sale financial instruments.
Banks’ loss-absorbing capacity remains strong, with excess capital buffers1 of RM131.9 billion as at January 2022.
The resilience of banks continued to be underpinned by sound asset quality
Overall gross and net impaired loans ratios remained broadly stable at 1.4% and 0.9%, respectively.
Banks continue to set aside additional provisions against potential credit losses. Total provisions currently stand at 1.9% of total banking system loans and 130.5% of impaired loans.
1 Refers to total capital above the regulatory minimum, which includes the capital conservation buffer (2.5%) and bank-specific higher minimum requirements.
View Monthly Highlights [PDF] Related Assets
Monthly Highlights and Statistics in January 2022
Bank Negara Malaysia
28 February 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
Monthly Highlights May 2023
Monthly Highlights
Headline inflation declined further to 2.8% in May
May 2023
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation moderated to 2.8% (April 2023:
3.3%). This decline was largely due to non-core
CPI components, particularly lower inflation for
fuel (-0.2 percentage points, ppt) and fresh food
(-0.1ppt).
• Core inflation also declined slightly to 3.5% (April
2023: 3.6%) amid lower inflation for
communication services.
3.3
2.8
3.6 3.5
0.00
2.00
4.00
0.0
2.0
4.0
J
a
n
-2
2
F
e
b
-2
2
M
a
r-
2
2
A
p
r-
2
2
M
a
y
-2
2
J
u
n
-2
2
J
u
l-
2
2
A
u
g
-2
2
S
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p
-2
2
O
c
t-
2
2
N
o
v
-2
2
D
e
c
-2
2
J
a
n
-2
3
F
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b
-2
3
M
a
r-
2
3
A
p
r-
2
3
M
a
y
-2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
1.6
5.1
4.6
0
1
2
3
4
5
6
7
May-22 Sep-22 Jan-23 May-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Credit to the Private Non-Financial Sector1,2
1
Growth in credit to the private non-financial sector improved in May
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
Contribution to growth (ppt)
• Credit to the private non-financial sector expanded
by 4.0% as at end-May (April 2023: 3.7%), driven
mainly by higher growth in credit to businesses
(2.8%; April 2023: 2.5%).
• Outstanding corporate bonds grew by 4.6% (April
2023: 4.4%), while outstanding business loans
expanded by 1.6% (April 2023: 1.0%). The higher
business loan growth reflected improvement in
loans for both working capital and investments to
SMEs and non-SMEs.
• In the household segment, outstanding loan
growth was sustained at 5.1% (April 2023: 5.0%),
supported by higher growth across most loan
purposes. Of note, household loan growth
continued to be driven by loans for the purchase of
houses and cars, which grew by 7.0% and 8.4%,
respectively (April 2023: 6.8% and 8.0%).
2.7 2.6 2.5 2.6
0.7 0.7 0.3 0.5
1.1 0.9
0.9 1.0
4.5 4.2
3.7 4.0
Feb-23 Mar-23 Apr-23 May-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Index of wholesale and retail trade growth moderated in April
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded more moderately by 4.7% in
April 2023 (March 2023: 9.4%). The lower growth
was due mainly to the decline in the motor vehicle
segment.
• However, the retail segment continued to record a
double-digit growth of 10.0% (March 2023:
13.8%), supported by sales in non-specialised and
other specialised stores1.
• On a month-on-month seasonally adjusted basis,
the index increased at a faster pace of 6.5%
(March 2023: -0.9%).
1 Other goods in specialised stores includes clothing, footwear,
pharmaceuticals, cosmetics, watches, jewellery and optical goods.
10.6
9.4
4.7
-2
3
8
13
18
23
28
33
Apr-22 Jun-22 Aug-22 Oct-22 Dec-22 Feb-23 Apr-23
ppt, %yoy
Motor vehicles Retail Wholesale
Index of Wholesale and Retail Trade
Monthly Highlights
2
May 2023
Domestic financial markets were largely affected by external factors
Financial Market Performance in May 2023
-18.0
-0.5
-1.1
-3.0
-2.0
-3.4
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-20 -15 -10 -5 0
May-23 Apr-23
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
1Regional countries comprise Singapore, Thailand, Philippines, Indonesia, and Korea
Source: Bank Negara Malaysia, Bursa Malaysia
• Global investors maintained a risk-off approach
throughout May, as concerns over the impact of the
US debt ceiling crisis and the weaker-than-
expected rebound in China’s economy weighed on
global financial markets.
• As a result, the ringgit depreciated against the US
dollar by 3.4% (regional1 average: -1.2%). Similarly,
the FBM KLCI declined by 2.0% (regional1 average:
-1.3%).
• Nonetheless, the 10-year MGS yields decreased
slightly by 3 basis points, supported by non-resident
inflows into the domestic bond market.
Banks maintained strong liquidity and funding positions to support intermediation
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
151.2% (April 2023: 154.3%).
• The aggregate loan-to-fund ratio remained stable at
81.8% (April 2023: 82.1%).
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.8
151.2
0
40
80
120
160
70
75
80
85
90
95
M
a
y
2
2
J
u
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2
2
J
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2
2
A
u
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2
2
S
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p
2
2
O
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t
2
2
N
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2
2
D
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2
2
J
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2
3
F
e
b
2
3
M
a
r
2
3
A
p
r
2
3
M
a
y
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
remained broadly unchanged at 1.80% (April
2023: 1.78%) and 1.10% (April 2023: 1.10%),
respectively.
• Loan loss coverage ratio (including regulatory
reserves) remained at a prudent level of 114.1%
of impaired loans, with total provisions accounting
for 1.7% of total loans.
%
1.8
1.1
1.7
0.5
1.0
1.5
2.0
M
a
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2
2
J
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2
2
J
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2
2
A
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2
2
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2
2
O
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2
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D
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3
F
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2
3
M
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3
A
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2
3
M
a
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2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
April 2023 Monthly Highlights
Slide 1
Slide 2
| Press Release |
28 Feb 2022 | Detailed Disclosure of International Reserves as at end-January 2022 | https://www.bnm.gov.my/-/detailed-disclosure-of-international-reserves-as-at-end-january-2022-1 | null | null |
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Detailed Disclosure of International Reserves as at end-January 2022
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Detailed Disclosure of International Reserves as at end-January 2022
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28 Feb 2022
In accordance with the IMF SDDS format, the detailed breakdown of international reserves provides forward-looking information on the size, composition and usability of reserves and other foreign currency assets, and the expected and potential future inflows and outflows of foreign exchange of the Federal Government and Bank Negara Malaysia over the next 12-month period.
The detailed breakdown of international reserves based on the SDDS format is shown in Tables I, II, III and IV. As shown in Table I, official reserve assets amounted to USD116,107.9 million, while other foreign currency assets amounted to USD133.3 million as at end-January 2022. As shown in Table II, for the next 12 months, the pre-determined short-term outflows of foreign currency loans, securities and deposits, which include among others, scheduled repayment of external borrowings by the Government and the maturity of foreign currency Bank Negara Interbank Bills, amounted to USD5,336.8 million. The short forward positions amounted to USD8,205.5 million while long forward positions amounted to USD130 million as at end-January 2022, reflecting the management of ringgit liquidity in the money market. In line with the practice adopted since April 2006, the data excludes projected foreign currency inflows arising from interest income and the drawdown of project loans. Projected foreign currency inflows amount to USD2,343.4 million in the next 12 months. As shown in Table III, the only contingent short-term net drain on foreign currency assets are Government guarantees of foreign currency debt due within one year, amounting to USD401.8 million. There are no foreign currency loans with embedded options, no undrawn, unconditional credit lines provided by or to other central banks, international organisations, banks and other financial institutions. Bank Negara Malaysia also does not engage in foreign currency options vis-à-vis ringgit.
Overall, the detailed breakdown of international reserves under the IMF SDDS format indicates that as at end-January 2022, Malaysia’s international reserves remain usable. Related Assets
International Reserves and Foreign Currency Liquidity (31 January 2022)
Bank Negara Malaysia
28 February 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
23 Feb 2022 | Matters relating to 1MDB | https://www.bnm.gov.my/-/stmt-20220223 | null | null |
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Matters relating to 1MDB
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Matters relating to 1MDB
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Wednesday, 23 February 2022
23 Feb 2022
Bank Negara Malaysia (BNM) refers to the witness testimony in an ongoing trial in New York relating to the approval given by BNM for 1MDB to invest abroad in 2009. All investments abroad by resident entities are subject to the requirements under the Exchange Control Act 1953 that was in force prior to 2013 (since replaced by the Financial Services Act 2013). These requirements and criteria governing such investments are transparent and published on BNM’s website. All submissions made by 1MDB, including the said application, were subject to the same approval criteria and internal governance process that apply to any submission by other entities to BNM.
BNM would also like to address previous reports on information received from foreign financial intelligence units (FIUs) with respect to the accounts belonging to the husband of a former Governor. On this, BNM has furnished information to the relevant law enforcement agency in April 2016 in accordance with our responsibilities under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001.
Bank Negara Malaysia
23 February 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
22 Feb 2022 | International Reserves of Bank Negara Malaysia as at 15 February 2022 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-15-february-2022 | https://www.bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf | null |
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International Reserves of Bank Negara Malaysia as at 15 February 2022
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International Reserves of Bank Negara Malaysia as at 15 February 2022
Embargo :
For immediate release
Not for publication or broadcast before
1500 on
Tuesday, 22 February 2022
22 Feb 2022
The international reserves of Bank Negara Malaysia amounted to USD115.8 billion as at 15 February 2022. The reserves position is sufficient to finance 6.1 months of imports of goods and services[1], and is 1.2 times total short-term external debt.
[1] Under the previous import coverage measure, reserves is sufficient to finance 7.3 months of retained imports of goods (31 January 2022: 7.5 months). For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27, which can be accessed at bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf Related Assets
BNM Statement of Assets & Liabilities - 15 February 2022
Bank Negara Malaysia
22 February 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
Monthly Highlights
Headline inflation declined to 3.4% in March
March 2023
1
3.7 3.4
3.9 3.8
0.00
2.00
4.00
0.0
2.0
4.0
J
a
n
-2
2
F
e
b
-2
2
M
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2
2
A
p
r-
2
2
M
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-2
2
J
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-2
2
J
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2
2
A
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-2
2
S
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-2
2
O
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t-
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2
N
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-2
2
D
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-2
2
J
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-2
3
F
e
b
-2
3
M
a
r-
2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation declined to 3.4% in March
(February: 3.7%) due mainly to lower inflation for
fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation moderated slightly to 3.8% during
the month (February: 3.9%), driven largely by
lower inflation for food away from home.
1
Robust growth in volume index driven by retail and motor vehicles
Index of Wholesale and Retail Trade
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded by 10.6% in February 2023
(January: 8.5%).
• The higher growth was driven mainly by retail
sales in non-specialised stores (e.g., department
stores) followed by continued strength in
purchases of motor vehicles amid the ongoing
fulfilment of backlog orders.
• On a month-on-month seasonally adjusted basis,
the index accelerated by 5.5% (January: 0.2%).
9.5 8.510.6
0
10
20
30
40
Feb-
22
Mar-
22
Apr-
22
May-
22
Jun-
22
Jul-
22
Aug-
22
Sep-
22
Oct-
22
Nov-
22
Dec-
22
Jan-
23
Feb-
23
ppt, %yoy
Motor vehicles Retail Wholesale
2.4
5.2
4.4
0
1
2
3
4
5
6
7
Mar-22 Jul-22 Nov-22 Mar-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Growth in credit to the private non-financial sector moderated
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
2.7 2.6 2.7 2.6
1.0 0.6 0.7 0.7
1.0
1.1 1.1 0.9
4.7 4.3 4.5 4.2
Dec-22 Jan-23 Feb-23 Mar-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Contribution to growth (ppt)
• Credit to the private non-financial sector grew by
4.2% as at end-March (February: 4.5%), attributed
to slower growth in credit to businesses (3.2%;
February: 3.7%).
• While growth in outstanding corporate bonds
moderated (4.4%; February : 5.5%), outstanding
business loan growth was sustained at 2.4%
(February: 2.4%). This was supported by the
continued growth in both working capital (2.2%;
February: 1.9%) and investment-related loans
(4.3%; February: 4.2%).
• Outstanding household loan growth remained
broadly stable (5.2%; February: 5.3%), supported
by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan
growth for the purchase of securities (-6.9%;
February: -3.3%).
Credit to the Private Non-Financial Sector1,2
Monthly Highlights
March 2023
Domestic financial market conditions remained orderly
Financial Market Performance in March 2023
Source: Bank Negara Malaysia, Bursa Malaysia
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
11.0
-2.1
-5.3
0.0
-2.2
1.7
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-10 -5 0 5 10 15
Mar-23
Feb-23
• In March, global financial markets were affected by
the emergence of banking sector stress in some
major economies. As spillovers were contained thus
far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds
improved.
• In line with the performance of regional currencies,
the ringgit appreciated by 1.7% against the US
dollar. Conditions in the domestic bond market
also remained stable.
• The FBM KLCI declined by 2.2% during the month.
2
Banks maintained strong liquidity and funding positions to support intermediation
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.9
157.4
0
40
80
120
160
70
75
80
85
90
95
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
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n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
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2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
increased slightly to 1.8% (February-23: 1.8%) and
1.2% (February-23: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory
reserves) continue to record a prudent level of
110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
%
1.8
1.2
1.7
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
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2
2
A
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2
2
S
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p
2
2
O
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t
2
2
N
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2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
157.4% (February-23: 152.7%).
• The aggregate loan-to-fund ratio remained stable at
81.9% (February-23: 81.6%).
PRESS RELEASE
Ref. No.: 04/23/05 EMBARGO: Not for publication or
broadcast before 1500 hours on
Friday, 28 April 2023
Monthly Highlights – March 2023
Headline inflation declined to 3.4% in March
• Headline inflation declined to 3.4% in March (February: 3.7%) due mainly
to lower inflation for fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation1 moderated slightly to 3.8% during the month
(February: 3.9%), driven largely by lower inflation for food away from
home.
Robust growth in volume index driven by retail and motor vehicles
• The Index of Wholesale and Retail Trade (IOWRT) expanded by 10.6%
in February 2023 (January: 8.5%).
• The higher growth was driven mainly by retail sales in non-specialised
stores (e.g., department stores) followed by continued strength in
purchases of motor vehicles amid the ongoing fulfilment of backlog
orders.
• On a month-on-month seasonally adjusted basis, the index accelerated
by 5.5% (January: 0.2%).
1 Core inflation is computed by excluding price-volatile and price-administered items.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth in credit to the private non-financial sector2,3 moderated
• Credit to the private non-financial sector grew by 4.2% as at end-March
(February: 4.5%), attributed to slower growth in credit to businesses
(3.2%; February: 3.7%).
• While growth in outstanding corporate bonds moderated (4.4%;
February: 5.5%), outstanding business loan growth was sustained at
2.4% (February: 2.4%). This was supported by the continued growth in
both working capital (2.2%; February: 1.9%) and investment-related
loans (4.3%; February: 4.2%).
• Outstanding household loan growth remained broadly stable (5.2%;
February: 5.3%), supported by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan growth for the purchase of
securities (-6.9%; February: -3.3%).
Domestic financial market conditions remained orderly
• In March, global financial markets were affected by the emergence of
banking sector stress in some major economies. As spillovers were
contained thus far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds improved.
• In line with the performance of regional currencies, the ringgit
appreciated by 1.7% against the US dollar. Conditions in the domestic
bond market also remained stable.
• The FBM KLCI declined by 2.2% during the month.
Banks maintained strong liquidity and funding positions to support
intermediation
• Banks continued to record healthy liquidity buffers with the aggregate
Liquidity Coverage Ratio at 157.4% (February: 152.7%).
2 Comprises loans to households and non-financial corporations from the banking system and development financial
institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
3 Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced
to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
• The aggregate loan-to-fund ratio remained stable at 81.9%
(February: 81.6%).
Asset quality in the banking system remained intact
• Overall gross and net impaired loans ratios increased slightly to 1.8%
(February: 1.8%) and 1.2% (February: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory reserves) continues to
record a prudent level of 110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
Bank Negara Malaysia
28 April 2023
20230428_BNM Monthly Highlights-March_en
Slide 1
Slide 2
20230428_BNM PR_Monthly Highlights-Mar 2023_eng
| Press Release |
18 Feb 2022 | eCCRIS Registration is Now Digital. Register Anytime, Anywhere | https://www.bnm.gov.my/-/eccris-digital | https://www.bnm.gov.my/documents/20124/6190098/CCRIS-Guide-en.pdf, https://www.bnm.gov.my/documents/20124/6190098/CCRIS-Highlights-en.pdf | null |
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eCCRIS Registration is Now Digital. Register Anytime, Anywhere
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224
eCCRIS Registration is Now Digital. Register Anytime, Anywhere
Embargo :
For immediate release
Not for publication or broadcast before
1430 on
Friday, 18 February 2022
18 Feb 2022
Bank Negara Malaysia wishes to announce that effective 18 February 2022, Malaysian individual new users may now directly register for eCCRIS at eccris.bnm.gov.my, without the need to walk into a BNM or Agensi Kaunseling dan Pengurusan Kredit (AKPK) office.
To register for eCCRIS, individuals need to only follow the steps attached. This includes for new users to make a RM1 online transfer to a designated BNM account via internet banking, with the RM1 automatically refunded within two working days upon registration. This step allows for the identities of individuals to be confirmed digitally, taking away the need for physical verification.
Deputy Governor Marzunisham Omar said, “These enhancements make it more convenient and safer for individual users to register for eCCRIS and have access to their CCRIS reports, all from the comfort of their homes.”
For companies and non-Malaysian individuals, new user registrations can continue to be performed through eLINK at telelink.bnm.gov.my.
Please visit bnm.gov.my/ccris for further information on CCRIS and eCCRIS. The public may also reach BNMTELELINK at 1-300-88-5465 or 603-2174 1717 (overseas) or via our newly introduced Live Chat function at bnm.gov.my/livechat.
See also:
Key highlights of the Enhanced eCCRIS
eCCRIS Online Registration User Guide for New Individual UserBank Negara Malaysia
18 February 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
Malaysia Islamic Overnight Rate (MYOR-i)
Issued on: 25 March 2022 BNM/RH/PD 034-4
Malaysia Islamic Overnight Rate
(MYOR-i)
Applicable to the following interbank institutions:
1. Licensed Islamic banks
2. Licensed banks and licensed investment banks carrying on Islamic banking business
3. Prescribed development financial institutions carrying on Islamic financial business
4. Other interbank institutions that are direct participants of RENTAS
Malaysia Islamic Overnight Rate (MYOR-i)
Issued on: 25 March 2022
TABLE OF CONTENTS
PART A OVERVIEW ............................................................................................... 1
1 Introduction ................................................................................................ 1
2 Applicability ............................................................................................... 1
3 Legal provisions ........................................................................................ 1
4 Effective date ............................................................................................. 1
5 Interpretation ............................................................................................. 1
6 Related legal instruments, policy documents and Shariah rulings ............. 3
PART B DESIGN AND METHODOLOGY ............................................................... 4
7 Calculation and eligible transactions ......................................................... 4
8 Data sources and quality ........................................................................... 4
9 Publication ................................................................................................. 5
PART C GOVERNANCE ......................................................................................... 6
10 Administration of MYOR-i .......................................................................... 6
11 Contingency arrangements ....................................................................... 6
APPENDIX 1 Eligible Instruments ............................................................................. 7
APPENDIX 2 MYOR-i features ................................................................................. 8
APPENDIX 3 Template for submission of RENTAS transaction data ....................... 9
APPENDIX 4 Illustration of a contingency calculation ............................................. 10
Malaysia Islamic Overnight Rate (MYOR-i) 1 of 10
Issued on: 25 March 2022
PART A OVERVIEW
1.1 In line with the continued development of the Islamic financial market, the
Financial Markets Committee (FMC), in consultation with the AIBIM-FMAM1
Islamic Market Technical and Development Committee (IMTDC), recommended
for the replacement of the Kuala Lumpur Islamic Reference Rate (KLIRR) with
a new Islamic benchmark rate, named the Malaysia Islamic Overnight Rate
(MYOR-i). MYOR-i is designed based on the International Organization of
Securities Commissions (IOSCO)’s Principles for Financial Benchmarks.
1.2 This policy document sets out the benchmark design, methodology and
governance framework to ensure the integrity and credibility of MYOR-i.
2.1 This policy document is applicable to interbank institutions as defined in
paragraph 5.2.
3.1 The requirements in this policy document are specified pursuant to sections 152
and 155 of the Islamic Financial Services Act 2013 (IFSA) and section 116 of
the Development Financial Institutions Act 2002 (DFIA).
3.2 The guidance in this policy document is issued pursuant to section 277 of the
IFSA and section 126 of the DFIA.
4.1 This policy document comes into effect on 25 March 2022.
5.1 The terms and expressions used in this policy document shall have the same
meanings assigned to them in the Financial Services Act 2013 (FSA), IFSA or
DFIA, as the case may be, unless otherwise defined in this policy document.
5.2 For the purposes of this policy document:
1 AIBIM: Association of Islamic Banking and Financial Institutions Malaysia
FMAM: Financial Markets Association Malaysia
1 Introduction
2 Applicability
3 Legal provisions
4 Effective date
5 Interpretation
Malaysia Islamic Overnight Rate (MYOR-i) 2 of 10
Issued on: 25 March 2022
“S” denotes a standard, an obligation, a requirement,
specification, direction, condition and any interpretative,
supplemental and transitional provisions that must be
complied with. Non-compliance may result in enforcement
action;
“G” denotes guidance which may consist of statements or
information intended to promote common understanding
and advice or recommendations that are encouraged to be
adopted;
“agent” refers to a market participant, generally an interbank
institution or an approved money broker, who executes
deals on behalf of its clients pursuant to the clients’
mandate and without taking on market risk in connection
with the deals;
“business day” means any calendar day from Monday to Friday except a
public or bank holiday in Kuala Lumpur;
“Commodity
Murabahah”
refers to a contract based on the sale and purchase of
Shariah-compliant commodities where the acquisition cost
and the mark-up are disclosed to the purchaser;
“Eligible Instrument” means a Shariah-compliant instrument listed in Appendix 1;
“FAST” means the Fully Automated System for Issuing / Tendering
which is a centralised system for the issuance of debt
securities and to facilitate the Bank’s monetary policy
operations;
“Funding Facility” refers to the funding facility provided by the Bank to meet
temporary liquidity needs of interbank institutions at a profit
rate as referenced in the Bank’s Policy Document on
Standing Facilities;
“interbank institutions” refer to the following institutions which are approved by the
Bank to deal in the interbank market, whether acting as
principals or agents in the wholesale financial markets –
(a) licensed Islamic banks under the IFSA;
(b) licensed banks and licensed investment banks
approved under section 15(1)(a) of the FSA to carry
on Islamic banking business;
(c) prescribed development financial institutions
approved under section 33B(1) of the DFIA to carry on
Islamic financial business; and
(d) any other interbank institution which is a direct
participant of the Real-Time Electronic Transfer of
Funds and Securities System (RENTAS);
Malaysia Islamic Overnight Rate (MYOR-i) 3 of 10
Issued on: 25 March 2022
“MYOR-i” refers to the Malaysia Islamic Overnight Rate, which is the
Shariah-compliant transaction-based Islamic benchmark
rate for Malaysia with features listed in Appendix 2;
“principal” refers to a market participant who transacts for its own
account and not acting as an agent;
“RENTAS” means the Real-Time Electronic Transfer of Funds and
Securities System which is the real-time gross settlement
system;
“senior management” refers to the chief executive officer and senior officers of
interbank institutions;
“Shariah Advisory
Council”
refers to the Bank’s Shariah Advisory Council (SAC)
established under section 51 of the Central Bank of
Malaysia Act 2009, which is the authority for the
ascertainment of Islamic law for the purposes of Islamic
financial business;
“Shariah-compliant” refers to Islamic financial products and services that are
consistent with Shariah principles and approved by the
Bank’s SAC; and
“Standing Facilities” means both the Lending / Funding Facility and Deposit /
Acceptance Facility offered by the Bank.
6.1 This policy document must be read together with other relevant legal
instruments, policy documents, guidelines, codes or circulars issued by the
Bank, in particular -
(a) Code of Conduct for Malaysia Wholesale Financial Markets;
(b) Participation Rules for Payments and Securities Services;
(c) Operational Procedures for Malaysian Ringgit (MYR) Settlement in
RENTAS;
(d) Policy Document on Standing Facilities;
(e) Policy Document on Murabahah;
(f) Policy Document on Tawarruq;
(g) Policy Document on Wakalah; and
(h) the Shariah Advisory Council of Bank Negara Malaysia (SAC) Ruling on
the New Islamic Reference Rate i.e Malaysia Islamic Overnight Rate
(MYOR-i) based on the 218th SAC Meeting dated 28 October 2021.
6 Related legal instruments, policy documents and Shariah rulings
Malaysia Islamic Overnight Rate (MYOR-i) 4 of 10
Issued on: 25 March 2022
PART B DESIGN AND METHODOLOGY
G 7.1 MYOR-i is calculated as the volume-weighted average rate of return on Shariah-
compliant unsecured overnight MYR interbank placements, rounded to two
decimal places. Eligible transactions comprise the following transactions that are
based on an Eligible Instrument:
(a) Unsecured placements between interbank institutions (either brokered or
direct/bilateral); and
(b) The Bank’s Islamic overnight monetary operations, which comprise tenders
conducted through FAST or manual operations, and direct overnight
placements between the Bank and interbank institutions, excluding
Standing Facilities.
G 7.2 To ensure MYOR-i is reflective of the latest conditions and developments in the
Islamic financial market, new Eligible Instruments may be added in the future,
subject to the following conditions:
(a) Instruments shall be approved by the Bank’s SAC; and
(b) Instruments shall meet all requirements for MYOR-i as assessed by the
Bank, including but not limited to liquidity, data quality and robust
governance standards.
G
8.1 The data used to calculate MYOR-i is collected from two key sources:
(a) RENTAS; and
(b) FAST.
S 8.2 In the event2 that there is insufficient or missing transaction data submitted
through RENTAS3, interbank institutions shall provide all relevant data on their
overnight interbank money market transactions to the Bank according to the
template provided in Appendix 3 via email by RENTAS closing time, or
immediately upon request by the Bank.
S
8.3 Interbank institutions shall notify the Investment Operations and Financial
Market Department of the Bank and provide all relevant transaction data by the
cut-off time specified in paragraph 9.2 upon identification of errors in RENTAS
transaction data which affect the calculation of MYOR-i. The notification shall
first be made via telephone followed by an email with supporting documentation.
S 8.4 The senior management of interbank institutions shall put in place and
implement robust internal policies and mechanisms, including effective back-up
arrangements to ensure the accuracy of RENTAS transaction data and enable
timely detection of errors which may affect the calculation of MYOR-i.
2 For example, due to IT or RENTAS-related issues.
3 Information in MT202 settlement instructions.
7 Calculation and eligible transactions
8 Data sources and quality
Malaysia Islamic Overnight Rate (MYOR-i) 5 of 10
Issued on: 25 March 2022
G
9.1 MYOR-i for a given business day is published by 12:00 noon on the following
business day on the Bank’s official website.
S 9.2 Interbank institutions shall report any identified errors to the Investment
Operations and Financial Market Department of the Bank by 2:00 p.m. on the
publication day. Errors identified or reported after 2:00 p.m. shall not be taken
into account by the Bank for the determination of the correct rate.
G 9.3 A republication shall be made by the Bank if the erroneous rate is two or more
basis points away from the correct rate.
G 9.4 A notification shall be made by the Bank by 3:00 p.m. on the same publication
day on the official webpage for MYOR-i to indicate a potential republication due
to erroneous data. In the absence of such a notification, MYOR-i will not be
republished.
G 9.5 The republication shall be made by the Bank by 4:00 p.m. on the same
publication day. An annotation shall be made to the republished rate to indicate
a rate change.
9 Publication
Malaysia Islamic Overnight Rate (MYOR-i) 6 of 10
Issued on: 25 March 2022
PART C GOVERNANCE
G 10.1 The Bank is the administrator of MYOR-i and shall undertake periodic reviews
of the design and methodology of MYOR-i to ensure that the benchmark rate
accurately reflects the underlying market structure.
G 10.2 The Bank will seek the views of the FMC and the IMTDC to ensure that a holistic
approach is undertaken when reviewing any changes to MYOR-i design or
methodology. For material changes, the Bank will conduct a public consultation
to seek feedback from market participants.
G 11.1 In the event of disruption to the normal production of MYOR-i (e.g. disruption to
trade settlement, interbank trading or data collection), the Bank shall calculate
and publish MYOR-i based on the average MYOR-i, adjusted for any changes
in the Funding Facility profit rate, over the previous three publication days:
MYOR-it =
1
3
�[MYOR-it-n + (FFPRt − FFPRt-n)]
3
𝑛𝑛=1
where t = day of disruption event (i.e. contingency calculation day); and
FFPR = Funding Facility profit rate
Refer to Appendix 4 for an illustration of the contingency calculations.
G 11.2 For exceptional circumstances other than short-term disruptions, the Bank shall
exercise expert judgement and recommend an appropriate rate for publication.
10 Administration of MYOR-i
11 Contingency arrangements
Malaysia Islamic Overnight Rate (MYOR-i) 7 of 10
Issued on: 25 March 2022
1. Commodity Murabahah
APPENDIX 1 Eligible Instruments
Malaysia Islamic Overnight Rate (MYOR-i) 8 of 10
Issued on: 25 March 2022
Description MYOR-i is the transaction-based Islamic benchmark
rate based on Shariah-compliant unsecured
overnight MYR interbank placements.
Administrator and
calculator
The Bank
Calculation methodology Volume-weighted average
Rounding precision Rounded to two decimal places
Eligible transactions Eligible transactions comprise the following
transactions that are based on an Eligible Instrument:
(a) Unsecured placements between interbank
institutions (either brokered or direct/bilateral);
and
(b) The Bank’s Islamic overnight monetary
operations, which comprise tenders conducted
through FAST or manual operations, and direct
overnight placements between the Bank and
interbank institutions, excluding Standing
Facilities.
Data sources RENTAS and FAST
Data collection window Eligible transactions done throughout the entire
business day (i.e. until RENTAS close).
Publication 12:00 noon Kuala Lumpur time on the next business
day on the Bank’s official website.
Republication A republication shall be made by the Bank if the
erroneous rate is two or more basis points away from
the correct rate and is identified or reported by 2:00
p.m. on the publication day.
A notification on potential republication due to
erroneous data will be made by 3:00 p.m., with
republication (if any) by the Bank by 4:00 p.m. on the
same day.
Contingency
arrangements
In the event of disruption to the normal production of
MYOR-i, the Bank shall calculate MYOR-i based on
the average MYOR-i, adjusted for any changes in the
Funding Facility profit rate, over the previous three
publication days. For exceptional circumstances, the
Bank shall exercise expert judgement and
recommend an appropriate rate.
APPENDIX 2 MYOR-i features
Malaysia Islamic Overnight Rate (MYOR-i) 9 of 10
Issued on: 25 March 2022
Institution: ________________________
Date : ________________________
MT202 Additional Info
Transaction
ID
Sender
Ref ID
Seller BIC Buyer BIC Settlement
date
TRN
code
Trans
type
Status Currency
code
Amount Market
Type
Method /
Brokers
Product Rate Maturity
date
MMO00 MT202 Settled MYR I MUR
For the columns under “MT202 Additional Info”, the information shall be consistent with the codes outlined in Appendix XVII of the
Operational Procedures for MYR Settlement in RENTAS, in particular:
Category Details Code
Market type Islamic I
Method /
Brokers
Brokered Affin Moneybrokers
Brokered ICAP (Malaysia)
Brokered Harlow’s & MGI
Direct Trade
AF
IM
HA
DT
Product Murabahah MUR
Rate Up to 2 decimal places x.xx
Maturity date
MMM format:
JAN, FEB, MAR, APR, MAY, JUN,
JUL, AUG, SEP, OCT, NOV, DEC
DDMMMYY
APPENDIX 3 Template for submission of RENTAS transaction data
Malaysia Islamic Overnight Rate (MYOR-i) 10 of 10
Issued on: 25 March 2022
Add the difference between
the FFPR for the contingency
calculation day (t) and the
historical date (t-n)
For illustrative purposes, the MYOR-i for t-3, t-2 and t-1 were 1.73%, 1.75% and 2.02%
respectively. There was a 25 bps increase in the Funding Facility profit rate (FFPR) on
day t-1:
Rates expressed as percentages (%)
Day t-3 t-2 t-1 t
MYOR-i 1.73 1.75 2.02 Contingency
FFPR 2.00 2.00 2.25 2.25
*25 bps increase in FFPR
According to the formula, the MYOR-i for day t-3 and day t-2 will be adjusted upwards
by 25 bps to 1.98% and 2.00% respectively:
Day t-3 t-2 t-1
Adjusted MYOR-i 1.73 + (2.25 - 2.00)
= 1.98
1.75 + (2.25 - 2.00)
= 2.00
2.02 + (2.25 - 2.25)
= 2.02
Contingency MYOR-i for day t = (1.98 + 2.00 + 2.02) / 3 = 2.00
APPENDIX 4 Illustration of a contingency calculation
TABLE OF CONTENTS
PART A OVERVIEW
1 Introduction
2 Applicability
3 Legal provisions
4 Effective date
5 Interpretation
6 Related legal instruments, policy documents and Shariah rulings
PART B DESIGN AND METHODOLOGY
7 Calculation and eligible transactions
8 Data sources and quality
9 Publication
PART C GOVERNANCE
10 Administration of MYOR-i
11 Contingency arrangements
APPENDIX 1 Eligible Instruments
APPENDIX 2 MYOR-i features
APPENDIX 3 Template for submission of RENTAS transaction data
APPENDIX 4 Illustration of a contingency calculation
Online eCCRIS ENG
1. Starting 18 February 2022, new individual users can register for eCCRIS online at
eccris.bnm.gov.my.
2. No physical presence needed at Bank Negara Malaysia or Agensi Kaunseling dan Pengurusan
Kredit’s (AKPK) premises for registration authentication.
3. New users must be Malaysian individuals with MyKad and internet banking facility. For others,
existing arrangements will still apply (i.e., registration via kiosk at AKPK premises or eLINK at
telelink.bnm.gov.my).
Key Highlights of the Enhanced eCCRIS:
Online Registration for New
Individual Users
4. Identity of new users will be confirmed digitally. This involves a RM1 transfer to a designated
Bank Negara Malaysia account via internet banking. The RM1 will be automatically refunded
within 2 working days upon registration.
If you have more queries on the online eCCRIS registration, you can contact BNMTELELINK at 1-300-88-5465 /
603-2174 1717 (overseas) or via Live Chat at www.bnm.gov.my/livechat
5. The online registration is more convenient and safer. New Malaysian individual users with an
internet connection can now register and access their CCRIS report anytime and anywhere. To
learn more about the CCRIS Report, visit bnm.gov.my/ccris.
New Malaysian individual users with
MyKad and internet banking facility
Applicable: Not Applicable but existing arrangements apply:
Malaysian individual
without internet banking
Permanent Resident
and non-Malaysian
Businesses
User registration at
eccris.bnm.gov.my
Step 1
Confirm details and Terms and Conditions
Step 2
If authentication is successful, you
will receive a 6-digit OTP to your
registered mobile number and
email to complete your registration
Step 4
OTP..
For a more detailed registration user guide, see bnm.gov.my/ccris
One-off RM1 transfer via internet
banking will be refunded automatically
within 2 working days
Step 3: Digital authentication
| Press Release |
11 Feb 2022 | Economic and Financial Developments in Malaysia in the Fourth Quarter of 2021 | https://www.bnm.gov.my/-/4q-gdp-2021 | https://www.bnm.gov.my/documents/20124/6118085/4Q_table_en.pdf, https://www.bnm.gov.my/documents/20124/6118085/4Q2021_GDP_Slides.pdf | null |
Reading:
Economic and Financial Developments in Malaysia in the Fourth Quarter of 2021
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Economic and Financial Developments in Malaysia in the Fourth Quarter of 2021
Embargo :
For immediate release
Not for publication or broadcast before
1200 on
Friday, 11 February 2022
11 Feb 2022
The Malaysian economy rebounded by 3.6% in the fourth quarter (3Q 2021: -4.5%)
The Malaysian economy registered a positive growth of 3.6% in the fourth quarter of 2021 (3Q 2021: -4.5%), as economic activities resumed with the easing of containment measures. The rebound in economic activity was aided by recovery in the labour market as well as continued policy support. In addition, strong external demand amid the continued upcycle in global technology provided a further lift to growth. On the supply side, all economic sectors recorded improvements in growth, led by the services and manufacturing sectors. On the expenditure side, growth was driven mainly by the improvement in household spending and trade activity. On a quarter-on-quarter seasonally-adjusted basis, the economy registered an increase of 6.6% (3Q 2021: -3.6%). With the turnaround in growth in the fourth quarter, the economy grew by 3.1% for 2021 as a whole, and the unemployment rate declined to 4.6%.
As expected, headline inflation increased to 3.2% during the quarter (3Q 2021: 2.2%). The higher inflation during the quarter was due mainly to the normalisation in electricity prices following the lapse of the three-month electricity bill discount implemented in July 2021. Core inflation increased marginally to 0.8% during the quarter (3Q 2021: 0.7%) as economic reopening gathered momentum. For 2021 as a whole, average headline inflation was 2.5% (2020: -1.2%), while core inflation averaged at 0.7% (2020: 1.1%).
Exchange rate developments
The ringgit appreciated by 0.3% against the US dollar in the fourth quarter of 2021. This was supported by improved sentiment from the easing of COVID-19 restriction measures and accelerated COVID-19 vaccine booster inoculations. However, since 3 January 2022, the ringgit depreciated marginally by 0.3% against the US dollar, broadly in line with the trend of other regional currencies amid growing expectations for tighter global liquidity conditions, including a more rapid pace of monetary policy tightening by the US Federal Reserve. Going forward, as uncertainties regarding global liquidity adjustments and developments surrounding the path of the pandemic remain, the domestic financial markets are expected to be subject to periodic bouts of volatility.
Financing conditions
Growth in net financing to the private sector increased to 4.7% (3Q 2021: 3.9%), due mainly to higher outstanding loan growth (4.4%; 3Q 2021: 2.9%) as economic activity picked up. Outstanding household loan growth grew by 4.2% (3Q 2021: 3.2%) with higher growth across most loan purposes. Loan applications and disbursements were substantially higher following the easing of movement restrictions, particularly for purchasing houses and passenger cars. For businesses, outstanding loan growth increased to 4.8% (3Q 2021: 2.4%) and continued to be driven by higher working capital loans.
The Malaysian economy is expected to remain on its recovery path in line with continued expansion in global growth and higher private sector spending
For 2022, the domestic economy is expected to remain on its recovery path, supported by the continued expansion in global demand and higher private sector expenditure given improving labour market conditions and on-going policy support. The continuation of major investment projects in both private and public sectors will also support growth. Governor Tan Sri Nor Shamsiah explained, “Malaysia is well-positioned to continue benefitting from the expansion in global economic and trade activities. The acceleration of the COVID-19 booster vaccination programme and vaccination of children above 5 years old, coupled with sufficient capacity in the healthcare system, would improve domestic economic activities, thus strengthening the recovery momentum.” However, the balance of risks remains tilted to the downside, mainly from development surrounding COVID-19, both globally and domestically.
Average headline inflation for 2022 is likely to remain moderate as the base effect from fuel inflation dissipates. Core inflation is expected to edge upwards as economic activity normalises amid the environment of high input costs. Nevertheless, core inflation is expected to be modest, with upside risk contained by the continued slack in the economy and labour market. The outlook, however, continues to be subject to global commodity price developments amid risks from prolonged supply-related disruptions.
Bank Negara is expected to publish the Annual Report 2021 (AR 2021), Economic and Monetary Review 2021 (EMR 2021), and Financial Stability Review for Second Half 2021 on 30 March 2022.
See also:
Table 1: GDP by Expenditure Components and Economic Activity
Presentation Slides (PDF)
Press Conference Video
Publication: Quarterly Bulletin Fourth Quarter 2021Bank Negara Malaysia
11 February 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
Monthly Highlights
January 2021
1
Headline inflation was less negative at -0.2%
• The less negative headline inflation in January
(December 2020: -1.4%) was driven mainly by
the increase in electricity inflation and higher
domestic retail fuel prices during the month.
• These increases reflected the lapse in the effect
from the tiered electricity tariff rebate and the
rise in global oil prices respectively.
• Underlying inflation, as measured by core
inflation, remained stable at 0.7%.
-1.7
-1.4
-0.2
0.70.70.7
-4.0
-2.0
0.0
2.0
-4.0
-2.0
0.0
2.0
Ja
n-
19
Fe
b-
19
M
ar
-1
9
A
pr
-1
9
M
ay
-1
9
Ju
n-
19
Ju
l-1
9
A
ug
-1
9
S
ep
-1
9
O
ct
-1
9
N
ov
-1
9
D
ec
-1
9
Ja
n-
20
Fe
b-
20
M
ar
-2
0
A
pr
-2
0
M
ay
-2
0
Ju
n-
20
Ju
l-2
0
A
ug
-2
0
S
ep
-2
0
O
ct
-2
0
N
ov
-2
0
D
ec
-2
0
Ja
n-
21
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
1 Core inflation is computed by excluding price-volatile and price-administered items.
It also excludes the estimated direct impact of tax policy changes.
Source: Department of Statistics Malaysia (DOSM), Bank Negara Malaysia estimates
Contribution to Inflation
ppt. contribution %, yoy
IOWRT improved in December, with a smaller contraction
Source: Department of Statistics, Malaysia
-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
Ja
n-
20
Fe
b-
20
M
ar
-2
0
A
pr
-2
0
M
ay
-2
0
Ju
n-
20
Ju
l-2
0
A
ug
-2
0
S
ep
-2
0
O
ct
-2
0
N
ov
-2
0
D
ec
-2
0
Motor vehicles Retail Wholesale
ppt, yoy
IOWRT: Contribution to growth • The Index of Wholesale and Retail Trade
(IOWRT) improved in December 2020,
recording a smaller annual contraction of 0.7%
in December 2020 (November: -1.6%), due to
the relaxation of CMCO, including the removal
of restrictions on interstate travel and mobility
on 9 December.
• The improvement was seen in wholesale trade,
which declined marginally by 0.02% (Nov:
-0.5%), while motor vehicles rose by 6.0%
(Nov: 0.5%).
• Meanwhile, retail trade declined at a smaller
rate (-2.9%; November: -3.2%).
-0.7
3.8
1.5
4.9
0
1
2
3
4
5
6
7
Jan-
20
Mar-
20
May-
20
Jul -
20
Sep-
20
Nov-
20
Jan-
21
Total loans
Business loans
Household loans
% yoy
Contribution to Net Financing1 Growth and Outstanding
Loan Growth
1 Refers to outstanding loans of the banking system (excluding development
financial institutions (DFIs)).
2 High base effect due to disbursements of large-value loans in the
manufacturing sector in December 2019
Source: Bank Negara Malaysia
Higher expansion in net financing
1
% yoy
2.7 2.5 2.8
1.8 1.8 1.7
4.5 4.2 4.5
Nov-20 Dec-20 Jan-21
Corporate Bonds
Banking System Loans
Net Financing
• Net financing expanded at 4.5% amid higher
outstanding loan growth (January: 3.8%,
December: 3.4%) while outstanding corporate bond
growth moderated slightly to 6.3% (December:
6.5%).
• Outstanding household loan growth was sustained
at 4.9% (December: 5.0%) with disbursements
remaining above historical average (January:
RM28.8bn, 2017-19 monthly average: RM27.8bn).
• Outstanding business loan grew at 1.5% after a
slower growth in December 20202. The growth was
contributed mainly by the SME segment.
Monthly Highlights
January 2021
Performance of domestic financial markets declined during the month
• In January, the performance of domestic
financial markets was affected by a confluence
of global and domestic factors.
• Globally, an uptick in US Treasury yields amid
rising US inflation expectations pushed global
bond yields higher, while supporting a broad
strengthening of the US dollar. As a result, the
10-year MGS yield increased by 5.4 basis
points and the ringgit depreciated by 1.0%
against the US dollar, in line with regional
trends.
• Domestically, investor sentiments were
affected by the re-imposition of stricter
containment measures to address rising
COVID-19 infections. In particular, concerns on
the impact of these restrictions to domestic
corporate earnings weighed on equity market
sentiments. As a result, the FBM KLCI declined
by 3.7% during the month.Source: Bank Negara Malaysia, Bursa Malaysia
-9.0
4.1
1.4
5.4
-3.7
-1.0
10-year MGS
(bps)
Equity
(% change)
Ringgit
(% change)
-10 -8 -6 -4 -2 0 2 4 6 8
Jan-21 Dec-20
-30.5
Financial Markets Performance in January
2
Banking system liquidity remained supportive of financial intermediation
Banking System Liquidity and Funding Ratios
82.7
71.8
147.6
0
40
80
120
160
70
75
80
85
90
95
Ja
n
20
Fe
b
20
M
ar
2
0
Ap
r 2
0
M
ay
2
0
Ju
n
20
Ju
l 2
0
Au
g
20
Se
p
20
O
ct
2
0
N
ov
2
0
D
ec
2
0
Ja
n
21
% %
Liquidity Coverage Ratio (RHS)
Loan to Fund Ratio
Loan to Fund and Equity Ratio
• Banking system liquidity coverage ratio (LCR)
remained at a healthy level, despite a slight
decline in January 2021 (Dec-20: 148.2%).
– This was supported by higher holdings of
marketable securities and placements with
central banks.
• Banks’ funding profile also remained stable
amid sustained growth in deposits.
Source: Bank Negara Malaysia
Banking system asset quality remains healthy
• Gross impaired loans ratio increased
marginally to 1.60% in January 2021
(December 2020: 1.56%).
• Banks continued to pre-emptively identify
loans with higher credit risks and set aside
additional provisions against future potential
losses to ensure their continued resilience.
1.0
1.6
1.7
0.7
0.9
1.1
1.3
1.5
1.7
1.9
Ja
n
20
Fe
b
20
M
ar
2
0
Ap
r 2
0
M
ay
2
0
Ju
n
20
Ju
l 2
0
Au
g
20
Se
p
20
O
ct
2
0
N
ov
2
0
D
ec
2
0
Ja
n
21
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Banking System Asset Quality
Source: Bank Negara Malaysia
%
Net Impaired Loans Ratio
SIARAN AKHBAR
Ref. No.: 02/21/06 EMBARGO: Not for publication or
broadcast before 1500 hours on
Friday, 26 February 2021
MONTHLY HIGHLIGHTS – JANUARY 2021
Headline inflation was less negative at -0.2%
• The less negative headline inflation in January (December 2020: -1.4%) was
driven mainly by the increase in electricity inflation and higher domestic retail fuel
prices during the month.
• These increases reflected the lapse in the effect from the tiered electricity tariff
rebate and the rise in global oil prices respectively.
• Underlying inflation, as measured by core inflation1, remained stable at 0.7%.
IOWRT improved in December, with a smaller contraction
• The Index of Wholesale and Retail Trade (IOWRT) improved in December 2020,
recording a smaller annual contraction of 0.7% in December 2020
(November: -1.6%), due to the relaxation of CMCO, including the removal of
restrictions on interstate travel and mobility on 9 December.
• The improvement was seen in wholesale trade, which declined marginally by
0.02% (November: -0.5%), while motor vehicles rose by 6.0% (November: 0.5%).
• Meanwhile, retail trade declined at a smaller rate (-2.9%; November: -3.2%).
Higher expansion in net financing
• Net financing2 expanded at 4.5% amid higher outstanding loan growth
(January: 3.8%, December: 3.4%) while outstanding corporate bond growth
moderated slightly to 6.3% (December: 6.5%).
• Outstanding household loan growth was sustained at 4.9% (December: 5.0%)
with disbursements remaining above historical average (January: RM28.8bn,
2017-19 monthly average: RM27.8bn).
1 Core inflation is computed by excluding price-volatile and price-administered items. It also excludes the estimated
direct impact of tax policy changes.
2 Refers to outstanding loans of the banking system (excluding development financial institutions (DFIs)).
D i t e r b i t k a n o l e h :
J a b a t a n K o m u n i k a s i S t r a t e g i k , T i n g k a t 1 4 , B l o k B , B a n g u n a n B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
T e l e f o n : + 6 0 ( 3 ) 2 6 9 8 8 0 4 4 F a k s i m i l i : + 6 0 ( 3 ) 2 6 9 3 6 9 1 9
W e b : w w w . b n m . g o v . m y
• Outstanding business loan grew at 1.5% after a slower growth in December
20203. The growth was contributed mainly by the SME segment.
Performance of domestic financial markets declined during the month
• In January, the performance of domestic financial markets was affected by a
confluence of global and domestic factors.
• Globally, an uptick in US Treasury yields amid rising US inflation expectations
pushed global bond yields higher, while supporting a broad strengthening of the
US dollar. As a result, the 10-year MGS yield increased by 5.4 basis points and
the ringgit depreciated by 1.0% against the US dollar, in line with regional trends.
• Domestically, investor sentiments were affected by the re-imposition of stricter
containment measures to address rising COVID-19 infections. In particular,
concerns on the impact of these restrictions to domestic corporate earnings
weighed on equity market sentiments. As a result, the FBM KLCI declined by
3.7% during the month.
Banking system liquidity remained supportive of financial intermediation
• Banking system liquidity coverage ratio (LCR) remained at a healthy level,
despite a slight decline in January 2021 (December-20: 148.2%).
− This was supported by higher holdings of marketable securities and
placements with central banks.
• Banks’ funding profile also remained stable amid sustained growth in deposits.
Banking system asset quality remains healthy
• Gross impaired loans ratio increased marginally to 1.60% in January 2021
(December 2020: 1.56%).
• Banks continued to pre-emptively identify loans with higher credit risks and set
aside additional provisions against future potential losses to ensure their
continued resilience.
Bank Negara Malaysia
26 February 2021
3 High base effect due to disbursements of large-value loans in the manufacturing sector in December 2019.
26022021_MSB January 2021 EN
26022021_Monthly Highlights January 2021_ EN
MONTHLY HIGHLIGHTS – JANUARY 2021
Bahagian
2021
(%)
2020 2021
S4 Tahun S1 S2 S3 S4 Tahun
Pertumbuhan tahunan (%)
Permintaan Dalam Negeri Agregat
(tidak termasuk stok)
Sektor swasta
Penggunaan
Pelaburan
Sektor awam
Penggunaan
Pelaburan
Eksport Bersih
Eksport Barangan dan Perkhidmatan
Import Barangan dan Perkhidmatan
92.7
74.3
58.8
15.6
18.3
13.8
4.5
6.0
69.2
63.2
-4.5
-4.0
-3.5
-6.6
-5.7
2.4
-20.4
10.0
-2.1
-3.3
-5.8
-6.0
-4.3
-11.9
-4.7
3.9
-21.3
-13.0
-8.9
-8.4
-1.0
-0.9
-1.5
1.3
-1.5
5.9
-18.6
0.8
11.9
13.0
12.4
13.0
11.7
17.4
9.7
9.0
12.0
34.3
37.4
37.6
-4.1
-4.4
-4.2
-4.8
-2.8
8.1
-28.9
-37.5
5.1
11.7
2.3
2.4
3.7
-3.0
1.9
4.3
-3.8
2.6
13.3
14.6
1.9
2.0
1.9
2.6
1.6
6.6
-11.4
-5.8
15.9
18.5
KDNK Benar 100.0 -3.4 -5.6 -0.5 16.1 -4.5 3.6 3.1
KDNK (pertumbuhan suku tahunan
terlaras secara bermusim) - -1.5 - 2.7 -1.9 -3.6 6.6 -
Nota: Angka-angka tidak terjumlah disebabkan oleh penggenapan dan pengecualian stok.
Sumber: Jabatan Perangkaan Malaysia
J1 KDNK Mengikut Komponen Perbelanjaan (pada harga malar tahun 2015)
Bahagian
2021
(%)
2020 2021
S1 S2 S3 S4 Tahun S1 S2 S3 S4 Tahun
Pertumbuhan tahunan (%)
Perkhidmatan
Perkilangan
Pertanian
Perlombongan
Pembinaan
57.0
24.3
7.2
6.7
3.7
3.1
1.4
-8.6
-2.9
-7.9
-16.2
-18.3
0.9
-20.8
-44.5
-4.0
3.3
-0.3
-7.8
-12.4
-4.8
3.0
-1.0
-10.4
-13.9
-5.5
-2.6
-2.2
-10.6
-19.4
-2.3
6.6
0.2
-5.0
-10.4
13.5
26.6
-1.5
13.9
40.3
-4.9
-0.8
-1.9
-3.6
-20.6
3.2
9.1
2.8
-0.9
-12.2
1.9
9.5
-0.2
0.7
-5.2
KDNK Benar 100.0 0.7 -17.2 -2.7 -3.4 -5.6 -0.5 16.1 -4.5 3.6 3.1
Nota: Angka-angka tidak terjumlah disebabkan oleh penggenapan dan pengecualian komponen duti import
Sumber: Jabatan Perangkaan Malaysia
J2 KDNK Mengikut Aktiviti Ekonomi (pada harga malar tahun 2015)
| Press Release |
10 Feb 2022 | International Reserves of Bank Negara Malaysia as at 31 January 2022 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-31-january-2022 | null | null |
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International Reserves of Bank Negara Malaysia as at 31 January 2022
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International Reserves of Bank Negara Malaysia as at 31 January 2022
Embargo :
For immediate release
Not for publication or broadcast before
1500 on
Thursday, 10 February 2022
10 Feb 2022
The international reserves of Bank Negara Malaysia amounted to USD116.1 billion as at 31 January 2022. The reserves position is sufficient to finance 7.5 months of retained imports and is 1.2 times total short-term external debt. Related Assets
BNM Statement of Assets & Liabilities - 31 January 2022
Bank Negara Malaysia
10 February 2022
© Bank Negara Malaysia, 2022. All rights reserved.
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31 Jan 2022 | Monetary and Financial Developments in December 2021 | https://www.bnm.gov.my/-/monetary-and-financial-developments-in-december-2021 | https://www.bnm.gov.my/documents/20124/5989921/i_en.pdf | null |
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Monetary and Financial Developments in December 2021
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Monetary and Financial Developments in December 2021
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Headline inflation moderated to 3.2% in December
Headline inflation moderated to 3.2% in December (November: 3.3%) due mainly to lower transport inflation (December: 9.5%; November: 12.7%), which was partly offset by higher food and non-alcoholic beverages inflation (December: 3.2%; November: 2.7%).
Underlying inflation, as measured by core inflation[1], increased to 1.1% (November: 0.9%), driven mainly by some food[2] and maintenance[3] goods and services.
For 2021 as a whole, average headline inflation was 2.5% (2020: -1.2%), while core inflation averaged at 0.7% (2020: 1.1%).
Strong export growth in December
Exports grew by 29.2% (November: 32.4%), reflecting continued strength across Malaysia’s export products.
Moving forward, Malaysia’s export performance will continue to benefit from external demand and the global technology upcycle. In addition, high commodity prices will provide further impetus to export growth.
Nonetheless, the trade outlook remains contingent on the path of the pandemic and global supply chain disruptions.
Higher net financing growth as economic activity picked up
Net financing growth increased to 4.8% (November: 4.5%), reflecting higher growth in both outstanding loans (December: 4.5%; November: 4.3%) and outstanding corporate bonds (December: 5.5%; November: 4.9%).
Household loan growth continued to increase to 4.3% (November: 4.1%), amid higher loan disbursements across most loan purposes.
For businesses, outstanding loan growth (December: 5.0%; November: 4.8%) continued to be supported by high growth in working capital loans (December: 7.4%; November: 8.0%; 2017-19 average: 4.3%).
Domestic financial markets were supported by the positive growth outlook
Domestic financial market conditions were stable in December, with non-resident (NR) inflows into the bond market offsetting outflows from the equity market.
Despite NR inflows, MGS yields increased, alongside sovereign yields in other countries. This reflected higher US Treasury yields due to the faster pace of US monetary policy normalisation. Notwithstanding the spillovers, domestic financial intermediation remained uninterrupted.
The ringgit appreciated and the KLCI rose amid favourable domestic factors, including improvements in economic activity, continued progress in COVID-19 booster vaccinations and higher global energy prices.
Sufficient liquidity in the banking system to support intermediation
Banking system funding and liquidity positions remain supportive of intermediation activity amid steady deposit growth.
The banking system liquidity coverage ratio (LCR) improved (December-21: 3%; November-21: 144.7%) following the dissipation of temporary effects from the expiry of income tax exemption on corporate investments in Money Market Funds in November.
The loan-to-fund ratio remained broadly stable at 82.3.
Banks’ asset quality remained sound and continued to improve
The extension of repayment assistance measures has provided much-needed temporary relief to affected borrowers.
Overall gross and net impaired loans ratios stood lower at 1.4% and 0.9%, respectively, driven by resumption of loan repayments amid the gradual reopening of the economy.
Banks continue to set aside provisioning buffers with total provisions accounting for 1.9% of total banking system loans.
[1]Core inflation is computed by excluding price-volatile and price-administered items. It also excludes the estimated direct impact of tax policy changes.
[2]For example, food away from home and bread & bakeries products.
[3]For example, repair & maintenance of personal transport.
View Monthly Highlights [PDF] Related Assets
Monthly Highlights and Statistics in December 2021
Bank Negara Malaysia
31 January 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
Monthly Highlights May 2023
Monthly Highlights
Headline inflation declined further to 2.8% in May
May 2023
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation moderated to 2.8% (April 2023:
3.3%). This decline was largely due to non-core
CPI components, particularly lower inflation for
fuel (-0.2 percentage points, ppt) and fresh food
(-0.1ppt).
• Core inflation also declined slightly to 3.5% (April
2023: 3.6%) amid lower inflation for
communication services.
3.3
2.8
3.6 3.5
0.00
2.00
4.00
0.0
2.0
4.0
J
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-2
2
F
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-2
2
M
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2
2
A
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2
2
M
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-2
2
J
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-2
2
J
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2
2
A
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-2
2
S
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-2
2
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2
2
N
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-2
2
D
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-2
2
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-2
3
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-2
3
M
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2
3
A
p
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2
3
M
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-2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
1.6
5.1
4.6
0
1
2
3
4
5
6
7
May-22 Sep-22 Jan-23 May-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Credit to the Private Non-Financial Sector1,2
1
Growth in credit to the private non-financial sector improved in May
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
Contribution to growth (ppt)
• Credit to the private non-financial sector expanded
by 4.0% as at end-May (April 2023: 3.7%), driven
mainly by higher growth in credit to businesses
(2.8%; April 2023: 2.5%).
• Outstanding corporate bonds grew by 4.6% (April
2023: 4.4%), while outstanding business loans
expanded by 1.6% (April 2023: 1.0%). The higher
business loan growth reflected improvement in
loans for both working capital and investments to
SMEs and non-SMEs.
• In the household segment, outstanding loan
growth was sustained at 5.1% (April 2023: 5.0%),
supported by higher growth across most loan
purposes. Of note, household loan growth
continued to be driven by loans for the purchase of
houses and cars, which grew by 7.0% and 8.4%,
respectively (April 2023: 6.8% and 8.0%).
2.7 2.6 2.5 2.6
0.7 0.7 0.3 0.5
1.1 0.9
0.9 1.0
4.5 4.2
3.7 4.0
Feb-23 Mar-23 Apr-23 May-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Index of wholesale and retail trade growth moderated in April
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded more moderately by 4.7% in
April 2023 (March 2023: 9.4%). The lower growth
was due mainly to the decline in the motor vehicle
segment.
• However, the retail segment continued to record a
double-digit growth of 10.0% (March 2023:
13.8%), supported by sales in non-specialised and
other specialised stores1.
• On a month-on-month seasonally adjusted basis,
the index increased at a faster pace of 6.5%
(March 2023: -0.9%).
1 Other goods in specialised stores includes clothing, footwear,
pharmaceuticals, cosmetics, watches, jewellery and optical goods.
10.6
9.4
4.7
-2
3
8
13
18
23
28
33
Apr-22 Jun-22 Aug-22 Oct-22 Dec-22 Feb-23 Apr-23
ppt, %yoy
Motor vehicles Retail Wholesale
Index of Wholesale and Retail Trade
Monthly Highlights
2
May 2023
Domestic financial markets were largely affected by external factors
Financial Market Performance in May 2023
-18.0
-0.5
-1.1
-3.0
-2.0
-3.4
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-20 -15 -10 -5 0
May-23 Apr-23
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
1Regional countries comprise Singapore, Thailand, Philippines, Indonesia, and Korea
Source: Bank Negara Malaysia, Bursa Malaysia
• Global investors maintained a risk-off approach
throughout May, as concerns over the impact of the
US debt ceiling crisis and the weaker-than-
expected rebound in China’s economy weighed on
global financial markets.
• As a result, the ringgit depreciated against the US
dollar by 3.4% (regional1 average: -1.2%). Similarly,
the FBM KLCI declined by 2.0% (regional1 average:
-1.3%).
• Nonetheless, the 10-year MGS yields decreased
slightly by 3 basis points, supported by non-resident
inflows into the domestic bond market.
Banks maintained strong liquidity and funding positions to support intermediation
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
151.2% (April 2023: 154.3%).
• The aggregate loan-to-fund ratio remained stable at
81.8% (April 2023: 82.1%).
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.8
151.2
0
40
80
120
160
70
75
80
85
90
95
M
a
y
2
2
J
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2
2
J
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2
2
A
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2
2
S
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2
2
O
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t
2
2
N
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2
2
D
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2
2
J
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2
3
F
e
b
2
3
M
a
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2
3
A
p
r
2
3
M
a
y
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
remained broadly unchanged at 1.80% (April
2023: 1.78%) and 1.10% (April 2023: 1.10%),
respectively.
• Loan loss coverage ratio (including regulatory
reserves) remained at a prudent level of 114.1%
of impaired loans, with total provisions accounting
for 1.7% of total loans.
%
1.8
1.1
1.7
0.5
1.0
1.5
2.0
M
a
y
2
2
J
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2
2
J
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2
2
A
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3
A
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2
3
M
a
y
2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
April 2023 Monthly Highlights
Slide 1
Slide 2
| Press Release |
31 Jan 2022 | Detailed Disclosure of International Reserves as at end-December 2021 | https://www.bnm.gov.my/-/detailed-disclosure-of-international-reserves-as-at-end-december-2021-1 | null | null |
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Detailed Disclosure of International Reserves as at end-December 2021
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Detailed Disclosure of International Reserves as at end-December 2021
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In accordance with the IMF SDDS format, the detailed breakdown of international reserves provides forward-looking information on the size, composition and usability of reserves and other foreign currency assets, and the expected and potential future inflows and outflows of foreign exchange of the Federal Government and Bank Negara Malaysia over the next 12-month period.
The detailed breakdown of international reserves based on the SDDS format is shown in Tables I, II, III and IV. As shown in Table I, official reserve assets amounted to USD116,890.4 million, while other foreign currency assets amounted to USD153.2 million as at end-December 2021. As shown in Table II, for the next 12 months, the pre-determined short-term outflows of foreign currency loans, securities and deposits, which include among others, scheduled repayment of external borrowings by the Government and the maturity of foreign currency Bank Negara Interbank Bills, amounted to USD4,869.3 million. The short forward positions amounted to USD7,553.3 million while long forward positions amounted to USD150 million as at end-December 2021, reflecting the management of ringgit liquidity in the money market. In line with the practice adopted since April 2006, the data excludes projected foreign currency inflows arising from interest income and the drawdown of project loans. Projected foreign currency inflows amount to USD2,368.3 million in the next 12 months. As shown in Table III, the only contingent short-term net drain on foreign currency assets are Government guarantees of foreign currency debt due within one year, amounting to USD386.3 million. There are no foreign currency loans with embedded options, no undrawn, unconditional credit lines provided by or to other central banks, international organisations, banks and other financial institutions. Bank Negara Malaysia also does not engage in foreign currency options vis-à-vis ringgit.
Overall, the detailed breakdown of international reserves under the IMF SDDS format indicates that as at end-December 2021, Malaysia’s international reserves remain usable. Related Assets
International Reserves and Foreign Currency Liquidity (31 December 2021)
Bank Negara Malaysia
31 January 2022
© Bank Negara Malaysia, 2022. All rights reserved.
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27 Jan 2022 | Launch of the Cross-Border QR Payment Linkage between Malaysia and Indonesia | https://www.bnm.gov.my/-/duitnow-qris-link-my-id | null | null |
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Launch of the Cross-Border QR Payment Linkage between Malaysia and Indonesia
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Launch of the Cross-Border QR Payment Linkage between Malaysia and Indonesia
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27 Jan 2022
Joint Press Release
Bank Negara Malaysia (BNM) and Bank Indonesia (BI) today launched a cross-border QR payment linkage. It will enable instant, secure, and efficient cross-border payments between Malaysia and Indonesia.
Through this linkage, consumers in both countries will be able to make retail payments by scanning the DuitNow or QRIS (Quick Response Code Indonesian Standard) QR codes displayed by offline and online merchants.[1] Today marks the beginning of a pilot phase that will pave the way for a full commercial launch in the third quarter of 2022. This linkage will be expanded in the future to support cross-border remittance where users in both countries can make real-time fund transfers with convenience.
Ms. Jessica Chew Cheng Lian, Deputy Governor of Bank Negara Malaysia said, “The cross-border QR payment linkage between Malaysia and Indonesia marks a key milestone in the long history of collaboration between both countries. Phase 2 of the QR payment linkage between Malaysia and Thailand[2] has also gone live this week. Such developments will bring us closer towards realising the vision of creating an ASEAN network of fast and efficient retail payment systems. This in turn will further accelerate our digital transformation and financial integration, for the benefit of individuals and businesses.”
In addition, Bank Indonesia Deputy Governor, Mr. Doni P. Joewono, said on this occasion “This initiative links cross-border payments through the interconnection of national QR codes of the two countries and also represents another milestone of the Indonesian Payment System Blueprint 2025. Bank Indonesia recognises the significance of cross-border payment system linkages and has continuously pursued such initiatives. This will give more options for users in the cross-border payment space and serve as a key to improve transaction efficiency, support the digitalisation of trade and investment, and maintain macroeconomic stability by promoting a more extensive use of Local Currency Settlement (LCS) Framework. Through the use of direct quotation of local currency exchange rates provided by Appointed Cross Currency Dealer (ACCD) banks under the LCS Framework, it will improve the efficiency of transactions, thus lowering the transaction cost.”
The payment connectivity will further strengthen the close economic ties between Malaysia and Indonesia and support post-pandemic economic recovery. As international travel resumes, tourism will be a key sector that will greatly benefit from this service. The sizeable traveller flows between the two countries recorded an average of 5.6 million arrivals yearly before the pandemic.[3] Both countries are also key remittance corridors for their nationals working abroad who will benefit from faster, cheaper, and more transparent cross-border remittances. This initiative is also aligned with the G20 Roadmap for Enhancing Cross-border Payments developed by the Financial Stability Board and other international bodies.
This project is made possible with the collaboration of various stakeholders from both countries under the joint stewardship of BNM and BI. These include Payments Network Malaysia Sdn Bhd (PayNet), the Indonesian Payment System Association (ASPI) and RAJA (Rintis, Artajasa, Jalin, and Alto) as payment system operators. The settlement banks are CIMB Bank Berhad, Bank Mandiri and Bank Negara Indonesia. Other participants include various banks and non-bank payment service providers from both countries[4].
Bank Negara Malaysia
Bank Indonesia
27 January 2022
[1] DuitNow QR and QRIS are national QR code solutions in Malaysia and Indonesia, respectively, that allow merchants to accept payments from customers of different participating banks and e-wallet operators using a unified QR code.
[2] Under Phase 1 of the QR payment linkage launched in June 2021, Thai users can use their mobile payment applications to scan DuitNow QR codes to make payment to Malaysian merchants. Following the launch of Phase 2, Malaysian users can now scan Thai QR codes to make payment to Thai merchants.
[3] Source: Ministry of Tourism, Arts and Culture, Malaysia
[4] Participants from Malaysia include Public Bank Berhad and Razer Merchant Services, while participants from Indonesia include Bank Central Asia, Bank Mandiri, Bank Mega, Bank Pembangunan Daerah Bali (BPD Bali), Bank Permata, Bank Sinarmas, Bank Syariah Indonesia, CIMB Niaga, LinkAja, Ottocash, ShopeePay Indonesia.
Bank Negara Malaysia
27 January 2022
© Bank Negara Malaysia, 2022. All rights reserved.
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24 Jan 2022 | Malaysia's Financial Sector Blueprint 2022-2026 unveiled at MyFintech Week 2022 | https://www.bnm.gov.my/-/fsb3_en_pr | null | null |
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Malaysia's Financial Sector Blueprint 2022-2026 unveiled at MyFintech Week 2022
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Malaysia's Financial Sector Blueprint 2022-2026 unveiled at MyFintech Week 2022
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Malaysia’s Financial Sector Blueprint 2022-2026 sets the vision for the nation’s financial sector development, in line with key national economic aspirations.
MyFintech Week 2022 features more than 100 speakers and experts on critical issues in finance such as digitalisation and innovation, financial inclusion and sustainability.
The week-long event will showcase transformational insights from thought leaders and masterclasses by industry experts.
Malaysia’s five year Financial Sector Blueprint was unveiled today at the launch of MyFintech Week 2022 (MyFW 2022) officiated by the Minister of Finance, YB Senator Tengku Datuk Seri Utama Zafrul Aziz. More than 3000 participants, including industry leaders, policymakers and the general public joined the virtual launch.
The 5-year Blueprint outlines the vision and strategies for the development of the nation’s financial sector. Underpinned by three broad outcomes of finance for all, finance for transformation and finance for sustainability, the Blueprint identifies five strategic thrusts to achieve these outcomes:
Fund Malaysia’s economic transformation;
Elevate the financial well-being of households and businesses;
Advance digitalisation of the financial sector;
Position the financial system to facilitate an orderly transition to greener economy; and
Advance value-based finance through Islamic finance leadership
In his speech, YB Senator Tengku Datuk Seri Utama Zafrul said, “the launch of the Financial Sector Blueprint 2022 – 2026 is timely. In realising the nations’s aspirations, the financial sector has always played an important role – be it supporting families to grow and protect their wealth, or helping businesses expand and venture into new areas. In the next five years, the strategies outlined in this Blueprint will be critical for the financial sector to continue to be the catalyst for reform, drive sustainability and contribute to our collective aspiration of a “Prosperous, Inclusive and Sustainable Malaysia”.”
“The financial sector will continue to have a central role in providing solutions to the challenges ahead”, said Governor Tan Sri Nor Shamsiah in her opening remarks. “It is our desire and belief that the financial sector will continue to serve Malaysia well in the years ahead, doing its part to improve the well-being of people now and for the generations to come”.
MyFW 2022 is a virtual conference covering a wide range of pressing issues facing the future of the financial industry. Themed “Advancing Digitalisation for Recovery, Sustainability and Inclusion”, MyFW 2022 focuses on seven key priorities for the financial sector, namely New Realities, Economy, Inclusion and Financial Health, Startups, Regulations, Sustainability and Resiliency. Day 1 of MyFW also featured an address by Achim Steiner, Administrator of the United Nations Development Programme who highlighted the importance to take bold action in dealing with climate issues.
Continuing on the theme of sustainability were other panel sessions featuring speakers which include Charlotte Wolff-Bye, Chief Sustainability Officer, Petronas who shared insights on the “Powering the Great Transition to a Greener, More Sustainable Economy”, and Gillian Tett, Chair of Editorial Board, The Financial Times (US) who led a discussion on “Net zero banking: How realistic? How soon?”. The sessions emphasised the need for financial institutions and large corporations to be torchbearers through greater transparency and accountability in implementing net zero targets. Day 1 of MyFW also saw discussions revolve around topics such as Bigtechs in finance and the future of Malaysia’s digital economy.
The conference will run for another four days with an exciting line up of sessions on topics such as invisible finance, decentralised finance (DeFi) and the future of digital insurance. Participants can also look forward to over 10 masterclasses delivered by industry experts which will provide in-depth exploration of issues such as cross-border payments and cloud adoption.
Download and read more about the Financial Sector Blueprint 2022-2026 or visit the event website to find out more about MyFintech Week 2022.
Bank Negara Malaysia
24 January 2022
© Bank Negara Malaysia, 2022. All rights reserved.
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24 Jan 2022 | International Reserves of Bank Negara Malaysia as at 14 January 2022 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-14-january-2022 | null | null |
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International Reserves of Bank Negara Malaysia as at 14 January 2022
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International Reserves of Bank Negara Malaysia as at 14 January 2022
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The international reserves of Bank Negara Malaysia amounted to USD116.2 billion as at 14 January 2022. The reserves position is sufficient to finance 7.4 months of retained imports and is 1.2 times total short-term external debt. Related Assets
BNM Statement of Assets & Liabilities - 14 January 2022
Bank Negara Malaysia
24 January 2022
© Bank Negara Malaysia, 2022. All rights reserved.
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21 Jan 2022 | Establishment of New Financing Facilities by Bank Negara Malaysia | https://www.bnm.gov.my/-/new-bnm-funds-sme-brf-lctf | https://www.bnm.gov.my/documents/20124/2294076/drf2022_en_broc.pdf, https://www.bnm.gov.my/documents/20124/2294076/brf2022_en_faq.pdf, https://www.bnm.gov.my/documents/20124/2294076/lctf2022_en_faq.pdf, https://www.bnm.gov.my/documents/20124/2294076/lctf2022_en_fi.pdf, https://www.bnm.gov.my/documents/20124/2294076/brf2022_en_broc.pdf, https://www.bnm.gov.my/documents/20124/2294076/drf2022_en_faq.pdf, https://www.bnm.gov.my/documents/20124/2294076/lctf2022_en_broc.pdf, https://www.bnm.gov.my/documents/20124/2294076/brf2022_en_fi.pdf | null |
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Establishment of New Financing Facilities by Bank Negara Malaysia
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Establishment of New Financing Facilities by Bank Negara Malaysia
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1745 on
Friday, 21 January 2022
21 Jan 2022
As announced during the Budget 2022 speech by the Minister of Finance, Bank Negara Malaysia (BNM) will introduce two new facilities under BNM’s Fund for SMEs. Applications to these facilities will be open from 3 February 2022 until the funds are fully utilised.
RM1 billion Business Recapitalisation Facility (BRF)
BRF aims to support SMEs to recover and grow, while managing their level of indebtedness[1] through innovative financing solutions. Under BRF, SMEs may obtain:
a) Equity financing through the issuance of preference shares, common shares, or any suitable equity-like instruments; or
b) A mix of debt financing from participating financial institutions (PFIs) and equity financing through third party equity financiers (blended finance).
BRF is available for SMEs of all economic sectors, up to a maximum of RM5 million, for financing working capital and/or capital expenditure. The tenure of financing is up to 10 years.
For b), the effective rate for debt financing under BRF is up to 3.5% per annum for financing without guarantee, or up to 5.0% per annum inclusive of any guarantee fee.
Interested SMEs can apply directly from participating commercial banks, Islamic banks and development financial institutions regulated by BNM.
According to Bank Negara Malaysia Governor, Tan Sri Nor Shamsiah Mohd Yunus, “More innovative financing solutions, such as blended finance and equity financing, pool together resources, capacity and knowledge across the public and private sectors comprising banks, development financial institutions and equity investors. This enables businesses to build back better in the post-pandemic landscape.”
RM1 billion Low Carbon Transition Facility (LCTF)
The RM1 billion LCTF by BNM supports and encourages SMEs to adopt sustainable practices for business resilience. Under the design of the Facility, financial institutions will match the LCTF with RM1 billion of their own funds. This Facility is in line with the Government’s target for Malaysia to be a net-zero emission economy by 2050.
These sustainable practices include, but are not limited to:
Obtaining sustainability certification;
Increasing use of sustainable materials for production;
Improving energy efficiency of building and appliances; and
Installing on-site renewable energy generation equipment.
The LCTF is available for SMEs of all economic sectors, up to a maximum of RM10 million, for financing working capital and/or capital expenditure. The tenure of financing is up to 10 years. The financing rate is up to 5.0% per annum, inclusive of any guarantee fee.
Interested SMEs can apply directly from participating commercial banks, Islamic banks and development financial institutions regulated by BNM.
“There is an urgent need for SMEs to adopt sustainable practices in their business operations moving forward. The LCTF encourages this and supports the financial industry to innovate their product offerings to facilitate businesses embed sustainability and recalibrate their business operations and processes,” said Governor Nor Shamsiah.
Enhanced Features of the Disaster Relief Facility 2022 (DRF 2022)
BNM has recently increased the allocation for DRF 2022 by RM300 million, bringing the total allocation to RM500 million. Eligible SMEs and micro enterprises will now be able to obtain financing up to RM700,000 per SME and up to RM150,000 for micro enterprises. The financing tenure has been extended up to 7 years. SMEs may contact BNM at bnm.my/LINK for more information on the DRF.
SMEs may also access other facilities available under BNM’s Fund for SMEs. Details on these funds are available at bnm.gov.my/sme-financing.
See also:
BRF brochure
Frequently asked questions on BRF
List of Participating Financial Institutions for BRF
LCTF brochure
Frequently asked questions on LCTF
List of Participating Financial Institutions for LCTF
DRF 2022 brochure
Frequently asked questions on DRF 2022
[1] This refers to improvements in the capital structure of an SME, particularly those who wish to undertake capital expenditure, facilitating a more manageable debt-to-equity (D/E) for the SME after tapping on the BRF.
Bank Negara Malaysia
21 January 2022
© Bank Negara Malaysia, 2022. All rights reserved.
|
Share
2021
(%)
2020 2021
4Q Year 1Q 2Q 3Q 4Q Year
Annual growth (%)
Aggregate Domestic Demand (excluding stocks)
Private sector
Consumption
Investment
Public sector
Consumption
Investment
Net Exports
Exports of Goods and Services
Imports of Goods and Services
92.7
74.3
58.8
15.6
18.3
13.8
4.5
6.0
69.2
63.2
-4.5
-4.0
-3.5
-6.6
-5.7
2.4
-20.4
10.0
-2.1
-3.3
-5.8
-6.0
-4.3
-11.9
-4.7
3.9
-21.3
13.0
-8.9
-8.4
-1.0
-0.9
-1.5
1.3
-1.5
5.9
-18.6
0.8
11.9
13.0
12.4
13.0
11.7
17.4
9.7
9.0
12.0
34.3
37.4
37.6
-4.1
-4.4
-4.2
-4.8
-2.8
8.1
-28.9
-37.5
5.1
11.7
2.3
2.4
3.7
-3.0
1.9
4.3
-3.8
2.6
13.3
14.6
1.9
2.0
1.9
2.6
1.6
6.6
-11.4
-5.8
15.9
18.5
Real GDP 100.0 -3.4 -5.6 -0.5 16.1 -4.5 3.6 3.1
GDP (q-o-q growth, seasonally adjusted) - -1.5 - 2.7 -1.9 -3.6 6.6 -
Note: Figures may not add up due to rounding and exclusion of stocks.
Source: Department of Statistics, Malaysia
T1 GDP by Expenditure Components (at constant 2015 prices)
Share
2021
(%)
2020 2021
1Q 2Q 3Q 4Q Year 1Q 2Q 3Q 4Q Year
Annual growth (%)
Services
Manufacturing
Agriculture
Mining
Construction
57.0
24.3
7.2
6.7
3.7
3.1
1.4
-8.6
-2.9
-7.9
-16.2
-18.3
0.9
-20.8
-44.5
-4.0
3.3
-0.3
-7.8
-12.4
-4.8
3.0
-1.0
-10.4
-13.9
-5.5
-2.6
-2.2
-10.6
-19.4
-2.3
6.6
0.2
-5.0
-10.4
13.5
26.6
-1.5
13.9
40.3
-4.9
-0.8
-1.9
-3.6
-20.6
3.2
9.1
2.8
-0.9
-12.2
1.9
9.5
-0.2
0.7
-5.2
Real GDP 100.0 0.7 -17.2 -2.7 -3.4 -5.6 -0.5 16.1 -4.5 3.6 3.1
Note: Numbers do not add up due to rounding and exclusion of import duties component.
Source: Department of Statistics, Malaysia
T2 GDP by Economic Activity (at constant 2015 prices)
BNM’s Fund for SMEs
Business Recapitalisation Facility
General Frequently Asked Questions (FAQ)
Business Recapitalisation Facility (BRF)
No. Question Answer
1. What is BRF? BRF is a financing facility established by Bank Negara Malaysia (BNM) to
support SMEs to recover and grow, while managing their level of their
indebtedness1 through innovative financing solutions. Under BRF, SMEs
may obtain:
• Equity financing through issuance of preference shares, common
shares, or any suitable equity-like instruments; or
• A mix of debt financing from participating financial institutions (PFIs) and
equity financing through third party equity financiers (blended finance).
Note: Financing should not be used for refinancing of existing
credit/financing facilities
2. Who is eligible to
apply for BRF?
Viable Malaysian-owned SMEs2 including micro enterprises from all
economic sectors including existing beneficiaries of BNM funds.
3. What
projects/activities are
eligible for financing
under BRF?
The purpose of BRF financing is for:
• Working capital; and/or
• Capital expenditure.
Note: Financing should not be used for refinancing of existing
credit/financing facilities
4. What is the maximum
financing amount and
tenure for SMEs
under the BRF?
• Eligible SMEs will be able to obtain financing up to RM5 million per
SME3.
• Financing tenure of up to 10 years.
5. What is the financing
rate?
• Debt financing: The maximum effective rate is 5.0% per annum
inclusive of guarantee fee or 3.5% per annum without guarantee fee.
• Equity financing: No cap imposed on return for equity investment.
1 This refers to improvements in the capital structure of an SME, particularly those who wish to
undertake capital expenditure, facilitating a more manageable debt-to-equity (D/E) for the SME after
tapping on the BRF.
2 At least 51% shares held by Malaysians and as defined by SME Corp. Malaysia’s Guideline for SME
Definition, accessible at:
www.smecorp.gov.my/images/pdf/2021/Guideline_on_SMEDefinition_Updated_Sept2020_Final.pdf
3 Under the blended financing option, SMEs may be able to receive a combined financing of more
than RM5 million from the PFI and third party equity financier.
http://www.smecorp.gov.my/images/pdf/2021/Guideline_on_SMEDefinition_Updated_Sept2020_Final.pdf
6. Which banks offer
financing under BRF?
Eligible SMEs can apply directly to PFIs, which comprise commercial
banks, Islamic banks and development financial institutions regulated by
BNM.
7. How can SMEs know
that they are eligible
to apply for financing
under the BRF?
Eligible SMEs are advised to contact the PFIs to ascertain their eligibility
under the facility. All applications for financing will be subject to
assessments by the PFIs and relevant third party equity financiers.
8. Is BRF open to
existing customers of
the PFIs only?
No, BRF is open to new and existing SME customers of the PFIs as long
as they are Malaysian SMEs that fulfil the eligibility criteria set out by BNM
as well as meet the credit assessments by the PFIs and relevant third
party equity financiers.
9. Do SMEs need to
provide collateral to
obtain financing under
the BRF?
No. Collateral is NOT required under the BRF.
10. If my business is not
eligible for the BRF,
what other support is
available for me?
• SMEs who are facing difficulties with loan/financing repayments are
advised to engage their respective financial institutions for rescheduling
and restructuring (R&R) of their existing facilities, to help alleviate their
cash flow problems.
• SMEs that are not eligible for the BRF may apply for financing from
other facilities under BNM’s Fund for SMEs (e.g. All Economic Sector
Facility, Agrofood Facility, Micro Enterprise Facility, PENJANA Tourism
Financing, SME Automation and Digitalisation Facility, High Tech
Facility – National Investment Aspirations or Low Carbon Transition
Facility), or other financing products for SMEs offered by financial
institutions. SMEs can also apply via the imSME platform
(imsme.com.my). Approval for financing under the above schemes are
subject to the specific scheme’s eligibility criteria and assessment by
the PFIs.
• Additionally, they could obtain financing advisory services through
MyKNP (Khidmat Nasihat Pembiayaan) that provides advisory
assistance and tips to improve eligibility for future financing and
alternative sources of finance at myknp.com.my.
11. What can an SME do
if its application for
financing under any of
the facilities is
rejected by the PFI?
If an application is rejected, the SME is advised to:
a) Obtain clarification from the PFI on the reason(s) of rejection;
b) Consider re-submitting the application via the imSME platform
(imsme.com.my) if the SME has not done so earlier;
https://imsme.com.my/portal/en
http://www.myknp.com.my/
https://imsme.com.my/portal/en
c) Obtain financing advisory services through MyKNP (that provides
advisory assistance and tips to improve eligibility for future financing
and alternative sources of finance at myknp.com.my; or
d) Channel enquiries or complaints to BNM via eLINK.
12. When will the BRF be
made available?
The Facility will be available starting from 3 February 2022 until full
utilisation.
http://www.myknp.com.my/
https://telelink.bnm.gov.my/
BNM’s Fund for SMEs
Low Carbon Transition Facility
Frequently Asked Questions (FAQ)
Low Carbon Transition Facility (LCTF)
No. Question Answer
1. What is Low Carbon
Transition Facility (LCTF)?
LCTF is a financing facility to encourage and support SMEs
to adopt sustainable practices for business resilience.
2. Who is eligible to apply for
LCTF and what are the
eligibility criteria?
SMEs in all sectors committed to transform towards low
carbon and sustainable business operations.
SMEs should contact any of the participating financial
institutions on their eligibility under the facility. All
applications for financing will be subject to assessments by
the participating financial institution.
3. What projects/activities are
eligible for financing under
the LCTF?
The LCTF can be used to finance capital expenditure or
working capital to initiate or facilitate the transition to low
carbon and sustainable operations.
These include, but are not limited to, the following activities:
(a) obtaining sustainability certification;
(b) increasing the use of sustainable materials for
production;
(c) improving energy efficiency of buildings and appliances;
and
(d) installing on-site generation equipment of renewable
energy.
SMEs should contact any of the participating financial
institutions to obtain the full list of projects/activities eligible
to be financed.
4. What is the maximum
financing amount and tenure
under the LCTF?
Eligible SMEs will be able to obtain financing up to
RM10 million per SME and financing tenure of up to 10
years.
5. What is the financing rate? The maximum financing rate is 5.0% per annum, inclusive of
guarantee fee.
6. When will the LCTF be made
available?
The facility will be available from 3 February 2022 until full
utilisation.
7. Which banks offer financing
under LCTF?
SMEs can apply for LCTF financing from participating
commercial banks, Islamic banks and development financial
institutions regulated by Bank Negara Malaysia.
The list of participating financial institutions is provided in the
Appendix.
8. Is LCTF a standardised
facility?
No. SMEs should contact any of the participating financial
institutions to discuss on the suitable facility that supports
their transition needs.
9. Can SMEs obtain the LCTF
to re-finance existing
credit/financing facilities?
No. The LCTF cannot be used for refinancing of existing
credit/financing facilities.
10. Do SMEs need to provide
collateral to obtain financing
under the LCTF?
No. Collateral is not required under the LCTF.
11. What can an SME do if its
application for financing
under any of the facilities is
rejected by the participating
financial institutions?
If an application is rejected, the SME is advised to:
(a) obtain clarification from the participating financial
institution on the reason(s) of rejection; or
(b) consider submitting the application via the imSME
platform, if the SME has not done so earlier; or
(c) obtain financing advisory services through MyKNP
(Khidmat Nasihat Pembiayaan) that provides advisory
assistance and tips to improve eligibility for future
financing and alternative sources of finance at
myknp.com.my; or
(d) channel enquiries or complaints to Bank Negara
Malaysia via eLINK.
http://www.myknp.com.my/
https://telelink.bnm.gov.my/
Low Carbon Transition Facility (LCTF)
List of Participating Financial Institutions
1. Affin Bank Berhad / Affin Islamic Bank Berhad
2. Alliance Bank Malaysia Berhad / Alliance Islamic Bank Berhad
3. Al Rajhi Banking & Investment Corporation (Malaysia) Berhad
4. AmBank (M) Berhad / AmBank Islamic Berhad
5. Bangkok Bank Berhad
6. Bank Islam Malaysia Berhad
7. Bank Kerjasama Rakyat Malaysia Berhad (Bank Rakyat)
8. Bank Muamalat Malaysia Berhad
9. Bank of China (Malaysia) Berhad
10. Bank Pembangunan Malaysia Berhad
11. Bank Pertanian Malaysia Berhad (Agrobank)
12. Bank Simpanan Nasional
13. CIMB Bank Berhad / CIMB Islamic Bank Berhad
14. Export-Import Bank of Malaysia Berhad (EXIM Bank)
15. HSBC Bank Malaysia Berhad / HSBC Amanah Malaysia Berhad
16. Hong Leong Bank Berhad / Hong Leong Islamic Bank Berhad
17. Malayan Banking Berhad / Maybank Islamic Berhad
18. MBSB Bank Berhad
19. OCBC Bank (Malaysia) Berhad / OCBC Al-Amin Bank Berhad
20. Public Bank Berhad / Public Islamic Bank Berhad
21. RHB Bank Berhad / RHB Islamic Bank Berhad
22. Small Medium Enterprise Development Bank Malaysia Berhad (SME Bank)
23. Standard Chartered Bank Malaysia Berhad / Standard Chartered Saadiq Berhad
24. United Overseas Bank (Malaysia) Bhd
Max RM5 million
Up to 5.0% p.a.
inclusive of guarantee fee or
3.5% p.a. without guarantee;
no cap on return for equity
investment
Up to
10 years
Financing size
per SME
Financing Rate
to SMEs
Maximum Tenure
For more
information
Contact the PFI’s customer service centre
Log on to PFI’s website
Credit Guarantee Providers:An initiative by:
bnm.gov.my/sme-financing
Objective To support SMEs to recover and grow, while managing their level of indebtedness1 through
innovative financing solutions
Size RM1 billion
Eligibility criteria Viable Malaysian-owned SMEs2 including micro enterprises from all economic sectors
Purpose of financing Working capital and/or capital expenditure
Tenure Up to 10 years
Financing size per SME Up to RM5 million
Financing rate to SMEs The maximum effective rate is up 5.0% p.a., inclusive of guarantee fee or 3.5% p.a. without
guarantee; no cap on return for equity investment
Type of facility SMEs can either obtain:
• Equity financing through issuance of preference shares, common shares, or any suitable
equity-like instruments; or
• A mix of debt financing from participating financial institutions (PFIs) and equity
financing through third party equity financiers (blended finance).
Availability 3 February 2022 until full utilisation
Application procedure Application for equity financing or blended financing can be submitted to PFIs and approval
will be subjected to the credit assessment of PFIs and/or relevant third party equity investors
All applications should be made directly with the participating financial institutions to reduce risk of financial scams.
No third party agents are being employed by participating financial institutions for the purpose of this facility.
1 This refers to improvements in the capital structure of an SME, particularly those who wish to undertake capital expenditure, facilitating a more manageable debt-
to-equity (D/E) for the SME after tapping on the BRF.
2 At least 51% shares held by Malaysians and as defined by SME Corp. Malaysia’s Guideline for SME Definition, accessible at
https://www.smecorp.gov.my/images/pdf/2021/Guideline_on_SMEDefinition_Updated_Sept2020_Final.pdf
BNM’s Business Recapitalisation Facility
is established to provide financing which
lowers the indebtedness of SMEs who wish to
undertake capital expenditure.
BNM’s Fund for SMEs :
Business Recapitalisation
Facility (BRF)
Updated as at 7 January 2022
BNM’s Fund for SMEs
Disaster Relief Facility 2022
General Frequently Asked Questions (FAQ)
Disaster Relief Facility (DRF) 2022
No. Question Answer
1. What is DRF 2022? DRF 2022 is a financing facility established by BNM to alleviate the
financial burden of SMEs and micro enterprises affected by the
recent floods nationwide, to enable them to resume their business
operations. The purpose of DRF 2022 financing are:
• Repairs and/or replacement of assets for business use (e.g.
plants and machinery) which have been damaged by
floods; and/or
• Working capital
Note: Financing should not be used for refinancing of existing
credit/financing facilities
2. Who is eligible to apply for
DRF 2022?
SMEs1 and micro enterprises affected by floods located in districts
identified by Agensi Pengurusan Bencana Negara (NADMA) as
flood disaster areas
Note: SMEs and micro enterprises may obtain the information from
Portal Bencana administered by NADMA at
https://portalbencana.nadma.gov.my/en/disaster-information
3. What is the maximum
financing amount and tenure
for SMEs and micro
enterprises under the DRF
2022?
• Eligible SMEs and micro enterprises will be able to obtain
financing up to RM700,000 per SME and up to RM150,000 for
micro enterprises
• Financing tenure of up to 7 years, including moratorium period
of 6 months on both principal and interest/profit payments
4. What is the financing rate? The maximum effective financing rate is 3.50% per annum,
inclusive of guarantee fee
5. Which banks can SMEs and
micro enterprises apply for
financing under DRF 2022?
Affected businesses can apply for financing from participating
financial institutions (PFIs) which comprise commercial banks,
Islamic banks and development financial institutions regulated by
BNM
1 At least 51% shares held by Malaysians and as defined by SME Corp. Malaysia’s Guideline for SME
Definition, accessible at
https://www.smecorp.gov.my/images/pdf/2021/Guideline_on_SMEDefinition_Updated_Sept2020_Fi
nal.pdf
https://portalbencana.nadma.gov.my/en/disaster-information
https://www.smecorp.gov.my/images/pdf/2021/Guideline_on_SMEDefinition_Updated_Sept2020_Final.pdf
https://www.smecorp.gov.my/images/pdf/2021/Guideline_on_SMEDefinition_Updated_Sept2020_Final.pdf
Updated as at 7 January 2022
6. How can SMEs and micro
enterprises know that they are
eligible to apply for financing
under the DRF 2022?
Eligible SMEs and micro enterprises are advised to contact the
PFIs to ascertain their eligibility under the facility. All applications
for financing will be subject to assessments by the PFIs
7. How long will it take for PFIs
to approve the application?
PFIs are to process the applications within 14 days upon receiving
complete documentation from the applicants
8. Do SMEs or micro enterprises
need to provide collateral to
obtain financing under the
DRF 2022?
No. Collateral is NOT required under the DRF 2022
9. What can an SME or micro
enterprise do if its
application for financing under
any of the facilities is rejected
by the PFI?
If an application is rejected, the SME or micro enterprise is advised
to do the following:
a) Obtain clarification from the PFI on the reason(s) of
rejection;
b) Obtain financing advisory services through MyKNP
(Khidmat Nasihat Pembiayaan) that provides advisory
assistance and tips to improve eligibility for future financing
and alternative sources of finance (www.myknp.com.my);
or
c) Contact BNM’s eLINK at bnm.gov.my/LINK for additional
assistance
10. When will the DRF 2022 be
made available?
The facility will be available from 27 December 2021 until full
utilisation (or subject to further decision by BNM)
Bank Negara Malaysia
Updated as at 7 January 2022
http://www.myknp.com.my/
https://telelink.bnm.gov.my/
BNM’s Fund for SMEs :
Low Carbon Transition
Facility (LCTF)
For more
information
Contact the participating financial institutions’
customer service centre
Credit Guarantee Providers:An initiative by:
bnm.gov.my/sme-financing
All applications should be made directly with the participating financial institutions to reduce risk of financial scams.
No third party agents are being employed by participating financial institutions for the purpose of this facility.
Objective Encourage and support SMEs to adopt sustainable practices for business resilience
Special feature Participating financial institutions to provide financing on a matching basis
Size RM2 billion
[RM1 billion allocation from Bank Negara Malaysia + RM1 billion from participating financial
institutions (matching basis)]
Eligibility criteria SMEs in all sectors
Purpose of financing To fund capital expenditure or working capital to initiate or facilitate the transition to low
carbon and sustainable operation
Tenure Up to 10 years
Financing size per SME Maximum RM10 million
Financing rate to SMEs Maximum financing rate of 5.0% p.a., inclusive of guarantee fee (if any)
Guarantee Guarantee schemes by Credit Guarantee Corporation Malaysia Berhad (CGC) / Syarikat
Jaminan Pembiayaan Perniagaan Berhad (SJPP)
Availability 3 February 2022 until full utilisation
Low Carbon Transition Facility (LCTF)
BNM’s Low Carbon Transition Facility is established to support SMEs in adopting
sustainable and low carbon practices.
The type of businesses suitable to apply for this facility
The Low Carbon Transition Facility is open for SMEs in all sectors that are committed
to transform their business operations towards low carbon operations. This includes
improving energy efficiency, increasing use of sustainable material for production and
obtaining sustainability certification.
Maximum
RM10 million
Maximum financing
rate of
5% p.a.
inclusive of guarantee
fee (if any)
Up to
10 years
Financing size
per SME
Financing Rate
to SMEs
Tenure
Log on to participating financial institutions’
website
Business Recapitalisation Facility (BRF)
List of Participating Financial Institutions
1. Affin Bank Berhad / Affin Islamic Bank Berhad
2. Alliance Bank Malaysia Berhad / Alliance Islamic Bank Berhad
3. Al Rajhi Banking & Investment Corporation (Malaysia) Berhad
4. AmBank (M) Berhad / AmBank Islamic Berhad
5. Bangkok Bank Berhad
6. Bank Islam Malaysia Berhad
7. Bank Kerjasama Rakyat Malaysia Berhad (Bank Rakyat)
8. Bank Muamalat Malaysia Berhad
9. Bank of China (Malaysia) Berhad
10. Bank Pembangunan Malaysia Berhad
11. Bank Pertanian Malaysia Berhad (Agrobank)
12. Bank Simpanan Nasional
13. CIMB Bank Berhad / CIMB Islamic Bank Berhad
14. Export-Import Bank of Malaysia Berhad (EXIM Bank)
15. HSBC Bank Malaysia Berhad / HSBC Amanah Malaysia Berhad
16. Hong Leong Bank Berhad / Hong Leong Islamic Bank Berhad
17. Malayan Banking Berhad / Maybank Islamic Berhad
18. MBSB Bank Berhad
19. OCBC Bank (Malaysia) Berhad / OCBC Al-Amin Bank Berhad
20. Public Bank Berhad / Public Islamic Bank Berhad
21. RHB Bank Berhad / RHB Islamic Bank Berhad
22. Small Medium Enterprise Development Bank Malaysia Berhad (SME Bank)
23. Standard Chartered Bank Malaysia Berhad / Standard Chartered Saadiq Berhad
24. United Overseas Bank (Malaysia) Bhd
| Press Release |
20 Jan 2022 | Monetary Policy Statement | https://www.bnm.gov.my/-/monetary-policy-statement-20012022 | null | null |
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Monetary Policy Statement
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5
Monetary Policy Statement
Embargo :
For immediate release
Not for publication or broadcast before
1500 on
Thursday, 20 January 2022
20 Jan 2022
At its meeting today, the Monetary Policy Committee (MPC) of Bank Negara Malaysia decided to maintain the Overnight Policy Rate (OPR) at 1.75 percent.
The global economy continues to recover, supported by manufacturing and trade activity. Labour market conditions have also improved in many countries. However, several countries reintroduced measures to curb ongoing COVID-19 resurgences, causing some moderation in the pace of recovery in domestic activity, especially services. Inflation remains elevated in a number of countries, driven by both supply and demand factors. Going forward, continued progress in vaccination coverage, advancements in vaccine efficacy, and the availability of anti-viral treatments will allow for better management of the pandemic, hence supporting global growth prospects. The global growth outlook will continue to be affected by uncertainties over the emergence of new variants of concern, risks of prolonged global supply disruptions, and risks of heightened financial market volatility amid adjustments in monetary policy in major economies.
For Malaysia, the latest high-frequency indicators show that economic activity rebounded in the fourth quarter, in line with the relaxation of containment measures. For 2021, growth will be within the projected range of 3% - 4%. Looking ahead, growth is expected to gain further momentum in 2022. This will be driven by the expansion in global demand and higher private sector expenditure amid improvements in the labour market and continued policy support. Risks to the growth outlook, however, remain tilted to the downside. Such risks may arise from a weaker-than-expected global growth, a worsening in supply chain disruptions, and the emergence of severe and vaccine-resistant COVID-19 variants of concern.
Headline inflation has averaged 2.3% for the period January-November 2021. For 2022, average headline inflation is likely to remain moderate as the base effect from fuel inflation dissipates. Underlying inflation, as measured by core inflation, is expected to edge upwards as economic activity normalises amid the environment of high input costs. Nevertheless, core inflation is expected to be modest, with upside risk contained by the continued slack in the economy and labour market. The outlook, however, continues to be subject to global commodity price developments amid risks from prolonged supply-related disruptions.
The MPC considers the current stance of monetary policy to be appropriate and accommodative. Fiscal and financial measures will continue to cushion the economic impact on businesses and households and provide support to economic activity. The stance of monetary policy will continue to be determined by new data and their implications on the overall outlook for inflation and domestic growth.
Bank Negara Malaysia
20 January 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
11 Jan 2022 | Appointment of an External Member to Bank Negara Malaysia's Monetary Policy Committee | https://www.bnm.gov.my/-/appointment-bnm-mpc-member-2022 | null | null |
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Appointment of an External Member to Bank Negara Malaysia's Monetary Policy Committee
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Appointment of an External Member to Bank Negara Malaysia's Monetary Policy Committee
Embargo :
For immediate release
Not for publication or broadcast before
1500 on
Tuesday, 11 January 2022
11 Jan 2022
Bank Negara Malaysia (BNM) wishes to announce the appointment of Mr. Lim Chee Sing as an external member of the Monetary Policy Committee (MPC). The appointment is for a two-year term, effective 1 January 2022.
Mr. Lim Chee Sing
From 2013 until 2017, Mr. Lim served as the Executive Director and Chairman of RHB Research Institute Sdn Bhd. He was also the Group Chief Economist of the RHB Banking Group and an equity market strategist for the Malaysian market for RHB Research Institute. An economist by training, he began his career with BNM in 1981, where he worked for close to eleven years. He then joined RHB Research Institute as its regional economist and subsequently promoted to the Head of Research. Mr. Lim holds an MBA and a Bachelor’s degree in Economics from the University of Malaya.
BNM also wishes to announce that Dato’ Dr. Gan Wee Beng will step down from his current position as external member of the MPC on 1 April 2022. He has been on the MPC since 1 April 2019.
Bank Negara Malaysia Governor Tan Sri Nor Shamsiah Mohd Yunus said, “I would like to welcome Mr. Lim to the MPC who brings with him a wealth of expertise and experiences. I would also like to express my utmost appreciation to Dato’ Dr. Gan for his contributions to the Bank’s monetary policy formulation over the last three years. We wish him all the best in his future endeavours.”
About the MPC
Under the Central Bank of Malaysia Act 2009 (CBA), the MPC is responsible for formulating monetary policy and deciding on policies for the conduct of monetary policy operations. The CBA also sets out the process for appointing members to the MPC.
Members of the MPC:
Governor Nor Shamsiah Mohd Yunus
Deputy Governor Abdul Rasheed Ghaffour
Deputy Governor Jessica Chew Cheng Lian
Deputy Governor Marzunisham Omar
Assistant Governor Norzila Abdul Aziz
Assistant Governor Dr. Norhana Endut
Dato' Dr. Gan Wee Beng (member until 1 April 2022)
Nor Zahidi Alias
Lim Chee SingBank Negara Malaysia
11 January 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
07 Jan 2022 | International Reserves of Bank Negara Malaysia as at 31 December 2021 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-31-december-2021 | null | null |
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International Reserves of Bank Negara Malaysia as at 31 December 2021
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International Reserves of Bank Negara Malaysia as at 31 December 2021
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7 Jan 2022
The international reserves of Bank Negara Malaysia amounted to USD116.9 billion as at 31 December 2021. The reserves level has taken into account the quarterly foreign exchange revaluation changes. The reserves position is sufficient to finance 7.7 months of retained imports and is 1.2 times total short-term external debt. Related Assets
BNM Statement of Assets & Liabilities - 31 December 2021
Bank Negara Malaysia
7 January 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
04 Jan 2022 | Discussion Paper on Licensing Framework for Digital Insurers and Takaful Operators | https://www.bnm.gov.my/-/dp-on-licensing-framework-dito | https://www.bnm.gov.my/documents/20124/943361/DP_on_Licensing_Framework_for_DITOs.pdf | null |
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Discussion Paper on Licensing Framework for Digital Insurers and Takaful Operators
Embargo :
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1917 on
Tuesday, 4 January 2022
4 Jan 2022
Bank Negara Malaysia (the Bank) today issued the Discussion Paper on Licensing Framework for Digital Insurers and Takaful Operators. The Discussion Paper outlines the proposed framework for licensing new digital insurers and takaful operators (DITOs) to encourage digital innovation in the insurance and takaful sector. It also complements the Bank’s initiative on digital banks and digitalisation of the financial sector.
DITOs are expected to contribute to a more inclusive, competitive, efficient insurance and takaful sector in line with evolving needs of consumers. “The proposed framework aims to attract new digital players that can offer innovative solutions to address critical protection gaps among the unserved and underserved market segments, as well as enhance customer experience and elevate trust,” said Bank Negara Malaysia Governor Tan Sri Datuk Nor Shamsiah Mohd Yunus.
The framework will adopt a balanced approach. The focus is to encourage more significant innovation, whilst promoting financial stability and protecting consumer interests. The Discussion Paper covers the requirements for entry, such as criteria in assessing an application and capital requirement, and explores new business models such as risk-sharing.
The Bank aims to issue an Exposure Draft upon obtaining feedback from the Discussion Paper. This will be followed by a Policy Document on prudential and business conduct requirements for DITOs in 2022. The applications for a DITO licence will be open at a later date. The Bank invites written feedback on the Discussion Paper by 28 February 2022.
See also:
Discussion Paper on Licensing Framework for Digital Insurers and Takaful OperatorsBank Negara Malaysia
4 January 2022
© Bank Negara Malaysia, 2022. All rights reserved.
| null | Press Release |
29 Dec 2023 | Reappointment of an External Member to Bank Negara Malaysia’s Monetary Policy Committee | https://www.bnm.gov.my/-/mpc-mbr-reappt-lim | null | null |
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Reappointment of an External Member to Bank Negara Malaysia’s Monetary Policy Committee
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Friday, 29 December 2023
29 Dec 2023
Bank Negara Malaysia (BNM) wishes to announce the reappointment of Mr. Lim Chee Sing as an external member of the Monetary Policy Committee (MPC). The reappointment is for a three-year term, effective 1 January 2024.
Mr. Lim Chee SingMr. Lim Chee Sing has been an external member of the MPC since 1 January 2022. From 2013 until 2017, he served as the Executive Director and Chairman of RHB Research Institute Sdn. Bhd. He was also the Group Chief Economist of the RHB Banking Group and an equity market strategist for the Malaysian market for RHB Research Institute. An economist by training, he began his career with BNM in 1981, where he worked for close to eleven years. He then joined RHB Research Institute as its regional economist, and was subsequently promoted to the Head of Research in 2002. Mr. Lim Chee Sing holds an MBA and a Bachelor’s degree in Economics from the University of Malaya.
About the MPC
Under the Central Bank of Malaysia Act 2009 (CBA 2009), the MPC is responsible for formulating monetary policy and deciding on policies for the conduct of monetary policy operations. The CBA 2009 also sets out the process for appointing members to the MPC.
Members of the MPC:
Governor Abdul Rasheed Ghaffour
Deputy Governor Jessica Chew Cheng Lian
Deputy Governor Marzunisham Omar
Deputy Governor Adnan Zaylani Mohamad Zahid
Assistant Governor Norhana Endut
Assistant Governor Fraziali Ismail
Lim Chee Sing (External Member)
Nor Zahidi Alias (External Member)
Bank Negara Malaysia
29 December 2023
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |
29 Dec 2023 | Monetary and Financial Developments in November 2023 | https://www.bnm.gov.my/-/monetary-and-financial-developments-in-november-2023 | https://www.bnm.gov.my/documents/20124/12999521/i_en.pdf | null |
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Monetary and Financial Developments in November 2023
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Monetary and Financial Developments in November 2023
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1500 on
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29 Dec 2023
Headline inflation moderated to 1.5% in November
Headline inflation continued to moderate to 1.5% in November (October 2023: 1.8%), driven by lower core inflation[1] (2.0%; October 2023: 2.4%) and fresh food inflation (0.1%; October 2023: 1.2%).
Notably, the lower core inflation was largely driven by food away from home (3.9%; October 2023: 5.6%).
Manufacturing production improved by 0.9% in October 2023
The manufacturing industrial production index (IPI) grew by 0.9% on an annual basis in October 2023 (September 2023: 0.4%), underpinned by a further improvement in domestic-oriented clusters, mainly transport equipment, and food, beverages, and tobacco.
This more than offset the continued drag from export-oriented clusters amid weaker semiconductor component production and the gradual restart from oil refinery maintenance.
Higher growth in credit to the private non-financial sector[2],[3]
Credit to the private non-financial sector grew by 4.6% as at end-November (October 2023: 4.2%), driven mainly by higher growth in credit to businesses (3.5%; October 2023: 2.8%).
Outstanding business loans expanded by 2.6% (October 2023: 1.1%), supported by higher growth in working capital loans. Of note, growth in outstanding loans to SMEs remained forthcoming (7.9%; October 2023: 7.2%). Meanwhile, outstanding corporate bonds growth moderated slightly to 4.6% (October 2023: 5.0%).
For households, outstanding loan growth was stable (5.7%; October 2023: 5.6%), supported by sustained growth across most loan purposes. Household loan growth continued to be driven by loans for the purchase of houses and cars, which grew by 7.6% and 9.4%, respectively (October 2023: 7.6% and 9.1%).
Domestic financial markets continued to be affected by global investor sentiments
Global financial conditions were driven by financial market expectations that interest rates in advanced economies had peaked. Reflecting these investor sentiments, global bond yields declined while global equity markets traded higher.
Against this backdrop, the ringgit appreciated by 2.4% against the US dollar (regional[4] average: +3.2%), while the 10-year MGS yield decreased by 30 bps (regional4 average: -49 bps) amid non-resident inflows into the domestic bond market.
The FBM KLCI also traded higher by 0.7%, in line with other bourses (regional4 average: 3.3%).
Banks remained well-capitalised to support economic growth
Banks’ capital position remained strong to withstand potential shocks and support credit intermediation growth in the economy.
The banking system recorded an excess capital buffer[5] of RM134.1 billion as of November 2023 (October 2023: RM132.9 billion).
Banking system resilience continued to be underpinned by sound asset quality
Overall gross and net impaired loans ratios remain largely stable at 1.7% and 1.0%, respectively.
Loan loss coverage ratio (including regulatory reserves) remained at a prudent level of 119.7% of impaired loans, with total provisions accounting for 1.6% of total loans.
[1] Core inflation is computed by excluding price-volatile and price-administered items.
[2] Comprises loans to households and non-financial corporations from the banking system and development financial institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
[3] Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
[4] Regional countries comprise: Singapore, Thailand, Philippines, Indonesia, and South Korea.
[5] Refers to total capital above the regulatory minimum, which includes the capital conservation buffer (2.5%) and bank-specific higher minimum requirements.
Monthly Highlights [PDF] Related Assets
Monthly Highlights & Statistics in November 2023
Bank Negara Malaysia
29 December 2023
© Bank Negara Malaysia, 2023. All rights reserved.
|
Monthly Highlights May 2023
Monthly Highlights
Headline inflation declined further to 2.8% in May
May 2023
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation moderated to 2.8% (April 2023:
3.3%). This decline was largely due to non-core
CPI components, particularly lower inflation for
fuel (-0.2 percentage points, ppt) and fresh food
(-0.1ppt).
• Core inflation also declined slightly to 3.5% (April
2023: 3.6%) amid lower inflation for
communication services.
3.3
2.8
3.6 3.5
0.00
2.00
4.00
0.0
2.0
4.0
J
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Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
1.6
5.1
4.6
0
1
2
3
4
5
6
7
May-22 Sep-22 Jan-23 May-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Credit to the Private Non-Financial Sector1,2
1
Growth in credit to the private non-financial sector improved in May
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
Contribution to growth (ppt)
• Credit to the private non-financial sector expanded
by 4.0% as at end-May (April 2023: 3.7%), driven
mainly by higher growth in credit to businesses
(2.8%; April 2023: 2.5%).
• Outstanding corporate bonds grew by 4.6% (April
2023: 4.4%), while outstanding business loans
expanded by 1.6% (April 2023: 1.0%). The higher
business loan growth reflected improvement in
loans for both working capital and investments to
SMEs and non-SMEs.
• In the household segment, outstanding loan
growth was sustained at 5.1% (April 2023: 5.0%),
supported by higher growth across most loan
purposes. Of note, household loan growth
continued to be driven by loans for the purchase of
houses and cars, which grew by 7.0% and 8.4%,
respectively (April 2023: 6.8% and 8.0%).
2.7 2.6 2.5 2.6
0.7 0.7 0.3 0.5
1.1 0.9
0.9 1.0
4.5 4.2
3.7 4.0
Feb-23 Mar-23 Apr-23 May-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Index of wholesale and retail trade growth moderated in April
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded more moderately by 4.7% in
April 2023 (March 2023: 9.4%). The lower growth
was due mainly to the decline in the motor vehicle
segment.
• However, the retail segment continued to record a
double-digit growth of 10.0% (March 2023:
13.8%), supported by sales in non-specialised and
other specialised stores1.
• On a month-on-month seasonally adjusted basis,
the index increased at a faster pace of 6.5%
(March 2023: -0.9%).
1 Other goods in specialised stores includes clothing, footwear,
pharmaceuticals, cosmetics, watches, jewellery and optical goods.
10.6
9.4
4.7
-2
3
8
13
18
23
28
33
Apr-22 Jun-22 Aug-22 Oct-22 Dec-22 Feb-23 Apr-23
ppt, %yoy
Motor vehicles Retail Wholesale
Index of Wholesale and Retail Trade
Monthly Highlights
2
May 2023
Domestic financial markets were largely affected by external factors
Financial Market Performance in May 2023
-18.0
-0.5
-1.1
-3.0
-2.0
-3.4
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-20 -15 -10 -5 0
May-23 Apr-23
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
1Regional countries comprise Singapore, Thailand, Philippines, Indonesia, and Korea
Source: Bank Negara Malaysia, Bursa Malaysia
• Global investors maintained a risk-off approach
throughout May, as concerns over the impact of the
US debt ceiling crisis and the weaker-than-
expected rebound in China’s economy weighed on
global financial markets.
• As a result, the ringgit depreciated against the US
dollar by 3.4% (regional1 average: -1.2%). Similarly,
the FBM KLCI declined by 2.0% (regional1 average:
-1.3%).
• Nonetheless, the 10-year MGS yields decreased
slightly by 3 basis points, supported by non-resident
inflows into the domestic bond market.
Banks maintained strong liquidity and funding positions to support intermediation
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
151.2% (April 2023: 154.3%).
• The aggregate loan-to-fund ratio remained stable at
81.8% (April 2023: 82.1%).
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.8
151.2
0
40
80
120
160
70
75
80
85
90
95
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3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
remained broadly unchanged at 1.80% (April
2023: 1.78%) and 1.10% (April 2023: 1.10%),
respectively.
• Loan loss coverage ratio (including regulatory
reserves) remained at a prudent level of 114.1%
of impaired loans, with total provisions accounting
for 1.7% of total loans.
%
1.8
1.1
1.7
0.5
1.0
1.5
2.0
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Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
April 2023 Monthly Highlights
Slide 1
Slide 2
| Press Release |
29 Dec 2023 | Detailed Disclosure of International Reserves as at end-November 2023 | https://www.bnm.gov.my/-/detailed-disclosure-of-international-reserves-as-at-end-november-2023-1 | null | null |
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Detailed Disclosure of International Reserves as at end-November 2023
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29 Dec 2023
In accordance with the International Monetary Fund (IMF) Special Data Dissemination Standard (SDDS) format, the detailed breakdown of international reserves provides forward-looking information on the size, composition and usability of reserves and other foreign currency assets, and the expected and potential future inflows and outflows of foreign exchange of the Federal Government and Bank Negara Malaysia over the next 12-month period.
The detailed breakdown of international reserves based on the SDDS format is shown in Tables I, II, III and IV.
As shown in Table I, official reserve assets amounted to USD112,302.6 million, while other foreign currency assets amounted to USD3.9 million as at end-November 2023.
As shown in Table II, for the next 12 months, the pre-determined short-term outflows of foreign currency loans, securities and deposits, which include among others, scheduled repayment of external borrowings by the Government and the maturity of foreign currency Bank Negara Interbank Bills, amounted to USD18,012.8 million. The net short forward positions amounted to USD23,990.5 million as at end-November 2023, reflecting the management of ringgit liquidity in the money market. In line with the practice adopted since April 2006, the data excludes projected foreign currency inflows arising from interest income and the drawdown of project loans. Projected foreign currency inflows amount to USD2,404.4 million in the next 12 months.
As shown in Table III, the only contingent short-term net drain on foreign currency assets are Government guarantees of foreign currency debt due within one year, amounting to USD369.4 million. There are no foreign currency loans with embedded options, no undrawn, unconditional credit lines provided by or to other central banks, international organisations, banks and other financial institutions. Bank Negara Malaysia also does not engage in foreign currency options vis-à-vis ringgit.
Overall, the detailed breakdown of international reserves under the IMF SDDS format indicates that as at end-November 2023, Malaysia’s international reserves remain usable. Related Assets
International Reserves and Foreign Currency Liquidity (30 November 2023)
Bank Negara Malaysia
29 December 2023
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |
22 Dec 2023 | International Reserves of Bank Negara Malaysia as at 15 December 2023 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-15-december-2023 | https://www.bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf | null |
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International Reserves of Bank Negara Malaysia as at 15 December 2023
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International Reserves of Bank Negara Malaysia as at 15 December 2023
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Friday, 22 December 2023
22 Dec 2023
The international reserves of Bank Negara Malaysia amounted to USD112.8 billion as at 15 December 2023. The reserves position is sufficient to finance 5.5 months of imports of goods and services[1], and is 1.0 times of the total short-term external debt.
[1] Under the previous import coverage measure, reserves is sufficient to finance 7.1 months of retained imports of goods. For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27, which can be accessed at Quarterly Bulletin 4Q2021 Related Assets
BNM Statement of Assets & Liabilities - 15 December 2023
Bank Negara Malaysia
22 December 2023
© Bank Negara Malaysia, 2023. All rights reserved.
|
Monthly Highlights
Headline inflation declined to 3.4% in March
March 2023
1
3.7 3.4
3.9 3.8
0.00
2.00
4.00
0.0
2.0
4.0
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Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation declined to 3.4% in March
(February: 3.7%) due mainly to lower inflation for
fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation moderated slightly to 3.8% during
the month (February: 3.9%), driven largely by
lower inflation for food away from home.
1
Robust growth in volume index driven by retail and motor vehicles
Index of Wholesale and Retail Trade
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded by 10.6% in February 2023
(January: 8.5%).
• The higher growth was driven mainly by retail
sales in non-specialised stores (e.g., department
stores) followed by continued strength in
purchases of motor vehicles amid the ongoing
fulfilment of backlog orders.
• On a month-on-month seasonally adjusted basis,
the index accelerated by 5.5% (January: 0.2%).
9.5 8.510.6
0
10
20
30
40
Feb-
22
Mar-
22
Apr-
22
May-
22
Jun-
22
Jul-
22
Aug-
22
Sep-
22
Oct-
22
Nov-
22
Dec-
22
Jan-
23
Feb-
23
ppt, %yoy
Motor vehicles Retail Wholesale
2.4
5.2
4.4
0
1
2
3
4
5
6
7
Mar-22 Jul-22 Nov-22 Mar-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Growth in credit to the private non-financial sector moderated
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
2.7 2.6 2.7 2.6
1.0 0.6 0.7 0.7
1.0
1.1 1.1 0.9
4.7 4.3 4.5 4.2
Dec-22 Jan-23 Feb-23 Mar-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Contribution to growth (ppt)
• Credit to the private non-financial sector grew by
4.2% as at end-March (February: 4.5%), attributed
to slower growth in credit to businesses (3.2%;
February: 3.7%).
• While growth in outstanding corporate bonds
moderated (4.4%; February : 5.5%), outstanding
business loan growth was sustained at 2.4%
(February: 2.4%). This was supported by the
continued growth in both working capital (2.2%;
February: 1.9%) and investment-related loans
(4.3%; February: 4.2%).
• Outstanding household loan growth remained
broadly stable (5.2%; February: 5.3%), supported
by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan
growth for the purchase of securities (-6.9%;
February: -3.3%).
Credit to the Private Non-Financial Sector1,2
Monthly Highlights
March 2023
Domestic financial market conditions remained orderly
Financial Market Performance in March 2023
Source: Bank Negara Malaysia, Bursa Malaysia
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
11.0
-2.1
-5.3
0.0
-2.2
1.7
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-10 -5 0 5 10 15
Mar-23
Feb-23
• In March, global financial markets were affected by
the emergence of banking sector stress in some
major economies. As spillovers were contained thus
far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds
improved.
• In line with the performance of regional currencies,
the ringgit appreciated by 1.7% against the US
dollar. Conditions in the domestic bond market
also remained stable.
• The FBM KLCI declined by 2.2% during the month.
2
Banks maintained strong liquidity and funding positions to support intermediation
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.9
157.4
0
40
80
120
160
70
75
80
85
90
95
M
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% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
increased slightly to 1.8% (February-23: 1.8%) and
1.2% (February-23: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory
reserves) continue to record a prudent level of
110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
%
1.8
1.2
1.7
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
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3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
157.4% (February-23: 152.7%).
• The aggregate loan-to-fund ratio remained stable at
81.9% (February-23: 81.6%).
PRESS RELEASE
Ref. No.: 04/23/05 EMBARGO: Not for publication or
broadcast before 1500 hours on
Friday, 28 April 2023
Monthly Highlights – March 2023
Headline inflation declined to 3.4% in March
• Headline inflation declined to 3.4% in March (February: 3.7%) due mainly
to lower inflation for fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation1 moderated slightly to 3.8% during the month
(February: 3.9%), driven largely by lower inflation for food away from
home.
Robust growth in volume index driven by retail and motor vehicles
• The Index of Wholesale and Retail Trade (IOWRT) expanded by 10.6%
in February 2023 (January: 8.5%).
• The higher growth was driven mainly by retail sales in non-specialised
stores (e.g., department stores) followed by continued strength in
purchases of motor vehicles amid the ongoing fulfilment of backlog
orders.
• On a month-on-month seasonally adjusted basis, the index accelerated
by 5.5% (January: 0.2%).
1 Core inflation is computed by excluding price-volatile and price-administered items.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth in credit to the private non-financial sector2,3 moderated
• Credit to the private non-financial sector grew by 4.2% as at end-March
(February: 4.5%), attributed to slower growth in credit to businesses
(3.2%; February: 3.7%).
• While growth in outstanding corporate bonds moderated (4.4%;
February: 5.5%), outstanding business loan growth was sustained at
2.4% (February: 2.4%). This was supported by the continued growth in
both working capital (2.2%; February: 1.9%) and investment-related
loans (4.3%; February: 4.2%).
• Outstanding household loan growth remained broadly stable (5.2%;
February: 5.3%), supported by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan growth for the purchase of
securities (-6.9%; February: -3.3%).
Domestic financial market conditions remained orderly
• In March, global financial markets were affected by the emergence of
banking sector stress in some major economies. As spillovers were
contained thus far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds improved.
• In line with the performance of regional currencies, the ringgit
appreciated by 1.7% against the US dollar. Conditions in the domestic
bond market also remained stable.
• The FBM KLCI declined by 2.2% during the month.
Banks maintained strong liquidity and funding positions to support
intermediation
• Banks continued to record healthy liquidity buffers with the aggregate
Liquidity Coverage Ratio at 157.4% (February: 152.7%).
2 Comprises loans to households and non-financial corporations from the banking system and development financial
institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
3 Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced
to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
• The aggregate loan-to-fund ratio remained stable at 81.9%
(February: 81.6%).
Asset quality in the banking system remained intact
• Overall gross and net impaired loans ratios increased slightly to 1.8%
(February: 1.8%) and 1.2% (February: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory reserves) continues to
record a prudent level of 110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
Bank Negara Malaysia
28 April 2023
20230428_BNM Monthly Highlights-March_en
Slide 1
Slide 2
20230428_BNM PR_Monthly Highlights-Mar 2023_eng
| Press Release |
18 Dec 2023 | Issuance of Commemorative Coins in Conjunction with the 100th Anniversary of UPSI | https://www.bnm.gov.my/-/upsi-100yrs-coins-en | null | null |
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Issuance of Commemorative Coins in Conjunction with the 100th Anniversary of UPSI
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Issuance of Commemorative Coins in Conjunction with the 100th Anniversary of UPSI
Embargo :
For immediate release
Not for publication or broadcast before
1100 on
Monday, 18 December 2023
18 Dec 2023
Bank Negara Malaysia today announces the issuance of commemorative coins in conjunction with the 100th anniversary of Universiti Pendidikan Sultan Idris (UPSI).
The commemorative coins will be issued in two denominations:
1. Coloured Sterling Silver Commemorative Coin (proof)
The square coin – Malaysia’s first – is made of sterling silver with 92.5 purity, and weighs 43 grams. It has a face value of RM10 and will be sold at RM440 per piece. The mintage quantity is 1,000 pieces.
2. Nordic Gold Brilliant Uncirculated (B.U.) Commemorative Coin
This coin is made of copper and several other metals, and weighs 8.5 grams. The coin has a face value of RM1 and will be sold at RM16.50 per piece. The mintage quantity is 5,000 pieces.
These commemorative coins are also available for sale in a Set of 2, with each set priced at RM495. The set comprises one coloured sterling silver proof coin and one Nordic gold proof coin. A total of 1,000 sets will be available for purchase.
Detailed specifications of these commemorative coins are set out in the Appendix.
Coin design
The design of the commemorative coins is as follows:
1.Coloured Sterling Silver Commemorative Coin (proof) – Square-shaped
Obverse – The obverse features the majestic Suluh Budiman building at UPSI’s campus in Tanjung Malim cast against a 3D engraving of a tembusu tree, one of several which dot the campus. Both the building and the tree symbolise the historic of UPSI, when it was known as the Sultan Idris Training College (SITC). The text “SAMBUTAN 100 TAHUN UPSI” is shown in the middle of the coin.
Reverse – The text “BANK NEGARA MALAYSIA”, as the issuing authority of the numismatic coins, is shown in the circumference of a stylised motif of the The text “10 RINGGIT” which denotes the face value is shown on the left, while silhouettes of UPSI graduates, fondly known as Anak Kandung Suluh Budiman, is shown on the right. The official logo of UPSI100 in colour is also depicted within the Grand Bell.
2. Nordic Gold Brilliant Uncirculated (B.U.) Commemorative Coin
Obverse - The text “UNIVERSITI PENDIDIKAN SULTAN IDRIS” is shown on the top circumference, against a background based on the stylised motif of the Grand Bell. The emblems of UPSI and its predecessors – SITC, MPSI and IPSI – are featured in the middle of the coin.
Reverse - The text “BANK NEGARA MALAYSIA”, as the issuing authority of the numismatic coins, is shown on the top circumference, while the text
“1 RINGGIT”, denoting its face value, is depicted on the bottom circumference. The official logo of UPSI100 and an image of an open book are featured, symbolising the abundance of knowledge.
Sale of commemorative coins
To provide a fair opportunity for members of the public to buy these limited-edition coins, there will be a purchase limit of one Set of 2, one coloured sterling silver coin (proof) and up to five Nordic gold (B.U.) coins per person.
Members of the public can place their orders at duit.bnm.gov.my from 11:00 a.m., Monday, 18 December 2023 to 11:00 p.m., Monday, 1 January 2024.
Members of the public are advised to place their orders through Bank Negara Malaysia’s online system and not with or through any other party or unauthorised ordering facility. All orders will be considered, and there will be no preference given to orders based on the order date and time. In the event of oversubscription, balloting will take place.
Appendix: Technical Specifications
Category
Metal
Alloy
Face Value (RM)
Diameter
(mm)
Weight
(g)
Mintage Quantity (pcs/set)
Price
(RM)
Single
Coloured Sterling Silver (proof)
Ag 92.5
10
41.65 x 41.65 (Square)
43
1,000
440
Nordic Gold (B.U.)
Cu89 Zn5 Al5 Sn1
1
30
8.5
5,000
16.50
Set of 2
Coloured Sterling Silver (proof) and
Nordic Gold (proof)
Ag 92.5 and Cu89 Zn5 Al5 Sn1
10 and 1
41.65 x 41.65 and 30
30
43 and
8.5
1,000
495
Note: Prices stated above are inclusive of 10% Sales and Services Tax (SST).
Bank Negara Malaysia
18 December 2023
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |
07 Dec 2023 | International Reserves of Bank Negara Malaysia as at 30 November 2023 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-30-november-2023 | https://www.bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf | null |
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International Reserves of Bank Negara Malaysia as at 30 November 2023
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International Reserves of Bank Negara Malaysia as at 30 November 2023
Embargo :
For immediate release
Not for publication or broadcast before
1500 on
Thursday, 7 December 2023
7 Dec 2023
The international reserves of Bank Negara Malaysia amounted to USD112.3 billion as at 30 November 2023. The reserves position is sufficient to finance 5.4 months of imports of goods and services[1], and is 1.0 time the total short-term external debt.
[1] Under the previous import coverage measure, reserves is sufficient to finance 7.1 months of retained imports of goods. For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27, which can be accessed at bnm.gov.my/-/quarterly-bulletin-4q-2021 Related Assets
BNM Statement of Assets & Liabilities - 30 November 2023
Bank Negara Malaysia
7 December 2023
© Bank Negara Malaysia, 2023. All rights reserved.
|
Monthly Highlights
Headline inflation declined to 3.4% in March
March 2023
1
3.7 3.4
3.9 3.8
0.00
2.00
4.00
0.0
2.0
4.0
J
a
n
-2
2
F
e
b
-2
2
M
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2
2
A
p
r-
2
2
M
a
y
-2
2
J
u
n
-2
2
J
u
l-
2
2
A
u
g
-2
2
S
e
p
-2
2
O
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t-
2
2
N
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-2
2
D
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-2
2
J
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-2
3
F
e
b
-2
3
M
a
r-
2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation declined to 3.4% in March
(February: 3.7%) due mainly to lower inflation for
fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation moderated slightly to 3.8% during
the month (February: 3.9%), driven largely by
lower inflation for food away from home.
1
Robust growth in volume index driven by retail and motor vehicles
Index of Wholesale and Retail Trade
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded by 10.6% in February 2023
(January: 8.5%).
• The higher growth was driven mainly by retail
sales in non-specialised stores (e.g., department
stores) followed by continued strength in
purchases of motor vehicles amid the ongoing
fulfilment of backlog orders.
• On a month-on-month seasonally adjusted basis,
the index accelerated by 5.5% (January: 0.2%).
9.5 8.510.6
0
10
20
30
40
Feb-
22
Mar-
22
Apr-
22
May-
22
Jun-
22
Jul-
22
Aug-
22
Sep-
22
Oct-
22
Nov-
22
Dec-
22
Jan-
23
Feb-
23
ppt, %yoy
Motor vehicles Retail Wholesale
2.4
5.2
4.4
0
1
2
3
4
5
6
7
Mar-22 Jul-22 Nov-22 Mar-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Growth in credit to the private non-financial sector moderated
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
2.7 2.6 2.7 2.6
1.0 0.6 0.7 0.7
1.0
1.1 1.1 0.9
4.7 4.3 4.5 4.2
Dec-22 Jan-23 Feb-23 Mar-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Contribution to growth (ppt)
• Credit to the private non-financial sector grew by
4.2% as at end-March (February: 4.5%), attributed
to slower growth in credit to businesses (3.2%;
February: 3.7%).
• While growth in outstanding corporate bonds
moderated (4.4%; February : 5.5%), outstanding
business loan growth was sustained at 2.4%
(February: 2.4%). This was supported by the
continued growth in both working capital (2.2%;
February: 1.9%) and investment-related loans
(4.3%; February: 4.2%).
• Outstanding household loan growth remained
broadly stable (5.2%; February: 5.3%), supported
by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan
growth for the purchase of securities (-6.9%;
February: -3.3%).
Credit to the Private Non-Financial Sector1,2
Monthly Highlights
March 2023
Domestic financial market conditions remained orderly
Financial Market Performance in March 2023
Source: Bank Negara Malaysia, Bursa Malaysia
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
11.0
-2.1
-5.3
0.0
-2.2
1.7
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-10 -5 0 5 10 15
Mar-23
Feb-23
• In March, global financial markets were affected by
the emergence of banking sector stress in some
major economies. As spillovers were contained thus
far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds
improved.
• In line with the performance of regional currencies,
the ringgit appreciated by 1.7% against the US
dollar. Conditions in the domestic bond market
also remained stable.
• The FBM KLCI declined by 2.2% during the month.
2
Banks maintained strong liquidity and funding positions to support intermediation
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.9
157.4
0
40
80
120
160
70
75
80
85
90
95
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
increased slightly to 1.8% (February-23: 1.8%) and
1.2% (February-23: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory
reserves) continue to record a prudent level of
110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
%
1.8
1.2
1.7
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
157.4% (February-23: 152.7%).
• The aggregate loan-to-fund ratio remained stable at
81.9% (February-23: 81.6%).
PRESS RELEASE
Ref. No.: 04/23/05 EMBARGO: Not for publication or
broadcast before 1500 hours on
Friday, 28 April 2023
Monthly Highlights – March 2023
Headline inflation declined to 3.4% in March
• Headline inflation declined to 3.4% in March (February: 3.7%) due mainly
to lower inflation for fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation1 moderated slightly to 3.8% during the month
(February: 3.9%), driven largely by lower inflation for food away from
home.
Robust growth in volume index driven by retail and motor vehicles
• The Index of Wholesale and Retail Trade (IOWRT) expanded by 10.6%
in February 2023 (January: 8.5%).
• The higher growth was driven mainly by retail sales in non-specialised
stores (e.g., department stores) followed by continued strength in
purchases of motor vehicles amid the ongoing fulfilment of backlog
orders.
• On a month-on-month seasonally adjusted basis, the index accelerated
by 5.5% (January: 0.2%).
1 Core inflation is computed by excluding price-volatile and price-administered items.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth in credit to the private non-financial sector2,3 moderated
• Credit to the private non-financial sector grew by 4.2% as at end-March
(February: 4.5%), attributed to slower growth in credit to businesses
(3.2%; February: 3.7%).
• While growth in outstanding corporate bonds moderated (4.4%;
February: 5.5%), outstanding business loan growth was sustained at
2.4% (February: 2.4%). This was supported by the continued growth in
both working capital (2.2%; February: 1.9%) and investment-related
loans (4.3%; February: 4.2%).
• Outstanding household loan growth remained broadly stable (5.2%;
February: 5.3%), supported by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan growth for the purchase of
securities (-6.9%; February: -3.3%).
Domestic financial market conditions remained orderly
• In March, global financial markets were affected by the emergence of
banking sector stress in some major economies. As spillovers were
contained thus far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds improved.
• In line with the performance of regional currencies, the ringgit
appreciated by 1.7% against the US dollar. Conditions in the domestic
bond market also remained stable.
• The FBM KLCI declined by 2.2% during the month.
Banks maintained strong liquidity and funding positions to support
intermediation
• Banks continued to record healthy liquidity buffers with the aggregate
Liquidity Coverage Ratio at 157.4% (February: 152.7%).
2 Comprises loans to households and non-financial corporations from the banking system and development financial
institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
3 Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced
to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
• The aggregate loan-to-fund ratio remained stable at 81.9%
(February: 81.6%).
Asset quality in the banking system remained intact
• Overall gross and net impaired loans ratios increased slightly to 1.8%
(February: 1.8%) and 1.2% (February: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory reserves) continues to
record a prudent level of 110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
Bank Negara Malaysia
28 April 2023
20230428_BNM Monthly Highlights-March_en
Slide 1
Slide 2
20230428_BNM PR_Monthly Highlights-Mar 2023_eng
| Press Release |
03 Dec 2023 | Bank Negara Malaysia and the World Bank Announce Initiatives to Enable the Financial Sector to Support Nature-Positive Outcomes | https://www.bnm.gov.my/-/cop28-pr-en | https://www.bnm.gov.my/documents/20124/3770663/wb-bnm-2022-report.pdf | null |
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Bank Negara Malaysia and the World Bank Announce Initiatives to Enable the Financial Sector to Support Nature-Positive Outcomes
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Bank Negara Malaysia and the World Bank Announce Initiatives to Enable the Financial Sector to Support Nature-Positive Outcomes
1610 on
Sunday, 3 December 2023
Financial risks assessment guide for Malaysian financial institutions and businesses to assess nature-related risks and impacts
Private capital mobilisation for nature-based solutions
Bank Negara Malaysia (BNM) and the World Bank announced two key initiatives to enable the financial sector to support nature-positive outcomes. The announcements were made at COP28[1] in conjunction with the Climate Finance Day at the Malaysia Pavilion in Dubai.
These initiatives will facilitate the integration of nature-related considerations into decision-making while supporting financial flows towards nature-based solutions. This follows from the recommendations outlined in the report ‘An Exploration of Nature-related Financial Risks in Malaysia’ released in 2022.
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “The partnership announced today is in recognition of the implications of nature-related risks to a megadiverse country like Malaysia. The collaboration sealed today will bring about greater alignment between financial flows and positive outcomes.“
The World Bank Country Director for Brunei, Malaysia, Philippines and Thailand Ndiame Diop said, “With this collaboration, Malaysia aims to develop robust measures to increase finance for the natural world, thereby setting a good example for other nations grappling with nature-related financial and economic risks.”
Nature-related financial risks assessment guide for Malaysian financial institutions and businesses
The risk assessment guide will be developed in consultation with the Taskforce on Nature-related Financial Disclosures (TNFD) Secretariat. The aim is to support Malaysian financial institutions and businesses in identifying and assessing an organisation's nature-related dependencies, impacts, risks and opportunities. The guide will be based on the integrated approach that TNFD has developed for the identification and assessment of nature-related issues, called the LEAP[2] approach.
This consultation will follow BNM becoming a member of the TNFD Forum, a global multidisciplinary consultative group that is aligned with TNFD’s mission and principles.
Private capital mobilisation for nature-based solutions
BNM and the World Bank will facilitate the development of innovative financial instruments to support private investments in nature. This includes enabling regulations to support nature-positive outcomes and piloting new financial structures.
[1] 28th United Nations Framework Convention on Climate Change Conference of Parties in Dubai, UAE.
[2] The LEAP approach (Locate, Evaluate, Assess, Prepare) is an integrated process developed by TNFD to help organisations identify and assess nature-related impacts, dependencies, risks, and opportunities, even without formal disclosure (https://tnfd.global/publication/additional-guidance-on-assessment-of-nature-related-issues-the-leap-approach/)
Bank Negara Malaysia
03 December 2023
© Bank Negara Malaysia, 2023. All rights reserved.
|
An Exploration of Nature-Related Financial Risks in Malaysia
MARCH 2022
An Exploration
of Nature-Related
Financial Risks
in Malaysia
CONNECT WITH US
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@WB_AsiaPacific
http://bit.ly/WB_blogsMY
www.bnm.gov.my
@bnm.official
@banknegaramalaysia
@BNM_official
BNM Official
Bank Negara Malaysia
MARCH 2022
An Exploration of
Nature-Related
Financial Risks
in Malaysia
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The World Bank, 1818 H Street NW, Washington, DC 20433, USA; e-mail: pubrights@
worldbank.org.
Acknowledgements
List of Figures
List of Boxes
Acronyms and Abbreviations
Executive Summary
ES.1 Introduction
ES.2 Key Findings
ES.3 Potential Actions to Address Challenges of Nature-Related Financial Risks
CHAPTER 1: Biodiversity, Nature, and Banking in Malaysia
1.1 The Malaysian Banking Sector
1.2 Malaysia, a Biodiversity Hotspot
1.3 Nature-Related Financial Risks
CHAPTER 2: Exposure Assessment
2.1 Dependency on Ecosystem Services
2.2 Impacts on Ecosystem Services
2.3 Activities in Key Biodiversity Areas
2.4 Physical and Transition Risk Scenarios
CHAPTER 3: Potential Actions to Address Nature-Related Financial Risks
CHAPTER 4: Conclusions
4.1 Key Findings
4.2 Potential Actions to Address Challenges of Nature-Related Financial Risks
4.3 Areas for Future Exploration
References
Appendix
A.1 Methodology
A.2 ENCORE Definitions
A.3 Reputational Risk
A.4 Drivers of Nature-Related Financial Risk Scenarios in Malaysia
A.4.1 Land and Sea Use Change
A.4.2 Natural Resource Use and Exploitation
A.4.3 Climate Change
A.4.4 Pollution
A.4.5 Invasive Species and Diseases
A.4.6 Governance Issues
A.4.7 Policy Uncertainty
A.5 Interviews with Experts Focused on Biodiversity in Malaysia
A.6 Full List of Explorative Nature-Related Risk Scenarios
4
5
6
7
8
8
10
14
16
19
22
30
32
34
37
42
47
50
58
59
60
61
63
68
69
74
78
80
80
83
85
87
88
89
89
90
91
Table of Contents
3An Exploration of Nature-Related Financial Risks in Malaysia
An Exploration of Nature-related Financial Risks in Malaysia was prepared through a joint Bank Negara
Malaysia-World Bank collaboration by core team members Nepomuk Dunz, Henk Jan Reinders, Shahira Johan
Arief Jothi, Rekha Reddy, Martijn Regelink, Fiona Stewart (World Bank), Mohd Shazwan Shuhaimen, and Thulaja
Thessa K. Vasudhevan (BNM), under the supervision of Cecile Thioro Niang (World Bank) and Madelena
Mohamed (BNM). Shashank Singh, Samantha Power, Uma Rajoo (World Bank), Keshia Jasmine Ashaari, Nur
Izzati Jamal, Nur Zalini Abdul Rahman, and Chow Chin Hwa (BNM) provided key inputs. Pietro Calice, Rafaello
Cervigni, Souleymane Coulibaly, Katia D’Hulster, Erik Feyen, Federico Diaz Kalan, Tatiana Didier, Olga Gavryliuk,
Giovanni Ruta, Marc Schrijver, Tao Wang (World Bank), Jessica Chew Cheng Lian, Fraziali Ismail, Suraya Sani,
Razeen Mohd Rom, Chuah Kue Peng, Katie Lee, Audrey Lim Shu Wen, Nur Syairah Husna (BNM), and Quek Yew
Aun of the Ministry of Energy and Natural Resources (KeTSA) provided useful comments on draft versions of
this report. Kane Chong and Francis Sim designed the report and its cover. The views, thoughts, and opinions
expressed in the text belong solely to the authors, and not necessarily to the authors’ employer, organization,
committee, or other group or individual.
Acknowledgements
4 An Exploration of Nature-Related Financial Risks in Malaysia
List of Figures
Figure 1 From nature-related risks to financial risks 9
Figure 2 Percentage of Malaysian banks’ commercial loans to sectors with high and very high
scores on nature-related risk dimensions
11
Figure 3 Top-15 identified nature-related financial risk scenarios by banking sector commercial
loans exposure
13
Figure 4 Possible actions to address challenges of nature-related financial risks 15
Figure 5 Scope of nature-related financial risks within the environmental, social, and governance
framework
18
Figure 6 Overall assets per bank type 19
Figure 7 Overall commercial lending of Malaysian banks by sector, as of December 2020 20
Figure 8 Commercial lending by Malaysian banks by state, as of December 2020 21
Figure 9 Projected GDP per sector by state level contribution (percent, 2019) 21
Figure 10 Malaysian environmental performance across several indicators in 2010 and 2020. 26
Figure 11 Change in 2030 real GDP under a partial ecosystem collapse scenario (compared with a
no-tipping-point scenario)
27
Figure 12 From nature-related risks to financial risks 31
Figure 13 The financial sector and ecosystem services dependencies per Malaysian ringgit
invested (in million RM)
34
Figure 14 Relative commercial lending exposure to sectors with high or very high dependencies
(physical risk)
35
Figure 15 Dependency of the commercial lending portfolio to individual ecosystem services
(percentage)
36
Figure 16 Unweighted share of commercial lending portfolio with high or very high dependencies
on ecosystem services by type of bank
36
Figure 17 The environmental impact of financial sector lending per Malaysian ringgit invested (in
million RM)
37
Figure 18 Relative commercial lending exposure to NACE sectors with high or very high impacts 38
Figure 19 Impact of the commercial lending portfolio on impact drivers from firms’ business
activities (in percentage)
39
Figure 20 Unweighted share of commercial lending portfolio with high or very high impact drivers
from firms’ activities on natural assets and ecosystem services by type of bank
40
Figure 21 High resolution Malaysia industrial and smallholder oil palm map for 2019 41
Figure 22 Protected areas in Malaysia 43
Figure 23 Protected and non-protected KBA as a share of Malaysian States area (percent of total
state area)
44
Figure 24 Commercial residential and non-residential purchase lending exposure by Postal Code
area of Malaysian banks to non-protected KBA
45
Figure 25 Net ecosystem service use (potential vs. realized services index) per district in Malaysia.
Model results from the Co$tingNature version 3 policy support system
45
Figure 26 Identified nature-related financial risk scenarios by banking sector exposure 48
5An Exploration of Nature-Related Financial Risks in Malaysia
List of Boxes
Box 1 Assessing materiality of an ecosystem service for a business 24
Box 2 Case Study − Transition risk for Malaysia’s palm oil sector 41
Box 3 Context for nature-related risks to the financial sector: Findings from the Netherlands, France,
and Brazil
49
Box 4 Mobilizing private finance for nature 53
Box 5 Nature-related disclosure developments 56
6 An Exploration of Nature-Related Financial Risks in Malaysia
Acronyms and Abbreviations
ASEAN Association of Southeast Asian Nations
BNM Bank Negara Malaysia
CO2/
CO2e
Carbon Dioxide/Carbon Dioxide
Equivalent
CCPT Climate Change and Principle Based
Taxonomy
DFI Development Finance Institutions
DNB Dutch Central Bank (De Nederlandsche
Bank)
ESG Environmental, Social, and Governance
ENCORE Exploring Natural Capital Opportunities,
Risks and Exposure (biodiversity tool)
EU European Union
EUR Euro (currency)
GDP Gross Domestic Product
GHG Greenhouse Gas
Gt Gigaton
IPBES Intergovernmental Science-Policy
Platform on Biodiversity and Ecosystem
Services
IBAT Integrated Biodiversity Assessment Tool
KBA Key Biodiversity Areas
JC3 Joint Committee on Climate Change
MSA Mean Species Abundance
MSPO Malaysia Sustainable Palm Oil
MyBIS Malaysia Biodiversity Information
System
NACE Statistical Classification of Activities
in the European Community
(Nomenclature des Activités
Économiques dans la Communauté
Européenne)
NGFS Network for Greening the Financial
System
NGO Non-Governmental Organization
RM Malaysian ringgit (currency)
TCFD Task Force for Climate-related Financial
Disclosure
TNFD Task Force for Nature-related Financial
Disclosure
UEBT Union for Ethical Biotrade
UK United Kingdom
UN United Nations
USD United States dollar (currency)
VBI/
VBIAF
Value-Based Intermediation/Value-
Based Intermediation Financing
and Investment Impact Assessment
Framework
WB World Bank
WEF World Economic Forum
7An Exploration of Nature-Related Financial Risks in Malaysia
Executive Summary
The term megadiverse country refers to any one of a group of nations that harbor the majority of Earth’s species and high numbers of endemic species. The
World Conservation Monitoring Centre of the United Nations Environment Program has identified 17 mega-diverse countries, one of which is Malaysia.
For example, this study finds that two important nature-related factors Malaysian banks may have exposure to are: (1) the imposition of more stringent climate
policies and (2) enhanced efforts to preserve nature’s function as a store of carbon-dioxide (C02). It also finds highly relevant risk factors that are connected to
climate change – including those related to extensive water use, land use, and pollution other than greenhouse gases (GHGs).
1
2
Malaysia is one of the world’s megadiverse countries, and many of its economic activities are directly
or indirectly dependent on nature and its associated ecosystem services.1 The COVID-19 pandemic,
with its far-reaching economic impacts, is a reminder of the link between human health and planetary health,
given that most human infectious diseases are transmitted between species (Taylor et al. 2001). Ecosystem
services are broadly defined as the benefits that people obtain from ecosystems and include regulating
services (such as regulation of droughts, floods, and land degradation), provisioning services (such as crops,
fresh water, aquaculture, and timber), supporting services (such as photosynthesis, nutrient cycle, and water
cycle), and cultural services (such as recreational and other non-material benefits). A recent World Bank (WB)
study found that, in a worst-case scenario of partial ecosystem collapse, Malaysia could experience a 6 percent
gross domestic product (GDP) annual loss by 2030 compared to a baseline scenario (Johnson et al. 2021). In
Malaysia, the losses would be driven by a decline in export demand and adverse impacts of the partial collapse
of forestry and fishery ecosystem services.
In parallel to climate-related risks, nature-related risks can lead to economic and financial losses. As
shown in Figure 1, nature-related risks as defined in this study encompass a broad set of risks that are related
to ecosystem services, biodiversity, and natural assets (such as water and forests). Within the environmental
risk dimension of the environmental, social, and governance (ESG) framework on sustainability, these risks
complement and partly overlap with those risks associated with climate change.2 Physical risk could emerge from
the deterioration and loss of ecosystem services that firms depend on. At the same time business operations
may have an impact on biodiversity and ecosystem services via excessive natural resources extraction, disposal
of waste, or land-use change. If firms do not adapt in a timely fashion and banks do not adjust their lending
portfolio, nature-related financial transition risk could materialize. Transition risk consists of sudden changes
in policy, technology, and consumer preferences in response to nature loss and can have a substantial impact
on the economic, financial, and reputational position of firms and their financing banks with large impacts on
biodiversity and ecosystems.
Central banks have recently started to investigate biodiversity and other nature-related impacts and
dependencies of financial systems. Central banks and supervisors have so far focused mainly on climate-
related risks but have recently expanded their efforts to cover a broader set of environmental risks. Studies
include France (Svartzman et al. 2021), the Netherlands (van Toor et al. 2020), and Brazil (Calice et al. 2021). Such
studies on nature-related risks are nevertheless at a nascent stage and largely exploratory in nature (Network
for Greening the Financial System (NGFS) 2021).
ES.1 Introduction
8 An Exploration of Nature-Related Financial Risks in Malaysia
Executive Summary
One of the main roles of the financial system is to allocate capital (both equity and debt) to productive activities. When risks are not adequately understood and
priced in, this could lead to an overallocation of capital to sectors that is not in line with sustainability objectives. Furthermore, it hinders adequate mitigation
actions to prevent or limit financial impacts of such risks.
Exposure is defined here as the fraction of outstanding loans to highly vulnerable sectors and regions that could potentially be affected by adverse nature-
related risk factors and scenarios.
3
4
More comprehensive regulatory and supervisory policy implications are under development. The NGFS,
of which Bank Negara Malaysia (BNM) is a member, has recommended several first actions that could be taken
by financial sector regulators and supervisors to help build the foundations for more comprehensive measures,
namely: (1) capacity building, (2) assessing domestic financial system dependencies and impacts on nature,
(3) awareness raising and signaling, and (4) supporting relevant initiatives to the extent possible (NGFS 2021).
BNM, as part of its mandate to promote monetary and financial stability conducive to the sustainable
growth of the Malaysian economy, has an interest in understanding nature-related financial risks
to the financial sector. A better understanding of nature-related financial risks is important for prudential
supervision to identify and address any emerging risks in the loan books and investments of banks and other
financial institutions. This work is the result of a collaboration between the WB and BNM to: (1) build capacity
to develop the analytical framework through which nature-related financial risks can be analyzed and managed
and (2) raise awareness of these issues within BNM and among stakeholders in the government and the financial
sector. Sustainable policies for the maintenance of ecosystem services are the main responsibility of the line-
ministries within the government. However, adequate pricing of nature-related financial risks is important to
align capital allocation, including loan origination, with Malaysia’s sustainability goals.3
This report assesses the exposure of Malaysian banks to sectors and regions that are highly vulnerable
to nature-related risks.4 Expanding on the work of other central banks, three main types of exposures are
examined. These include (1) the exposure of banks to sectors that are highly dependent on ecosystem services
and hence pose physical risk, (2) the exposure of banks to sectors that negatively affect ecosystem services
Figure 1: From nature-related risks to financial risks
Source: Based on van Toor et al. 2020 and Svartzman et al. 2021
Nature
Financial
system
Physical risk
• Loss of Ecosystem Services
creating
» ‘slow-onset’ loss
» ‘sudden-onset’ events
• Interactions with other
ecological issues
(e.g., climate change)
Dependency
Macroeconomic
deterioration
Impact Revised lending
conditions
Economy
Economic risks
• Supply chain disruptions
• Raw material price volatility
• Limited substitutability of
essential ecosystem services
• Productivity changes
(e.g., agriculture)
• Changing demand and costs
• Stranded assets
• Relocation of activities
• Legal liabilities
• Lower asset value
Financial risks
• Credit risk
(e.g., losses on corporate
loans)
• Underwriting risk
(e.g., inaccurate risk
assessment)
• Market risk
(e.g., losses on shares and
bonds)
• Operational risk
(e.g., liability risks, legal
costs, reputational damage)
• Liquidity risk
(e.g., refinancing risk)
Transition and reputation risk
• Policy and regulation change
• Change in demand – including
from international buyers
• Change in technology
Liability risk
• Lawsuits from harmed
communities
• Fines from regulators
9An Exploration of Nature-Related Financial Risks in Malaysia
Executive Summary
and hence pose transition risk, and (3) the exposure of banks to Key Biodiversity Areas (KBA) that may become
protected in the future. In addition, a first set of adverse scenarios are identified that are most relevant to
Malaysia and these are mapped to bank’s loan exposures.
This study makes use of both Malaysian and global data. The sectoral mapping data is primarily obtained
from the Exploring Capital Opportunities, Risks and Exposure (ENCORE) database while the exposure data
is obtained from BNM. The spatial analysis uses data on KBA in Malaysia from the World Database of Key
Biodiversity Areas, hosted by the Integrated Biodiversity Assessment Tool (IBAT). The sectoral analysis covers
approximately 90 percent of the total commercial loan portfolio of Malaysian banks while data for the spatial
analysis are far more limited.
Given that the data and methodologies to assess nature-related financial risks are currently limited,
this study is exploratory in nature. This report constitutes a first step towards assessing the exposure
of Malaysian banks to nature-related financial risks. However, data on economic and financial vulnerability
is often incomplete or unavailable. To get a more complete understanding of nature-related financial risks,
further research is needed, this may include developing: (1) a comprehensive set of scenarios to be used in
assessing nature-related financial risks, (2) a better understanding of how scenarios lead to adverse economic
and financial outcomes (e.g., transmission channels), and (3) models to understand the quantitative impact
of scenarios and transmission channels on economic sectors and financial institutions, including banks. Key
findings are provided in section ES.2 and a list of potential actions in section ES.3.
This terminology refers to the provision of clean water from rain and water flow from natural sources.
This terminology refers to unsustainable land use change or resource use, which reduces the extent of natural ecosystems, or over exploits them beyond their
ability to replenish, which in turn affects continuous provision of ecosystem services.
5
6
ES.2 Key Findings
Based on loans to economic sectors, Malaysian banks are exposed to a broad range of nature-related
physical and transition risks. Of the commercial loans portfolio analyzed, 54 percent is exposed to sectors
that depend to a high extent on ecosystem services. This high dependency exposes Malaysian banks to
physical risk from ecosystem deterioration, particularly related to deterioration in surface water5 (29 percent),
climate regulation such as carbon storage (26 percent), and flood and storm protection (16 percent) (Figure 2,
panel a). Of the commercial loans portfolio, 87 percent is also exposed to sectors that strongly impact
ecosystem services (thus potentially facing a higher level of transition risk from changes in regulations and
policies), particularly related to greenhouse gas (GHG) emissions (61 percent), water use (55 percent), and
terrestrial ecosystem use6 (43 percent) among others (Figure 2, panel b).
There are wide differences between individual banks and bank types in their exposure to physical
risk arising from lending to sectors that depend highly on ecosystem services and transition risk, and
arising from lending to sectors that have significant impact on nature. The differences are linked to the
target sector of lending that those banks predominantly serve. For example, construction lending is strongly
dependent on surface water6,climate regulation, and flood and storm protection, and strongly impacts nature
via terrestrial ecosystem use, freshwater use, and GHG emissions, among others.
10 An Exploration of Nature-Related Financial Risks in Malaysia
Executive Summary
Figure 2. Percentage of Malaysian banks’ commercial loans to sectors with high and very high
scores on nature-related risk dimensions
Source: ENCORE, BNM, WB calculations
Animal-based energy
Buffering and attenuation of mass �ows
Climate regulation
Disease control
Fibers and other materials
Flood and storm protection
Ground water
Maintain nursery habitatsMass stabilization and erosion control
Pest control
Pollination
Soil quality
Surface water
Water �ow maintenance
Water quality
0% 5% 10%
15%
20%
25%
30%
5%
0%
10%
15%
20%
25%
30%
0% 10%
20%
30%
40%
50%
60%
Disturbances
Freshwater ecosystem use
GHG emissions
Marine ecosystem use
Non-GHG air pollutants
Other resource useSoil pollutants
Solid waste
Terrestrial ecosystem use
Water pollutants
Water use
10%
20%
30%
40%
50%
60%
(a) Dependency on ecosystem services (physical risk)
(b) Impacts on ecosystem services induced by firms’ business activities (transition risk)
11An Exploration of Nature-Related Financial Risks in Malaysia
Executive Summary
For physical risk, individual banks’ exposure to one or more sectors that are highly or very highly
dependent on ecosystem services range between 5 and 83 percent of the total commercial loan
portfolio. The average exposure according to bank type ranges from 40 percent (investment banks) to 55
percent (Islamic banks). As for transition risk, the individual banks’ exposures to sectors that highly or very
highly impact nature range between 28 and 100 percent. The average exposure according to bank type ranges
from 70 percent (investment banks) to 95 percent (development finance institutions (DFIs). The largest variance
in exposures to both physical and transition risks according to bank type is observed in investment banks.
Based on the spatial distribution of loans, Malaysian banks have limited direct exposure to KBA that
may be increasingly protected in the future. KBA are sites that contribute significantly to maintaining global
biodiversity and are hence important candidates for future protective regulation (i.e., transition risk).7 The
states Perak and Kedah currently have more than a quarter of their territory designated as non-protected KBA.
However, the majority of the commercial loans analyzed are channeled to Kuala Lumpur and Selangor, areas
that are already well developed. Less than one percent of Malaysian banks’ lending portfolio (RM 329 million,
USD 78 million) is estimated to go to firms in currently non-protected KBA.
Due to data limitations, however, it is possible that exposures are higher.8 It would be important to
monitor new loan origination practices towards both currently protected areas and areas that may become
protected in the future, especially as there are ongoing discussions for an increased target on protected areas
under the Convention on Biological Diversity, to which Malaysia is a signatory. There may also be an important
role to monitor more indirect exposures through, for example, supply chain linkages between firms in and
outside protected areas.
An explorative set of nature-related events shows that there is a wide range of adverse physical
risk and transition risk scenarios that could affect Malaysian banks. Based on ENCORE and interviews
with stakeholders, 21 possible scenarios of nature-related financial physical risk and 7 nature-related financial
transition risk scenarios were identified. These scenarios were not projections of a business-as-usual scenario,
but rather state the current financial exposure if affected ecosystem services of identified scenarios defaulted.
Scenarios with the highest banking sector exposure are those that affect a wide range of sectors.
These include: reduced ecosystem services due to continued high resource use, pollution, and urban sprawl
(44 percent of the commercial loans portfolio), sudden and unexpected introduction of new climate policy (38
percent), and deterioration of ecosystem services due to continued high rates of deforestation (30 percent), as
shown in Figure 3.
Sectors including agriculture, forestry, fisheries, and tourism are affected by many different financial
physical and transition risk scenarios. Other sectors, such as real estate, construction, and wholesale, are
large sectors within the Malaysian banking sector’s loan books but have a more limited number of relevant
scenarios connected to them. These sectors are specifically exposed to scenarios that limit water availability
and scenarios that affect a wide range of ecosystem services (such as deforestation-induced ecosystem service
deterioration).
The Integrated Biodiversity Assessment Tool website (IBAT) utilizes two subsets of KBA in virtually all countries: Important Bird and Biodiversity Areas (IBA)
and Alliance for Zero Extinction Sites (AZE). For Malaysia, KBA data is primarily based on IBA data, capturing bird population and diversity. IBAT data show
that IBAs make up 55 of 60 terrestrial KBA in Malaysia. Other areas could be important for biodiversity and at risk as well, where currently no data is available.
See Appendix Section A1 for details on data limitations.
7
8
12 An Exploration of Nature-Related Financial Risks in Malaysia
Executive Summary
Source: ENCORE, BNM, interviews, WB calculations.
Note: Dark blue scenarios are nature-related financial transition risk scenarios, light blue scenarios are nature-related financial physical risk scenarios. Exposure
amounts are based on the share of corporate loans to economic sectors that could be directly affected in the scenario under consideration.
Figure 3: Top-15 identified nature-related financial risk scenarios by banking sector
commercial loans exposure
Reduced ecosystem services due to resource overuse, pollution and urban sprawl
Sudden and unexpected climate policy introduction
Ecosystem services deterioration due to deforestation
Sudden increase in the price of water
Regulatory restriction of water pollution
Changed ocean current and circulation
Increase in sea surface temperature
Severe reduction in available timber
Severe �ooding occurrence
Severe storm occurrence
Increased ocean acidi�cation
Extension of protected areas
Lower clean water availability due to continously high water pollution
Regulatory restriction of non-sustainable fertilizers
Regulatory restriction of non-sustainable pesticides
N
at
ur
e-
re
la
te
d
�
na
nc
ia
l r
is
k
sc
en
ar
io
Share of total commercial loans outstanding (%)
0 20 40
13An Exploration of Nature-Related Financial Risks in Malaysia
Executive Summary
ES.3 Potential Actions to Address Challenges
of Nature-Related Financial Risks
Based on this initial assessment, the findings of this report may support further policy discussions
to understand the potential impacts of nature-related financial risks on the financial sector and the
economy. Like climate change, addressing the nature-related agenda demands a multistakeholder approach
driven by the federal government as part of an integrated national strategy in which financial regulators can
act as a central coordinator for a relevant financial sector action plan. Financial regulators, as advisors to the
government, have an important role in providing a feedback loop to the government to highlight the potential
impacts of nature-related financial losses to the financial sector and the economy. Thus, this report can be
a catalyst to initiate discussions and synchronize existing efforts by relevant government agencies to better
model and quantify the value of ecosystem services in Malaysia.
Malaysia’s financial sector regulators could build on their ongoing climate change initiatives to deepen
the understanding of nature-related financial risks, aiming to address them in a more comprehensive
manner. While the discussion on nature-related financial risks is still at a nascent stage, efforts to address such
risks are within the existing mandate of BNM to the extent that they pose a threat to its ability to preserve
Malaysia’s financial stability. Although this report is exploratory and its analyses have limitations, the risks
presented in its findings, Malaysia’s status as a megadiverse country, and the impact of the recent flood event,9
provide motivation for BNM to continue building its internal capacity for analysis and facilitate wider awareness
of these issues as initial steps. Moreover, BNM could help contribute towards knowledge development
and regulatory discourse on nature-related financial risks in the region and globally, bringing the valuable
perspective of a megadiverse developing country.
Subsequently, BNM could develop further actions related to nature-related financial risks that are
cohesive and integrated within its existing climate change strategy. These might include: (1) national
policy discussion and direction on nature-related risks, (2) further development of nature-related financial risks
methodologies and analyses, (3) progress of ongoing climate change initiatives and determined linkages with
nature-related financial risks, and (4) incorporation of evolving practices and standards from the global financial
regulatory and supervisory community.
Key areas for actions to manage nature-related financial risks include, (1) raising awareness
and policy discourse, (2) enhancing capacity building of relevant stakeholders, (3) enhancing
macroeconomic surveillance capacity and risk identification, and (4) developing regulatory and
supervisory requirements. Figure 4 depicts recommended actions that could be considered by BNM (and
relevant stakeholders such as ministries with responsibility for environmental issues, state-level agencies, and
financial institutions) and the level of policy intervention intensity, recognizing the need for prioritization in this
challenging pandemic period.
The December 2021 flood event, which displaced around 125,000 people across ten states, was linked to extreme weather patterns that became more likely
with climate change. Public opinion in one state suggests deforestation worsened flood conditions. As at 2 January 2022, the government had allocated
RM1.2 billion (USD335 million) in financial aid and other forms of relief for the flood victims.
9
14 An Exploration of Nature-Related Financial Risks in Malaysia
Executive Summary
Figure 4: Possible actions to address challenges of nature-related financial risks
Source: WB. Note: CCPT = Climate Change and Principle-based Taxonomy; VBIAF = Value-based Intermediation Financing and Investment Impact Assessment
Framework; ASEAN = Association of Southeast Asian Nations.
Raising
awareness,
stakeholder
engagement
and policy
discourse on
understanding
nature-related
financial risks
• Disseminate report findings
with relevant governmental
and non-governmental
stakeholders, relevant
regulators and supervised
financial institutions.
• Contribute to knowledge
programs that raise
awareness on nature-related
financial risks.
• Advocate and work closely
with government to include
considerations of nature-
related financial risks
in relevant policies and
investment decisions.
• Encourage and support
the government towards
developing a cohesive
national strategy to
address nature-related risks
alongside climate change.
Enhancing
capacity
building
of relevant
stakeholders
• Expand existing capacity
building and stakeholder
engagement programs
under the Joint Committee
on Climate Change (JC3)
to include nature-related
financial risks.
• Collaborate with key
knowledge partners to build
understanding and tools for
nature-related financial risks.
• Support development of
incentives and instruments
to mobilize private finance
for the protection and
management of biodiversity
and ecosystem services.
• Provide financial sector
perspectives to government
to expand existing
government grants/funds
related to climate change to
encompass goals relevant
to protection of biodiversity
and ecosystem services.
Enhancing
macroeconomic
surveillance
capacity and risk
identification
• Enhance technical capacity
in understanding nature-
related financial risks by
identifying transmission
channels and interacting
factors between climate and
nature-related risks.
• Incorporate a basic concept
of nature-related financial
risks in existing plans for a
surveillance framework on
climate risks where both
risks have strong synergies
(ex: deforestation, disaster
resilience).
• Improving existing data
collection relevant to nature-
related risks at a granular
level, including for non-credit
products (e.g., insurance)
and leveraging ongoing work
under the JC3.
• Consider nature-related
financial risks as part of high-
level reference scenarios
for Malaysia, towards
developing stress testing
plans for nature-related risks
alongside climate change.
• Consider supervisory deep
dives at select banks that
are deemed at higher risk,
for example due to their
financing activities in (future)
protected areas.
Developing
regulatory and
supervisory
requirements
• Enhance existing guidance
on nature-related risks
in relevant taxonomies
and frameworks (CCPT,
VBIAF, ASEAN taxonomy)
by synthesizing relevant
findings of this report.
• Signal expectations for
supervised institutions
to understand the most
relevant nature-related
financial risks faced by their
institution.
• Enhance climate-related
regulatory guidance on risk
management, governance,
and disclosures with specific
aspects of nature-related
financial risks.
• Communicate regulatory and
supervisory expectations
on managing and disclosing
nature-related financial risks
along with risks of climate
change for supervised
institutions.
• Develop a monitoring
system for new credit to be
compliant with climate and
nature-related regulations,
including checking whether
business activities will take
place in (future) protected
areas.
Public
awareness/
Policy
discourse
Capacity
building
Policy
adoption
Less intensive More intensive
Policy intervention
15An Exploration of Nature-Related Financial Risks in Malaysia
Biodiversity, Nature,
and Banking in
Malaysia
CHAPTER 1
16 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
Globally, ecosystem health and biodiversity are gaining increasing attention as key challenges for
environmental sustainability.10 Biodiversity is declining faster than at any time in human history, with one-
quarter of species globally threatened and around one million species facing extinction (Intergovernmental
Science Policy Platform on Biodiversity and Ecosystem Services (IPBES)11 2019). The World Economic Forum
(WEF), in its Global Risks Report 2021, cited biodiversity loss as one of top global risks society faces (WEF
2021). Biodiversity - the diversity among living organisms - strongly contributes to the generation of ecosystem
services and ensures ecosystem functioning.12
Other threats such as land and sea-use change, pollution, direct exploitation of organisms, climate
change, and invasive alien species also put ecosystems at risk and these drivers of nature loss are
largely the result of human economic activities (IPBES 2019). This is an essential issue as ecosystem
services make human life possible by providing essential benefits from ecosystems such as regulating services
(such as regulation of floods, droughts, and land degradation), provisioning services (such as crops, fresh water,
aquaculture, and timber), supporting services (such as photosynthesis, nutrient cycle, water cycle), and cultural
services (such as recreational and other non-material benefits).13
The decline in global wildlife populations coupled with the massive degradation of oceans, forests,
freshwater bodies, and other ecosystems undermines nature’s productivity, resilience, and adaptability.
Fourteen of the 18 ecosystem services categories that the IPBES defines have declined since 1970 (IPBES 2019).
This underpins broad consensus that humanity overstretches its pressure on nature (Steffen et al. 2015; IPBES
2019; Dasgupta 2021). Estimates show that 1.6 earths would be required to maintain the world’s current living
standards with the current economic systems (Dasgupta 2021).
A continuous excessive use of ecosystems beyond their regenerative rate could trigger abrupt,
nonlinear, and systemic change in the health of entire ecosystems, if certain ecological thresholds are
passed (Lenton 2013; Dasgupta 2021). This has a direct bearing on future economic performance; furthermore,
socio-economic impacts can be particularly severe if ecosystems collapse. To illustrate this point: more than
half the world’s total GDP is moderately or highly dependent on nature and its services; with construction,
agriculture, and food and beverages being the three sectors that depend most on nature (WEF, 2020). Recently,
the devastating effects of the COVID-19 pandemic have provided an important example of what could become
a more frequent event due to deforestation, land-use change, and species exploitation (Platto et al. 2021;
IPBES 2020). As such, biodiversity and nature loss fuel risks and uncertainties for our economies and wellbeing
(Dasgupta 2021; Folke et al. 2021).
This report investigates the exposure of the banking sector to a broad range of nature-related risks to
the financial sector. Exposure is defined here as the fraction of outstanding loans to highly vulnerable sectors
(i.e., highly dependent or highly impacting sectors on nature) in the economy, or in other words the maximum
possible loss in those sectors. Nature-related risks encompass risks that relate to ecosystem services, natural
assets (such as water and forests), and biodiversity. It thereby covers a large share of the environmental risk
dimension in the ESG framework for sustainable development. Thus, the scope of risks that are covered in this
report are termed “nature-related risks”, as outlined in Figure 5.
Biodiversity is defined in the United Nations Convention on Biological Diversity (1992) as the “variability among living organisms from all sources, including
terrestrial, marine and other aquatic ecosystems, and the ecological complexes of which they are part; this includes diversity within species, between species,
and of ecosystems”.
The IPBES is an independent intergovernmental body established by States to strengthen the science-policy interface for biodiversity and ecosystem services
for the conservation and sustainable use of biodiversity, long-term human well-being, and sustainable development (https://ipbes.net/about).
https://www.fao.org/ecosystem-services-biodiversity/en/
To emphasize the interconnectedness of biodiversity and ecosystem services this report applies a more holistic terminology of ‘nature’ and ‘nature-related
risks.’
10
11
12
13
17An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
Figure 5: Scope of nature-related financial risks within the environmental, social, and
governance framework
Sustainable Development
Environmental Social Governance
Other
Environmental
Biodiversity
“Climate”
“Nature”
“Sustainable”
Climate Change
Adaptation & Mitigation
Source: WB
Nature-related risks are sometimes interrelated with climate-related risks, sharing common drivers
through human activities. Climate- and nature-related risks are interconnected (Lade et al. 2021) as for
instance, climate-induced flooding, wildfires, and cyclones accelerate habitat and biodiversity loss. At the same
time, forests, mangroves, and peatlands are natural carbon sinks, capturing and storing carbon dioxide (CO2)
while also providing protection from extreme weather events. Protecting and restoring those ecosystems can
thereby mitigate climate change and prevent its worst impacts (Poertner et al. 2021).
Nevertheless, nature-related risks are often more localized and multidimensional than climate-related
risks, posing some challenges for policy design.14 Yet, explicitly considering climate-nature interactions in
policy designs provides opportunities to maximize co-benefits, while minimizing trade-offs and compounding
risks for the economy and the financial sector (Poertner et al. 2021). Moreover, methodologies used for the
assessment of climate-related risks may be tailored to assess nature-related risks as well, including scenario
analysis and stress testing.
This multidimensionality, for instance, is one reason why there is no single high-level metric to assess the footprint of economic activity such as tons of CO2
equivalent for nature, nor a global goal equivalent to keeping warming well below 2°C and pursuing efforts to limit the temperature increase to 1.5°C above
pre-industrial levels (Power et al. 2022).
14
18 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
Figure 6: Overall assets per bank type
Source: Based on publicly available BNM data (BNM 2021)
This total includes all bank categories except for DFIs.
https://www.bnm.gov.my/-/monthly-highlights-and-statistics-in-november-2021)
https://www.bnm.gov.my/-/3q-gdp-2021
15
16
17
Malaysia has a large, well-developed banking sector. Total assets15 in March 2021 were RM 3,016 billion
(USD 754 billion or about 224 percent of 2020 GDP) (Figure 6). Government securities (20 percent) and loans
and advances (60 percent) make up the bulk of Malaysian banks’ balance sheets, with differences across bank
types. BNM is the principal regulator and supervisor of the Malaysian banking sector, which as the central bank
for Malaysia, is mandated to promote monetary and financial stability conducive to the sustainable growth of
the Malaysian economy.
The Malaysian banking sector has shown resilience through the COVID-19 crisis. Capital buffers were
adequate with regulatory capital to risk-weighted assets at 18.2 percent as of September 2021. Reported non-
performing loans to total gross loans ratio were 1.5 percent as of October 2021, one of the lowest compared
to Association of Southeast Asian Nations (ASEAN) countries, although extended forbearance measures
remained in effect for many individuals and firms. The systemwide liquidity coverage ratio was 153 percent
as of October 2021, well above the Basel III regulatory minimum of 100 percent.16 The contraction by 4.5
percent of the Malaysian economy in the third quarter of 2021 was a risk factor to financial stability. However,
the Malaysian economy is expected to improve following the normalization of economic activities after the
COVID-19 pandemic, which would relax pressures on financial markets.17
Commercial Banks (RM2,063bn)
Cash and Cash Equivalents
Balances in Current Account with Bank Negara Malaysia
Other Deposits Placed and Reverse Repos
Statutory Deposits with Bank Negara Malaysia
Investment Account Due from Designated Financial Institutions
Negotiable Instrument Deposits Held
Treasury Bills
Government Securities
Other Securities
Loans and Advances
Other Assets
Islamic Banks (RM903bn)
B
an
k
Ty
p
e
Assets by bank type March 2021
0 20 40
Assets in % of Total
60 80 100
Investment Banks (RM50bn)
1.1 The Malaysian Banking Sector
19An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
Comparing Malaysian banks’ commercial sector lending with sectoral GDP data shows that capital intensive sectors such as construction have a higher lending
share in banks’ portfolios (15 percent) compared to their contribution to GDP (4 percent). Other sectors are relatively underrepresented, this may be because
they have limited access to lending or are less capital intensive (e.g., agriculture has a lending share of 4 percent vs. a GDP share of 8 percent). Furthermore,
some sectors might be dominated by large firms (e.g., oil and gas), which are capital intensive but acquire the bulk of their financing from capital markets.
This has implications for the analysis as it only considers impacts and dependencies of sectors that have outstanding loans with the Malaysian banking sector.
Household loans are the largest share of Malaysian banks’ lending portfolio. 40 percent of commercial sectoral lending goes to corporates, micro, small, and
medium enterprises and others.
18
19
Finance provision to the real economy in Malaysia concentrates around loan financing, with a dominant
role for the Malaysian banking sector. Seventy-four percent of outstanding net financing in December 2020
was provided by loans from banks and DFIs. Corporate bonds are a growing financing instrument, representing
the remaining 26 percent of outstanding net financing. Nevertheless, the banking sector (and specifically loan
financing) remains the dominant source of financing. For commercial lending, the wholesale and retail trade
sector constitutes the largest share of Malaysian banks’ commercial loans outstanding balance, at slightly more
than 16 percent (Figure 6). Manufacturing is the second largest lending exposure (16 percent), followed by
construction (15 percent), and real estate (14 percent). This reflects the high importance of manufacturing and
construction sectors in the Malaysian economy. The agricultural sector (4 percent) and especially the mining
sector (1 percent) constitute only a small share of Malaysian banks’ commercial loans portfolio (Figure 7).18
The following analysis considers Malaysian banks’ commercial sector lending portfolio, which represents a
significant share of Malaysian banks’ lending.19
Figure 7: Overall commercial lending of Malaysian banks by sector, as of December 2020
Source: Based on unpublished BNM data
Wholesale and Retail Trade 16.14%Other Sectors 15.66%
Manufacturing 15.51%
Construction 15.12% Real Estate Activities 14.11%
Financial and Insurance/ Takaful Activities 10.09%
Agriculture, Forestry and Fishing 4.39%
Transportation and Storage 3.38%
Accommodation and Food Service 2.61%
Electricity Supply 1.49%
Mining and Quarrying 1.04%
Water Supply & Co 0.45%
Lending by sector
20 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
‘Supra’ State covers production activities that are beyond the center of predominant economic interest for any state.20
Figure 8: Commercial lending by Malaysian banks by state, as of December 2020
Commercial lending by Malaysian banks is heterogeneously distributed among states (Figure 8),
reflecting the population and economic centers of the country. Over 60 percent of commercial lending
goes to Kuala Lumpur and Selangor, having a strong manufacturing, service, and real estate sector and
contributing the largest share of Malaysian GDP (Figure 9). Johor with its strong oil palm sector (10 percent),
Sarawak (6 percent), and Pulau Pinang (5 percent) also receive considerable lending shares. The other Malaysian
states share the remaining 17 percent of banks’ lending, with Perlis having the lowest share of only 0.1 percent
of total lending.
Source: Based on unpublished BNM data
Figure 9: Projected GDP per sector by state level contribution (percent, 2019)
State100%
80%
60%
40%
20%
0%
Agriculture Construction GDP at
purchasers
prices
Import
duties
Manufacturing Mining and
quarrying
Services
Johor
Kedah
Kelantan
Melaka
Negeri Sembilan
Pahang
Perak
Perlis
Pulau Pinang
Sabah
Sarawak
Selangor
Supra
Terengganu
W.P. Kuala Lumpur
W.P. Labuan
Source: Based on Department of statistics Malaysia (DOSM 2021) data20
Sabah
Sarawak
Selangor
Kuala Lumpur
Putrajaya
Labuan
Pahang
Perak
Melaka
Pulau Pinang
Negeri
Sembilan
Terengganu
Kelantan
Kedah
Perlis
Johor
30
20
10
0
%
O
ve
ra
ll
Le
nd
in
g
21An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
The sample of commercial loans outstanding by Malaysian banks represents 90 percent of the total
commercial loan portfolio. The sample portfolio data, as of December 2020, totaled RM 733 billion
(USD 183 billion). The largest bank type, with about 68 percent share of banking sector assets, are 26
commercial banks, which account for about 66 percent of the lending sample, followed by 16 Islamic banks.21
Islamic banks cover about 30 percent of banking sector assets and about 31 percent of the lending sample.
Investment banks are the third bank category, consisting of 10 domestically owned banks22 that account for
about 2 percent of total banking sector assets and 0.4 percent of the sample. Additionally, 9 DFIs23 play a role in
commercial lending in Malaysia, accounting for about 2 percent of the analyzed lending portfolio in this report.
Malaysia’s biological diversity is among the richest in the world. Spread across the three regions of
Peninsular Malaysia, Sabah, and Sarawak, Malaysia’s terrestrial, coastal, and marine habitats harbor a wide
variety of floral and faunal communities. The country’s forest cover extends to around 59 percent of the total
land area (MyBIS 2015).24 This includes extensive tropical peatlands, which cover more than 7 percent of
Malaysia’s total land area, and whose unique wet, acidic, and low-nutrient conditions harbor species of plants
and animals not found in other tropical forests (MyBIS 2016). These peatlands also store more than 9 gigatons
(Gt) of carbon (almost the size of annual global carbon emissions),25 more than twice the 4 Gt carbon that is
stored in the rest of Malaysia’s forest vegetation (Page and Rieley 2018). Malaysia’s vast shoreline has more than
half a million hectares of mangroves, with five mangrove areas designated as Ramsar sites – an international
network of wetlands recognized, among other things, for their importance to conservation of global biological
diversity (Ramsar 2010). Together, these and other natural habitats nurture more than 15,000 species of vascular
plants, 307 known species of mammals, 785 species of birds, 2,068 species of freshwater and marine animals,
150,000 species of invertebrates, and more than 612 species of hard corals in the country (MyBIS 2015). This
rich variety of life has placed Malaysia, a country with only 0.2 percent of the world’s land mass, as one of 17
megadiverse countries in the world.26
Malaysia’s rich biodiversity, and the natural ecosystems it supports, sustain the country’s economy.
Natural resources such as oil, timber, and fish, and the provision of ecosystem services such as healthy soils,
clean water, pollination, and a stable climate, strongly influence the productivity of various sectors of the
economy. Many sectors rely directly on natural resources and ecosystem services for a range of factors within
their production processes including inputs to production, inputs to research and development, business
operations, and assimilation of waste in these sectors (WEF 2020).27 A sector is highly reliant on an ecosystem
service if any disruption in this service can prevent the production processes, and thus directly impact the
financial viability of the businesses in these sectors (Box 1) (NCFA and UN-WCMC 2018).
https://www.bnm.gov.my/web/guest/islamic-banks: Eight commercial banks have domestic ownership while 18 banks have foreign ownership. Of the 16
Islamic banks, 11 are domestically owned and 5 are foreign owned.
https://www.bnm.gov.my/web/guest/investment-banks
6 DFIs regulated under the DFI Act and 3 DFIs not regulated under the DFI Act (https://www.bnm.gov.my/-/akta-institusi- kewangan-pembangunan-2002-
act-618-)
https://data.worldbank.org/indicator/AG.LND.FRST.ZS?locations=MY
Note that global carbon dioxide emissions were 36.7 Gt in 2019 (Ritchie and Roser 2020), this corresponds to carbon emissions of 10 Gt in 2019.
https://www.biodiversitya-z.org/content/megadiverse-countries
Natural genetic diversity plays a particularly key role in pharmaceutical and biomedical research.
21
22
23
24
25
26
27
1.2 Malaysia, a Biodiversity Hotspot
22 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
The recent Changing Wealth of Nations report by the WB (2021) shows that while human and produced capital in Malaysia have grown, natural capital has
declined. Specifically, forests, mangroves, and fisheries-based wealth in Malaysia has declined, while protected areas’, cropland, and pastureland wealth has
increased.
See the Appendix Section A4 for a more detailed analysis on the current stage of drivers for nature and biodiversity loss in Malaysia as defined by the IPBES
(2019).
28
29
Sectors that are highly reliant on an ecosystem service include agriculture, fishing and forestry,
construction, electricity, water utilities, and food, beverages, and tobacco sectors. Furthermore, there
are other sectors which are moderately reliant on nature, meaning they have a limited dependency on ecosystem
services within their direct operations. However, those sectors often rely on inputs from sectors with high direct
nature dependencies and are thus indirectly dependent on its ecosystem services. This includes manufacturing,
transport, chemicals and materials, aviation, travel and tourism, real estate, mining and metals, retail, consumer
goods and lifestyle, oil and gas, and automotive sectors (WEF 2020). This supports the claim by the Dasgupta
report (2021), that the entire economy is embedded in nature and as such reliant on a functioning biosphere.
Malaysia experienced strong economic growth in recent decades; yet this economic growth has come
at the cost of a significant loss of biodiversity and natural capital in the country.28 The country’s
high levels of economic growth in the last two decades have led to an exponential rise in demand for natural
resources, which in turn has amplified key drivers of nature and biodiversity loss in Malaysia. These include
habitat loss and fragmentation, pollution, unsustainable resource extraction and usage, and climate change.29
23An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
Materiality of potential dependencies
To assess the importance of the contribution an ecosystem service makes to a production process,
and the materiality of the impact if this service is disrupted, two aspects can be considered:
1. How significant is the loss of functionality in the production process if the ecosystem service is
disrupted?
a. Limited loss of functionality: the production process can continue as is or with minor
modifications.
b. Moderate loss of functionality: the production process can continue only with important
modifications (e.g., slower production or use of substitutes).
c. Severe loss of functionality: Disruption in the service provision prevents the production process.
BOX 1
Assessing materiality of an ecosystem service
for a business
24 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
Source: Natural Capital Finance Alliance (2021)
2. How significant is the financial loss due to the loss of functionality in the production process?
a. Limited financial loss: Disruption to the production process doesn’t materially affect the
company’s profits.
b. Moderate financial loss: Disruption to the production process materially affects the company’s
profits.
c. Severe financial loss: There is a reasonable possibility that disruption in the production process
will affect the financial viability of the company.
The materiality assessment reflects both these considerations. A very high materiality rating means
that the loss of functionality is severe and that the expected financial impact is severe as well.
Materiality of potential impacts on ecosystem services
To assess the importance of a potential impact of a production process on natural capital, the
following three aspects were considered:
1. How frequently might the impact occur?
• High: The impact and its resulting effects on natural capital are expected to occur continuously
throughout the project life cycle.
• Medium: The impact and its resulting effects on natural capital are expected to occur regularly
throughout the project life cycle (i.e., from several times per year to several times per month).
• Low: The impact and its resulting effects on natural capital are expected to occur only a small
number of times in the project life cycle (e.g., only during construction/set-up).
2. How quickly might the impact start to affect natural capital?
• <1 year: The impact and its resulting effects on natural capital will occur within one year of the
start of the production process.
• 1-3 years: The impact and its resulting effects on natural capital will occur between one and
three years after the start of the production process.
• >3 years: The impact and its resulting effects on natural capital will occur more than three years
after the start of the production process.
3. How severe might the impact be?
• High: The impact and its resulting effects are expected to cause major, irreparable, and long-
lasting damage to natural capital.
• Medium: The impact and its resulting effects are expected to cause significant and lasting
damage to natural capital.
• Low: The impact and its resulting effects are expected to cause minor, reparable, and temporary
damage to natural capital.
25An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
Major environmental challenges exist with respect to deforestation, pollution, and water management.
Figure 10 shows results from the Yale University Environmental Performance Index for Malaysia for the years
2010 (orange) and 2020 (blue).30 Malaysian environmental performance showed improvements in areas like
environmental health, air quality, agriculture, climate change, and sanitation and drinking water, though
arguably starting from a low environmental performance base. In contrast, pollution emissions and, more
notably, ecosystem services and biodiversity and habitat indicators show a deterioration over the past decade.
Those findings have also been confirmed in interviews with different stakeholders from academia,
the government, and non-governmental organizations (NGOs).31 Interview partners expressed concerns
especially with respect to Malaysian forest management, water pollution, and species loss. Furthermore,
governance related issues were frequently mentioned as a driver of nature and biodiversity loss. These issues
stem mainly from the contention between the federal and state governments’ jurisdiction over land and forest
matters.32
Figure 10: Malaysian environmental performance across several indicators in 2010 and 2020
Sources: Based on the Yale Environmental Performance Index
Note: Scores are normalized to 100, with 100 being the target to reach.
Figure 3 compares environmental indicators between 2010 and 2020 that are scaled to 100. Hence, the graph also provides an indication of the current level
of environmental quality in Malaysia, with 100 being perfectly healthy ecosystems.
Appendix Section A5 contains details on interview insights.
https://www.wwf.org.my/?18445/STATE-GOVERNMENT-HAS-JURISDICTION-OVER-FOREST-AND-LAND-MATTERS; https://www.malaysianbar.org.my/article/
news/legal-and-general-news/legal-news/challenges-in-implementing-and-enforcing-environmental-protection-measures-in-malaysia-by-ainul-jaria-bt-
maidin
30
31
32
Environmental Performance Index
Environmental Health
Air Quality
Sanitation & Drinking Water
Waste Management
Biodiversity & Habitat
Ecosystem Services
Fisheries
Climate Change
Pollution Emissions
Agriculture
Water Resources
0 20 40 60 80 100
2020
2010
26 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
Environmental degradation can push an ecosystem to a “tipping point” beyond which it will shift to a new state or collapse entirely. Such a collapse would lead
to a large-scale, abrupt decline in ecosystem services.
See Johnson et al. (2021) “The Economic Case for Nature - A global Earth-economy model to assess development policy pathways”. The model developed
by the WB in collaboration with the University of Minnesota and Purdue University assesses a scenario of partial ecosystem service collapse—a 90 percent
reduction in the flow of the following ecosystem services: wild pollination, marine fisheries, and provision of timber from native forests on real economic activity
to 2030.
The CGE model utilized in the study accounts for a broad range of direct and indirect substitution effects. Under the tipping point scenario, global GDP
declines relative to the business-as-usual (BAU) scenario. With less income in the rest of the world, demand for Malaysian exports declines and hence leading
to a decline in domestic production in Malaysia relative to BAU. In addition, relative to East Asia and the Pacific, the adverse impacts of ecosystems collapse in
Malaysia’s forestry and fisheries are much larger, which would cause a larger decline in Malaysia’s GDP relative to the rest of East Asia and the Pacific.
The model used in the analysis does not offer precise predictions about what the global economy or any given country’s economy will look like in the future.
Rather, the scenarios described in this report illustrate the direction and range of possible outcomes of select biophysical scenarios and policy responses. The
estimations presented are conservative, due to the limited range of ecosystem services considered, as well as other limitations (for further details please see
Johnson et al. 2021).
33
34
35
36
Both nature preservation policies and nature loss can have impacts on the economy and hence can
be sources of financial risks to Malaysian banks. A recent WB (Johnson et al. 2021) study analyzes the
economic impacts from degrading ecosystem services. In an adverse scenario of partial ecosystem collapse,
economic losses could mount up to 3.4 percent of GDP in East Asia and the Pacific region in 2030.33,34 For
Malaysia specifically, the effects of such a scenario are estimated to be higher than the region’s average,
projected at 6 percent of GDP loss by 2030 (Figure 11), driven by decline in export demand and adverse
impacts of the collapse of forestry and fisheries ecosystem services.35
Figure 11: Change in 2030 real GDP under a partial ecosystem collapse scenario (compared
with a no-tipping-point scenario)36
b) Change in percentage termsa) Change in monetary terms (US$ billions)
0-5-10-15-20-25-1000 -500 0
Sub-Saharan Africa
South Asia
North America
Middle East and North Africa
Latin America and Caribbean
Europe and Central Asia
East Asia and Paci�c
Madagascar
Angola+DRC
Ethiopia
Rest of SS Africa
Nigeria
South Africa
Bangladesh
Pakistan
Rest of S Asia
India
Canada
United States
Egypt, Arab Rep.
Morocco
Rest of M East N Africa
Rest of S America
Brazil
Central America
Argentina
Colombia
Mexico
Rest of C Asia
Turkey
Other Europe
Poland
Russian Federation
European Union
Indonesia
Vietnam
Philippines
Malaysia
Rest of SE Asia
China
Korea, Rep.
Rest of E Asia
Oceania
Japan
Source: Johnson et al. (2021)
27An Exploration of Nature-Related Financial Risks in Malaysia
28 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
https://ukcop26.org/glasgow-leaders-declaration-on-forests-and-land-use/
https://www.bnm.gov.my/climatechange
https://www.nst.com.my/opinion/letters/2021/10/738332/corporate-role-biodiversity-conservation
37
38
39
The Malaysian government has taken several policy actions on biodiversity, with additional initiatives
by the private sector.
• Its National Policy on Biodiversity 2016-2025 serves as its guide for biodiversity management and
complement to Malaysia’s commitment to the United Nations Convention on Biological Diversity and
the Sustainable Development Goals. The policy is part of Malaysia’s agenda to promote sustainability
and mentions that Malaysia is committed to conserve its biological diversity, promote its sustainable use,
and ensure the fair and equitable sharing of benefits arising from the utilization of biological resources. A
National Biological Diversity Roundtable group was created in 2019 to advise the minister on the direction
and strategy of implementing the National Biodiversity Policy.
• Malaysia also signed the Glasgow Leaders’ Declaration on Forests and Land Use at the 26th United Nations
(UN) Climate Change Conference of the Parties, a commitment to halt and reverse forest loss and land
degradation by 2030.37
Malaysia’s financial regulators have demonstrated their leadership in driving the sustainability and
climate change agenda in the financial sector by deploying several initiatives that aim to address
climate related risks and sustainable finance practices.38
• In 2019, BNM and the Securities Commission of Malaysia formed the JC3 to pursue collaborative actions
for building climate resilience within the Malaysian financial sector. JC3 initiatives encompass aspects of
risk management, governance and disclosure, product and innovation, capacity building and stakeholder
engagement, and data.
• Since its formation, BNM has finalized the issuance of a principle-based taxonomy – Climate Change and
Principle-based Taxonomy (CCPT), that is intended to facilitate the financial institutions’ categorization
of economic activities against climate objectives and promote the transition to a low-carbon economy.
BNM has also collaborated with Islamic financial institutions under the Value-based Intermediation (VBI)
Community of Practitioners to publish guidance documents on credit risk management practices to help financial
institutions evaluate financing and investment activities against ESG criteria. The CCPT and VBI guidance
documents refer to biodiversity risk as an element of managing environmental risks. In December 2021, BNM
issued the Reference Guide on Climate Risk Management and Scenario Analysis for public consultation. The
JC3 members also supported the proposal for financial institutions to make mandatory Task Force for Climate-
related Financial Disclosure (TCFD)-aligned climate-related financial risk disclosures from 2024.
Private sector initiatives around biodiversity are also developing. In February 2020, an interim working
group consisting of members from the private sector, academia, research institutes, and NGOs was formed with
the mandate to establish the Malaysia Platform for Business and Biodiversity. This is envisioned as a platform
for the private sector to discuss, share, and collaborate on issues related to biodiversity conservation and its
mainstreaming, particularly to support the implementation of the National Policy on Biological Diversity.39
29An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
One of the main roles of the financial system is to allocate capital (both equity and debt) to productive activities. When risks are not adequately understood
and priced in, this could lead to an overallocation of capital to sectors that is not in line with sustainability objectives. Further, it hinders adequate mitigation
actions to prevent or limit financial impacts of such risks.
Subsequent exposure analysis of this report focuses on direct dependencies only.
40
41
Financial institutions’ relationship with nature is twofold, often referred to as a “double materiality”
(European Commission 2019, Oman and Svartzman 2021). On the one hand, the activities that are being
financed can either contribute to or deteriorate the value of ecosystem services in Malaysia. On the other hand,
ongoing biodiversity loss could have negative economic and financial implications for Malaysian firms and the
financial sector (NGFS 2021, World Bank Group 2021b). Globally, nature-related risks are becoming increasingly
likely, whereas precise timing and magnitude are difficult to predict (Kedward et. al. 2020). Malaysia could
be particularly exposed to those risks, given its status as a megadiverse country and its high dependence
of economic activity on ecosystem service provision (see section above for details). Better identification,
assessment, and management of nature-related financial risks can help align capital allocation with sustainability
goals.40 Even though some nature-related risks may be gradual trends, these could turn into abrupt financial
risks when financial sector participants reprice assets based on changed future expectations and better data.
The degradation of biodiversity and natural ecosystems could lead to physical and transition risks
that could transmit through the economy. This could potentially pose a risk for the financial system (Figure
12), with reinforcing macroeconomic feedback effects (Dunz and Power 2021). Physical risk could emerge from
the loss of ecosystem services that firms are depending on. Such dependencies could be direct (e.g., fisheries
decline for the aquaculture sector) or indirect via supply chain impacts and relative price changes (e.g., higher
food prices).41 Physical risk could either be triggered through ‘slow-onset’ loss of ecosystem services (e.g.,
reduced agricultural yields) or ‘sudden-onset’ events like the triggering of an ecological regime shift (e.g.,
eutrophication of a lake).
1.3 Nature-Related Financial Risks
30 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 1 - Biodiversity, Nature, and Banking in Malaysia
See Appendix Section A3 for details on reputational risk.
The impacts of Malaysian companies on biodiversity and nature may also expose them to liability risk. Such risks may materialize for companies through
litigation or other legal avenues outside courtrooms such as regulatory fines and enforcement. Physical risk could pose liability risk to companies as they
might be deemed responsible for a loss or injury associated with nature loss and may be required to pay compensation to the affected parties. Nature-related
transition risk could pose liability risk as firms continuously contributing to nature loss could be sued. Liability risk can materialize for banks through various
avenues – direct impacts as defendants in litigation, and indirect second order impacts through credit, investment, and underwriting risk stemming from their
exposure to the affected companies, as well as third order indirect impacts through systemic risks if nature-related liability risk is of a sufficient magnitude
across sectors or geographies (Barker et al. 2020).
42
43
Figure 12: From nature-related risks to financial risks
Source: WB based on van Toor et al. 2020 and Svartzman et al. 2021
Sudden changes in policy, technology, and consumer preferences in response to nature loss can have a
substantial impact on the economic, financial, and reputational42 position of firms and their financing
banks with large impacts on biodiversity and ecosystems. Business operations may have an impact on
biodiversity and ecosystem services via excessive natural resources extraction, disposal of waste, or land-use
change. If firms do not adapt timely and banks do not adjust their lending portfolio, nature-related financial
transition risk could materialize following sudden changes in policy, technology, and consumer preferences.
Those pressures on companies could stem from domestic changes as well as changes in important export
markets for Malaysia such as the European Union (EU).
Physical and transition risks can directly disrupt production processes or indirectly materialize across
value chains of businesses (second- and third-order effects), thus impacting their ability to generate
profits and repay debts. The degree of nature-related risk emergence, however, depends on the availability
of substitutes for those depleted ecosystem services as well as the ability of firms and banks to adapt timely. If
not anticipated and no action is taken, the sectors with high negative impacts on biodiversity may see abrupt
write-downs in their asset valuations (stranded assets) as the economies transition to more sustainable pathways
and higher liability claims (liability risk)43 arising from impacts and dependencies on biodiversity. For financial
institutions, this adverse impact on the profitability of businesses they lend to may translate into market, credit,
liquidity, and operational risks (Figure 12).
Nature
Financial
system
Physical risk
• Loss of Ecosystem Services
creating
» ‘slow-onset’ loss
» ‘sudden-onset’ events
• Interactions with other
ecological issues
(e.g., climate change)
Dependency
Macroeconomic
deterioration
Impact Revised lending
conditions
Economy
Economic risks
• Supply chain disruptions
• Raw material price volatility
• Limited substitutability of
essential ecosystem services
• Productivity changes
(e.g., agriculture)
• Changing demand and costs
• Stranded assets
• Relocation of activities
• Legal liabilities
• Lower asset value
Financial risks
• Credit risk
(e.g., losses on corporate
loans)
• Underwriting risk
(e.g., inaccurate risk
assessment)
• Market risk
(e.g., losses on shares and
bonds)
• Operational risk
(e.g., liability risks, legal
costs, reputational damage)
• Liquidity risk
(e.g., refinancing risk)
Transition and reputation risk
• Policy and regulation change
• Change in demand – including
from international buyers
• Change in technology
Liability risk
• Lawsuits from harmed
communities
• Fines from regulators
31An Exploration of Nature-Related Financial Risks in Malaysia
Exposure
Assessment
CHAPTER 2
32 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
A detailed description of the underlying methodology in this report can be found in Appendix Section A1.
https://encore.naturalcapital.finance/en/explore
Box 1 provides an overview of the core assumptions of ENCORE with respect to materiality of ecosystem services for businesses.
One could argue, however, that absent more detailed information on the production process of Malaysian firms, this approach is conservative as it caps the
exposure towards one ecosystem service to its relative share of the entire lending portfolio.
44
45
46
47
This report investigates the exposure in the commercial loan book of Malaysian banks using a
combination of sectoral and spatial analyses.44
1. First, it investigates banking sector exposures to economic sectors by using the ENCORE biodiversity
tool. Following the work of other central banks, the analysis is focused on relationships between economic
sectors and ecosystem services with high or very high dependencies, as the degradation of those
ecosystem services is likely to have a strong detrimental impact on firms’ business processes (physical
risk).
2. Second, exposures of banks to sectors that have a negative impact on ecosystem services and that could
hence be subject to transition risk in case of unanticipated policy introduction and consumer preference
change are mapped.
3. Third, spatial exposure of banks’ commercial property purchase lending to areas that may become
protected in the future are analyzed.
4. Fourth, a first non-exhaustive set of nature-related risk scenarios for Malaysia (see Figure 26) are explored.
These are based on interviews (the conclusions of which are summarized in Appendix Section A5),
datasets such as ENCORE and the WB Terrestrial Biodiversity Indicators, and reports from Malaysian
stakeholders which are summarized in Appendix Section A4. For most analyses results are obtained for
individual banks, however outcomes are reported at the bank segment level to ensure confidentiality of
respective bank’s exposures.
The analysis on ecosystem dependency and impact is conducted by using ENCORE (Natural Capital
Finance Alliance 2021).45 ENCORE is a database that maps sector-based impacts and dependencies on
ecosystem services for sectors of the economy.46 This allows a detailed assessment of the interactions of the
economy with the natural environment and thus an exposure analysis of Malaysian banking sectors’ lending
portfolio to potential nature-related physical and transition risks. The overall commercial loans outstanding
in the sample stood at RM 733 billion (USD 183 billion) as of December 2020. The analysis follows closely the
approach proposed by the Dutch Central Bank (DNB) (van Toor et al. 2020), consisting of several steps of data
reclassification and remapping. Reclassification and remapping are needed to align sector classification of the
lending data with sector classification used in ENCORE. Following the DNB approach, the focus of the analysis
is on relationships between economic sectors and ecosystem services with high or very high dependencies only,
as the degradation of those ecosystem services is likely to have a strong detrimental impact on firms’ business
processes. Likewise, only linkages of economic sectors and drivers of environmental change with a high or
very high impact to assess transition risk exposure are considered. The reclassification allows assessment of
the nature-related physical and transition risk exposure of the Malaysian banks’ commercial lending portfolio.
ENCORE is a global tool and thereby subject to some caveats. Ecosystem service dependencies and the
state of natural assets differ by country and require a geographical context to refine the assessment provided
by ENCORE. ENCORE focuses on direct nature-related impacts and dependencies for the various sectors of
the economy. Thus, ENCORE can only give a comprehensive view on the key first-order nature-related impacts
and dependencies at the level of sectors of the economy. Furthermore, the currently applied equal weighting
approach in the case of multiple sector or ecosystem service linkages influences the exposure results.47
33An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
This section estimates the risks that Malaysian banks may be exposed to from the loss in ecosystem
services (physical risk). Multiple sectors of the economy depend directly or indirectly on ecosystem services.
The resilience of these ecosystem services, in turn, is contingent upon a thriving biodiversity. Biodiversity
loss, driven by unsustainable business processes, could thus lead to a degradation of the ecosystem services
it sustains. In turn, negative impacts on the financial position of companies that depend on these ecosystem
services could emerge, with negative financial implications for banks financing them.
Fifty-four percent of the commercial lending portfolio of Malaysian banks is to sectors which are highly
or very highly dependent on one or several ecosystem services (Figure 13). This amounted to RM 398 billion
(USD 94 billion) lent to these sectors as of December 2020.48 Most of these ecosystem service dependencies
concentrate around a few economic sectors, with real estate and construction activities constituting about
42 percent of all sectors’ dependencies (Figure 14).49 Real estate activities strongly depend on surface water
provision. Construction activities are especially vulnerable to climate physical risk, thus depending on climate
regulation (chronic temperature increase) and flood and storm protection (acute climate physical risk). Wholesale
trade is also strongly dependent on ecosystem services due to its reliance on climate regulation provision.
Agricultural activities make up about 8 percent of sectors’ dependencies on ecosystem services, whereas they
depend on a multitude of different ecosystem services such as disease control and maintenance of nursery
habitats. This makes agriculture especially vulnerable to a multitude of ecosystem service deteriorations.
Figure 13: The financial sector and ecosystem services dependencies per Malaysian ringgit
invested (in million RM)
Source: BNM (unpublished data), ENCORE, WB calculations
This sectoral analysis covers approximately 90 percent of the total corporate loan portfolio of Malaysian banks.
The oil and gas sector that is relatively important for the Malaysian economy does not show up prominently in this analysis as oil and gas companies receive
large shares of their financing from capital markets.
48
49
2.1 Dependency on Ecosystem Services
Real estate activities
Leisure facility provision
Processed food and drink production
Construction materials production
Hotels and resorts provision
Tyre and rubber production
Life science, pharma and biotech manufacture
Life science, pharma and biotech tools and services
Production of forest and wood-based products
Catalytic cracking, fractional distillation and crystallization
Natural �bre production
Synthetic �bre production
Alcoholic fermentation and distilling
Tobacco production
Nuclear and thermal power stations
Iron extraction
Geothermal energy production
Mining
Construction
Marine ports and services
Distribution
Water services (e.g. waste water, treatment and distribution)
Cruise line provision
Large-scale livestock (beef and dairy)
Small-scale livestock (beef and dairy)
Telecommunication and wireless services
Integrated oil and gas
Large-scale forestry
Small-scale forestry
Hydropower production
Solar energy provision
Wind energy provision
Saltwater wild-caught �sh
Freshwater wild-caught �sh
Marine transportation
Airport services
Infrastructure maintenance contracts
Large-scale irrigated arable crops
Small-scale irrigated arable crops
Electric/nuclear power transmission and distribution
Large-scale rainfed arable crops
Small-scale rainfed arable crops
Aquaculture
Oil and gas transportation
Gas distribution
Railway transportation
Fibre-optic cable installation (marine)
Biomass energy production
Production of paper products
Production of leisure or personal products
Commercial Banks
Surface water
Ground water
Climate regulation
Flood and storm protection
Water �ow maintenance
Water quality
Maintain nursery habitats
Fibres and other materials
Pollination
Soil quality
Disease control
Pest control
Animal-based energy
Mass stabilisation and erosion control
Buffering and attenuation of mass �ows
Islamic Banks
Investment Banks
DFIs
Real estate activities
Leisure facility provision
Processed food and drink production
Construction materials production
Hotels and resorts provision
Tyre and rubber production
Life science, pharma and biotech manufacture
Life science, pharma and biotech tools and services
Production of forest and wood-based products
Catalytic cracking, fractional distillation and crystallization
Natural �bre production
Synthetic �bre production
Alcoholic fermentation and distilling
Tobacco production
Nuclear and thermal power stations
Iron extraction
Geothermal energy production
Mining
Construction
Marine ports and services
Distribution
Water services (e.g. waste water, treatment and distribution)
Cruise line provision
Large-scale livestock (beef and dairy)
Small-scale livestock (beef and dairy)
Telecommunication and wireless services
Integrated oil and gas
Large-scale forestry
Small-scale forestry
Hydropower production
Solar energy provision
Wind energy provision
Saltwater wild-caught �sh
Freshwater wild-caught �sh
Marine transportation
Airport services
Infrastructure maintenance contracts
Large-scale irrigated arable crops
Small-scale irrigated arable crops
Electric/nuclear power transmission and distribution
Large-scale rainfed arable crops
Small-scale rainfed arable crops
Aquaculture
Oil and gas transportation
Gas distribution
Railway transportation
Fibre-optic cable installation (marine)
Biomass energy production
Production of paper products
Production of leisure or personal products
Commercial Banks
Surface water
Ground water
Climate regulation
Flood and storm protection
Water �ow maintenance
Water quality
Maintain nursery habitats
Fibres and other materials
Pollination
Soil quality
Disease control
Pest control
Animal-based energy
Mass stabilisation and erosion control
Buffering and attenuation of mass �ows
Islamic Banks
Investment Banks
DFIs
34 An Exploration of Nature-Related Financial Risks in Malaysia
34
An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 — Exposure Assessment
2.1 Dependency on Ecosystem Services
This section estimates the risks that Malaysian banks may be exposed to from the loss in ecosystem
services (physical risk). Multiple sectors of the economy depend directly or indirectly on ecosystem services.
The resilience of these ecosystem services, in turn, is contingent upon a thriving biodiversity. Biodiversity
loss, driven by unsustainable business processes, could thus lead to a degradation of the ecosystem services
it sustains. In turn, negative impacts on the financial position of companies that depend on these ecosystem
services could emerge, with negative financial implications for banks financing them.
Fifty-four percent of the commercial lending portfolio of Malaysian banks is to sectors which are highly
or very highly dependent on one or several ecosystem services (Figure 13). This amounted to RM 398 billion
(USD 94 billion) lent to these sectors as of December 2020.48 Most of these ecosystem service dependencies
concentrate around a few economic sectors, with real estate and construction activities constituting about
42 percent of all sectors’ dependencies (Figure 14).” Real estate activities strongly depend on surface water
provision. Construction activities are especially vulnerable to climate physical risk, thus depending on climate
regulation (chronic temperature increase) and flood and storm protection (acute climate physical risk). Wholesale
trade is also strongly dependent on ecosystem services due to its reliance on climate regulation provision.
Agricultural activities make up about 8 percent of sectors’ dependencies on ecosystem services, whereas they
depend on a multitude of different ecosystem services such as disease control and maintenance of nursery
habitats. This makes agriculture especially vulnerable to a multitude of ecosystem service deteriorations.
Figure 13: The financial sector and ecosystem services dependencies per Malaysian ringgit
invested (in million RM)
Real estate activities
Leisure facility provision
Processed food and drink production
Construction materials production
Hotels and resorts provision
Tyre and rubber production
cite science, pharma and biotech manufacture
=roduction o leisure or ersonal products
.ife science, harma andnbiotech tools and services
=rodi.ictiori o forest and woodrbased pro ucts
catalytic cracking fractional distillation and crystallization
atural fibre ro ction
?I'Ofi|‘.lCt‘lO _o pape products
:ynt et_lc ibre pro Vucilon . _ 4
Acohollc fermentation and distilling
Tab cco pr duction ,
Nuc ear an thermal power stations
lron extraction
Geothermal energy production
Mining
Surface water
aim was. I
Commercial Banks
Climate regulation
Construction
Marine ports and services
Flood and storm protection I
Water {low maintenance 1
water quality —
Maintain nursery habitats —
Distribution
water services (e.g. waste water, treatment and distribution)
Cruise line provision
.arge-scale livestock (beef and dairy)
ntegrated oil and gas
qarge-scale fores ry ,
.Y . . ‘ ' ?
Sollar El'lel'gy|dPl’OVlSl|'K‘)V1{_ h P°lll"a"°"
I I - I - -
\£\?inl%fer?e|r\g,l pr°r?i‘fi§ion '5 5°" quallw —
ma -sca e orestry— , _ ~ :
Small-scale liyestock (beef an’d’dairy)_~~ es, Dlsease Comwl
Telecommunication and wireless services \‘\ \ _ \ pest comm; :
Freshwater wild-caught fish * e
Marine transportation
Airport services ,
infrastructure niaintenance contracts
Large-scale Irrigated arable crops 2
Fibres and other materials 1
Islamic Banks
T Animalrbasedienergy
2 Investment Banks
Z DF|s
} kit/lass,stabilisation and erosion control 2
giomass energy P,9duc,i°.-./ I Buffering and attenuation of mass flows 2
Small-scale irrigated arable cm s
Electric/nuclear ower transmission and distribution
l.arge—scale rain ed arable crops
Aquaculture _
Oi and gas transportation
srnall-scale rainied arable crops
Gas rl u on ,
Ra: way transportation
Fibre—aptic cable installation (marine)
Source: BNM (unpublished data), ENCORE, WB calculations
48 This sectoral analysis covers approximately 90 percent of the total corporate loan portfolio of Malaysian banks.
49 The oil and gas sector that is relatively important for the Malaysian economy does not show up prominently in this analysis as oil and gas companies receive
large shares of their financing from capital markets.
Chapter 2 - Exposure Assessment
It should be noted that the indicated dependencies per bank level rely on sectoral global averages from the ENCORE database. Ecosystem service dependency
might differ depending on project design and should ultimately be assessed on a project level. For instance, a real estate investment that incorporates a
passive house standard (i.e. a green building standard) might be far less dependent on ecosystem services such as water compared to conventional real estate
projects.
50
Figure 14: Relative commercial lending exposure to sectors with high or very high dependencies
(physical risk)
Source: BNM (unpublished data), ENCORE, WB calculations
Note: Sectors according to the Statistical Classification of Activities in the European Community (NACE)
Real estate activities
Construction of buildings
Wholesale trade, except of motor vehicles and motorcycles
Crops and animal production, hunting and related service activities
Manufacture of food products
Accommodation
Retail trade, except of motor vehicles and motorcycles
Wholesale and retail trade and repair of motor vehicles and motorcycles
Warehousing and support activities for transportation
Others
26.6%
15.4%
9.0% 7.7%
5.7%
4.2%
4.1%
2.1%
2.1%
23.2%
Among all ecosystem services, Malaysian banks depend most strongly on individual ecosystems
which provide surface water (30 percent), ground water (14 percent), flood and storm protection (16
percent), and climate regulation (26 percent) (Figure 15). Of every RM per loan, almost half depends highly
or very highly on these four ecosystem services. For instance, Ulu Muda forest complex, covering 7 forest
reserves, is an important water catchment forest not only for Kedah (96 percent of its water supply), but also the
neighboring states of Penang and Perlis (80 percent and 50 percent of water supply respectively) (Sharma 2016,
Ramasamy 2017). Flood and storm protection is becoming increasingly important as climate change grows.
For example, floods have already had a substantial impact in Malaysia, with the recent Klang Valley and East
Coast floods. The high dependence on climate regulation – long-term carbon storage in natural assets such as
soils, vegetable biomass, and the oceans, as well as the role of vegetation to modify temperatures, humidity,
and wind speeds at local levels – indicates the strong relevance of natural asset intactness moderating climate
change impacts. This shows how climate- and nature-related risks are interacting, with large potential for co-
benefits from policy, regulation, and investment.
These dependencies of Malaysian banks on ecosystem services vary widely across the types of banks
and across individual banks within the same category.50 Ecosystem service dependency varies across bank
types, with commercial banks (54 percent) and Islamic banks (55 percent) showing the highest dependency.
Both bank types are specifically dependent on climate regulation and surface water, indicating their large
exposure towards real estate activities and wholesale sectors. DFIs (46 percent) show a relatively strong
dependency on flood and storm protection, indicating the importance of infrastructure and agricultural sectors
in their loan portfolio. Dependencies on ecosystem services vary across individual banks, even within the same
bank type (Figure 16). Investment banks have the lowest exposure to ecosystem service dependent sectors on
average (40 percent), with a high variability across peers. While the overall categories of commercial banks and
Islamic banks have the highest dependency on ecosystem services in their loan portfolios, for individual banks
dependency can be as low as 10 percent. Those dependencies are often driven by a specific lending focus in
banks’ portfolios, with agriculture, real estate, and construction lending showing high dependencies.
35An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
Figure 15: Dependency of the commercial lending portfolio to individual ecosystem services
(percentage)
Source: BNM (unpublished data), ENCORE, WB calculations
Figure 16: Unweighted share of commercial lending portfolio with high or very high
dependencies on ecosystem services by type of bank
Surface water
E
co
sy
st
em
S
er
vi
ce
Climate regulation
Flood and storm protection
Ground water
Water �ow maintenance
Soil quality
Mass stabilization and erosion control
Disease control
Buffering and attenuation of mass �ows
Pest control
Pollination
Water quality
Animal-based energy
Fibers and other materials
Maintain nursery habitats
Very high dependency
0 20 40 60 80 100
High dependency
Share of Total Credit to Economic Sectors in %
Other
80
70
60
50
40
30
20
10
0
Islamic Banks Development Finance Institutions Investment Banks Commercial Banks
P
er
ce
nt
ag
e
Bank Type
Source: BNM (unpublished data), ENCORE, WB calculations
36 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
Nature-related financial transition risk could emerge for Malaysian banks through the financing of
companies that have negative impacts on biodiversity and ecosystem services, as these companies
could face regulatory or reputational implications. A transition to conserve and restore biodiversity may
expose companies, and the banks financing them, to potential disruptions and shocks (see Section 1.3 for
details). Regulatory and reputational issues could emerge for entire sectors, posing sectoral transition risk.
For example, in 2019, Norway’s USD 1 trillion Government Pension Fund Global, revealed that since 2012, the
Fund had divested from 33 palm oil companies over deforestation risks.51,52 This included Malaysia’s Sime Darby
Plantation, the world’s largest oil palm planter by land size. The Fund also announced that it was asking banks
in Indonesia, Malaysia, and Brazil to adopt No Deforestation criteria for their loans to the agricultural sector
(Norges Bank 2019). The analysis of impacts on ecosystem services follows the same methodology as for the
dependency of ecosystem service assessment.
Eighty-seven percent of the commercial loan portfolio analyzed are channeled to sectors which highly
or very highly impact various natural assets and ecosystem services (Figure 17). This represented RM 639
billion (USD 151 billion) of commercial loans outstanding to these sectors as of December 2020. Malaysian banks
could face high risk to changes in regulations, technologies, and consumer preferences driven by concern over
these environmental impacts. This further emphasizes the importance for the financial sector to start taking
actions to mitigate such transition risk.
https://www.nbim.no/en/the-fund/investments/holdings-as-at-31.12.2018/
https://www.regnskog.no/en/news/norways-government-pension-fund-acts-against-deforestation-divests-major-agricultural-companies
51
52
2.2 Impacts on Ecosystem Services
Figure 17: The environmental impact of financial sector lending per Malaysian ringgit
invested (in million RM)
Source: BNM (unpublished data), ENCORE, WB calculations
Commercial Banks
Real estate activities
Infrastructure holdings
Construction
GHG emissions
Solid waste
Water use
Terrestrial ecosystem use
Water pollutants
Soil pollutants
Disturbances
Non-GHG air pollutants
Freshwater ecosystem use
Marine ecosystem use
Other resource use
Distribution
Islamic Banks
Investment Banks
DFIs
Commercial Banks
Real estate activities
Infrastructure holdings
Construction
GHG emissions
Solid waste
Water use
Terrestrial ecosystem use
Water pollutants
Soil pollutants
Disturbances
Non-GHG air pollutants
Freshwater ecosystem use
Marine ecosystem use
Other resource use
Distribution
Islamic Banks
Investment Banks
DFIs
37An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
Figure 18: Relative commercial lending exposure to NACE sectors with high or very high
impacts
Source: Based on unpublished BNM data and ENCORE data
Real estate activities
Wholesale trade, except of motor vehicles and motorcycles
Construction of buildings
Civil engineering
Retail trade, except of motor vehicles and motorcycles
Crops and animal production, hunting and related service activities
Manufacture of food products
Others
43.0%
16.6%
11.2%
9.6%
6.1%
5.1%
4.8%
3.5%
The impacts considered here are classified as high or very high impacts. 53
Yet, the commercial lending portfolio of Malaysian banks that highly or very highly drive impacts, are
mainly accounted by six sectors which are responsible for over half of those impacts. This is both due
to the size of lending exposure and the sectoral characteristics. Those sectors include real estate activities (17
percent), wholesale trade (11 percent), construction of buildings (10 percent), civil engineering (6 percent), retail
trade (5 percent), and crops and animal production (5 percent) (Figure 18). Drivers of environmental impact,
such as excessive water use, in turn affect the underlying natural assets, such as species, water, and habitat.
The banking sector could be particularly exposed to these drivers of environmental impacts given that
Malaysia is a megadiverse country and the structure of its economy largely comprises production
activities that are closely tied to natural assets and ecosystems. However, as becomes evident, the
sectoral impacts on natural assets and ecosystem services are less concentrated than sectoral dependencies
on ecosystem service provision. This indicates the wide range of economic activities that have a negative
impact on nature and the scope of the challenge to reduce those impacts.
Among all impact drivers, the ones individually impacted the most53 through commercial lending by
Malaysian banks are GHG emissions (61 percent), water use (56 percent), and terrestrial ecosystem
use (43 percent) (Figure 19). Of every RM of lending by the banks, about 40 cents are in sectors that highly
or very highly impact these three impact drivers. This indicates the strong exposure of the natural assets that
are most severely impacted by those impact drivers. GHG emissions are a main driver of impact on ecosystem
services by contributing to climate change, which highlights the interlinkage between climate-related and
nature-related risks. It further highlights the relevance of marine and terrestrial protected areas to lower
impacts, and helps to maintain key ecosystem service provision in Malaysia. Enforcement of existing protected
areas and the creation of new areas could pose significant nature transition risk to the Malaysian banking sector.
38 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
Figure 19: Impact of the commercial lending portfolio on impact drivers from firms’ business
activities (in percentage)
Source: BNM (unpublished data), ENCORE, WB calculations
GHG emissions
Im
p
ac
t
d
ri
ve
rs
Water use
Terrestrial ecosystem use
Solid waste
Soil pollutants
Disturbances
Non-GHG air pollutants
Water pollutants
Freshwater ecosystem use
Marine ecosystem use
Other resource use
Very high
0 20 40 60 80 100
High
Share of Total Credit to Economic Sectors in %
Other
39An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
The impacts of Malaysian banks on natural assets and ecosystem services are generally high but vary
across types of banks and individual banks.54 Impact drivers vary strongly across individual banks (Figure
20), depending on their lending focus. Banks that have a large exposure towards real estate activities and
infrastructure projects, for instance, contribute to the deterioration of natural assets and ecosystem services
via GHG emissions, terrestrial ecosystem use, and water-related impacts (i.e., water use and water pollutants).
This partially explains why DFIs have a relatively high impact on natural assets and ecosystem services in their
loan portfolio (95 percent), followed by Islamic banks (89 percent). There is a relatively low variability in impact
among DFIs and Islamic banks, indicating a homogenous impact in their lending activities amongst peers (e.g.,
DFIs usually lend to sectors with high impacts on nature such as infrastructure and agriculture55). Investment
banks show the lowest impact on average; but it is still 70 percent. Additionally, there is high variability across
the group.
Figure 20: Unweighted share of commercial lending portfolio with high or very high impact
drivers from firms’ activities on natural assets and ecosystem services by type of bank
Source: BNM (unpublished data), ENCORE, WB calculations
100
90
80
70
60
50
40
30
Islamic Banks Development Finance Institutions Investment Banks Commercial Banks
Pe
rc
en
ta
g
e
Bank Type
It should be noted, however, that the indicated impacts per bank level rely on sectoral global averages from the ENCORE database. Ecosystem service
impacts might differ depending on project design and should ultimately be assessed on a project level. For instance, a civil engineering project that includes
a comprehensive environmental impact assessment in the planning phase might be far less impacting on ecosystem services compared to conventional real
estate projects.
Note that impact might vary with projects and only global averages are considered here. For example, a sustainable agriculture project with no fertilizer and
pesticide use and space for species that is financed by a DFI might actually create a nature-positive impact.
54
55
40 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
The upstream palm oil sector is often linked with deforestation, making it particularly susceptible
to transition risk. The sector is particularly relevant for Malaysia as it contributed to 2.7 percent of
the country’s GDP in 2019 and is its biggest agricultural export (DOSM 2021). However, shifts in public
perception and increased investor pressure have led to an increased focus on reducing the use of
commodities with negative environmental impact within the supply chains and production processes
of companies. The environmental concerns linked to palm oil have triggered major regulatory and
market movements, such as the EU’s 2019 Renewable Energy Directive, which requires that by 2030,
no crop sourced from recently deforested areas or peatlands can be used to produce biofuels.56
These considerations linked to negative environmental impacts of the palm oil sector in Malaysia
can be a source of transition risk to companies and the financial institutions linked to them. Already,
there have been tentative signs of transition risk impacting companies’ stock price performance.
While crude palm oil prices rose 42 percent year to year in November 2021, the FBM KLCI Plantation
Index slipped 3.8 percent during the corresponding period. This was partly attributed to the “steep
ESG discount attached to plantation stock valuations” amid “deforestation, fire and haze, and labor
concerns”.57
The Malaysian government has enacted policy measures to boost the share of sustainability
certified palm oil58, aiming to mitigate such transition risk. It has enforced mandatory sustainability
standards under the Malaysia Sustainable Palm Oil (MSPO) scheme, which mandate all oil palm
plantations to be certified for sustainability (Malaysia Palm Oil Board, Government of Malaysia). As of
end-2020, 88 percent of the total oil palm planted area in Malaysia, equivalent to 5.2 million hectares,
has been MSPO certified.59 Meanwhile, 21 percent of the planted area has also been certified under
the internationally recognized Roundtable on Sustainable Palm Oil.60 There is also a proposal to cap
the area of oil palm plantations to 6.5 million hectares by 2023, whereas the area recorded in 2018
was 5.8 million hectares.61
BOX 2
Case Study – Transition risk for Malaysia’s
palm oil sector
https://ec.europa.eu/commission/presscorner/detail/en/MEMO_19_1656
CPO Price Rally Marred by ESG Concerns, Public Invest Research Sector Update November 8, 2011
https://www.eco-business.com/news/what-is-sustainable-palm-oil/
https://mspotrace.org.my/Home
https://rspo.org/news-and-events/news/press-release-positive-growth-for-sustainable-palm-oil
https://www.thestar.com.my/business/business-news/2021/01/05/malaysia-committed-to-cap-total-oil-palm-planted-area-at-65m-hectares
56
57
58
59
60
61
Figure 21: High resolution Malaysia industrial and smallholder oil palm map for 2019
Source: Adrià et al. 2021, WB calculations
Sabah
Sarawak
Selangor
Kuala Lumpur
Putrajaya
Labuan
Pahang
Perak
Melaka
Pulau Pinang
Negeri
Sembilan
Terengganu
Kelantan
Kedah
Perlis
Johor
Industrial oil palm plantations Smallholder oil palm plantations Other land cover
41An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
Malaysian banks could also be exposed to spatial biodiversity transition risk by financing companies
that operate in nature and biodiversity-relevant areas. To protect those sites, the government could
introduce new protective policy measures that would restrict or even impede business operations in those
locations. Companies could face relocation costs or a need to adjust business models, potentially weakening
their financial position. Consequently, transition risk for the Malaysian banking sector could emerge.
Ambitious global nature conservation targets would require Malaysia to significantly increase its
protected area scope (currently at about 13 percent of its land area [UNEP-WCMC 2021]), posing a
potential risk for firms that currently operate in to-be protected areas. Recent research shows that more
ambitious and urgent steps are needed to stop the rapid decline in biodiversity (IPBES 2019). Thus, a target of
30 percent protection of the Earth’s land and sea area by 2030 (“30x30” goal) is currently being discussed62 and
was officially put forward at the UN Convention on Biological Diversity in October 2021 in Kunming, as part of
the ‘Kunming Declaration’ (2021).63 This would mean a significant step-up compared to the 2010 declared Aichi
Biodiversity Targets, which aim for 17 percent of terrestrial and 10 percent of maritime area protection across
the globe (currently at 15 percent globally [Lewis et al. 2019]).
Current non-protected KBA could serve as a proxy for areas that could become protected if Malaysia
follows the targets of the ‘Kunming Declaration’. Protecting currently non-protected KBA would increase
the share of terrestrial protected areas (Figure 22, panel a and b) of total land area from 13 percent (UNEP-
WCMC 2021)64 to about 24 percent. However, KBA relevance is not equally distributed across Malaysian states
(Figure 23). States such as Perak, Pahang, Kedah, and Selangor are biodiversity hotspots, with KBA making up
almost 50 percent of Perak’s land area. While Malaysia has seen ambitious efforts in stepping-up protected
areas since the 2000s (UNEP-WCMC 2021), a large share of KBA in Malaysian states is currently non-protected
(see light blue bars in Figure 23 as a share of dark blue bars). As such, firms currently operating in those regions
could be restricted, with implications for their financing banks.
For the spatial transition risk analysis, postal code-based lending data65 for commercial non-
residential and residential property purchases (excluding household loans) are mapped to KBA. KBA
could potentially be designated as protected in the future and it is thus relevant to see banks’ financial exposure
to those areas. This report refers to the gap between the protected areas and KBA as “currently non-protected
KBA” and is intended to provide a proxy for areas that could become protected in the future. The sample has
loans outstanding and the location of loan utilization as of December 2020 and covers about 5 percent of the
overall commercial lending data sample.
The Malaysian banking sector has RM 329 million (USD 78 million) in lending exposure to firms
that are active in currently non-protected KBA, although limitations in the analysis, such as data
restrictions, suggest this could be a conservative estimate. Figure 24 shows the geographical distribution
of Malaysian banks’ commercial residential and non-residential property lending that occurs in currently non-
protected KBA.
Malaysia is also currently considering protecting at least 30% of terrestrial areas and inland waters and 15% of coastal and marine areas through an effectively
managed and ecologically representative system of protected areas and other effective area-based conservation measures by 2030.
Due to COVID-19, the final negotiations on the Kunming Declaration will not take place until May 2022.
Terrestrial protected areas are as of 2016, marine protected areas as of 2022.
Data correspond to the location of loan utilization i.e., where the economic activity is undertaken.
62
63
64
65
2.3 Activities in Key Biodiversity Areas
42 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
Figure 22: Protected areas in Malaysia
Source: UNEP-WCMC 2021, WB calculations
Malaysia
W.P. Putrajaya
W.P. Labuan
W.P. Kuala Lumpur
Terengganu
Selangor
Sarawak
Sabah
Pulau Pinang
Perlis
Perak
Pahang
Negeri Sembilan
Melaka
Kelantan
Kedah
Johor
St
at
e
% of total state area
0 5 10 15 20 25
Protected area share within Malaysian States
a) Protected terrestrial area share of total state area as of 2016, by state in Malaysia (percent)
b) Protected area (state parks, wildlife reserves, forest reserves) in Malaysia (terrestrial and marine)
Sabah
Sarawak
Selangor
Kuala Lumpur
Putrajaya
Labuan
Pahang
Perak
Melaka
Pulau Pinang
Negeri
Sembilan
Terengganu
Kelantan
Kedah
Perlis
Johor
State park Wildlife reserve Forest Reserve
43An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
Figure 23: Protected and non-protected KBA as a share of Malaysian States area (percent of
total state area)
Malaysia
W.P. Putrajaya
W.P. Labuan
W.P. Kuala Lumpur
Terengganu
Selangor
Sarawak
Sabah
Pulau Pinang
Perlis
Perak
Pahang
Negeri Sembilan
Melaka
Kelantan
Share of protected KBA
Share of non-protected KBA
Kedah
Johor
St
at
e
% of total state area
Key biodiversity area share within Malaysian States
0 10 20 30 40
Source: Statistical Office Malaysia, IBAT (BirdLife International Partnership, Alliance for Zero Extinction), WB calculations
The share of commercial lending to non-protected KBA of overall commercial lending is relatively
small, which could be explained by three reasons. First, the geospatial resolution of available financial data
only covers residential and non-residential property lending, constituting only a share of 5 percent of overall
commercial lending in our sample. Further, the matching process would benefit from geospatial files that
could provide the full extent of postal code level territories. Second, sectors that are most likely to be active
in those areas include agriculture and mining, only constituting about 5 percent of overall commercial lending
of Malaysian banks (Figure 7). Third, the states with the highest shares of non-protected KBA such as Perak,
Kedah, and Sarawak only make up about 3 percent, 2 percent, and 6 percent respectively of state-level lending
by Malaysian banks (Figure 8), whereas the bulk of the lending of over 60 percent goes to just two states that
have limited KBA in their state area (Kuala Lumpur) or no lending that would occur in KBA (Selangor).
KBA are in areas that are relatively untouched by economic activity as strong economic activity in
those areas would have deteriorated biodiversity and as such impacted their status as KBA. This could
point to the fact that first-order spatial transition risk might not be as problematic for the Malaysian banking
sector but instead second-order dependencies for firms that depend on the primary inputs from agriculture
and mining, such as manufacturing and construction firms, could be indirectly impacted by spatial transition
risk.66 Figure 25 supports this claim as the net balance of potential provision of ecosystem services and use of
ecosystem services for each district in Malaysia differ strongly across the country. The coastal urban areas of
An analysis of upstream and downstream input dependence for selected countries has been conducted by Cahen-Fourot et al. (2020) and Cahen-Fourot et
al. (2021)
66
44 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
https://data.humdata.org/67
Figure 24: Commercial residential and non-residential purchase lending exposure by Postal
Code area of Malaysian banks to non-protected KBA
Source: Statistical Office Malaysia, IBAT, BirdLife International Partnership, Alliance for Zero Extinction, BNM (unpublished data), Humanitarian Data Exchange
2021,67 WB calculations
Figure 25: Net ecosystem service use (potential vs. realized services index) per district in
Malaysia. Model results from the Co$tingNature version 3 policy support system
Source: Mulligan, M. (2021), Humanitarian Data Exchange 2021, WB calculations
Sabah
Sarawak
Selangor
Kuala Lumpur
Putrajaya
Labuan
Pahang
Perak
Melaka
Pulau Pinang
Negeri
Sembilan
Terengganu
Kelantan
Kedah
Perlis
Johor
Non-protected key biodiversity areas Protected key biodiversity areas Currently protected areas Financial exposure
0.6
0.4
0.2
0.0
-0.2
-0.4
-0.6
R
el
at
iv
e
to
ta
l p
ot
en
ti
al
s
er
vi
ce
s
in
d
ex
Peninsular Malaysia’s west coast with its strong manufacturing, services, and construction sectors (Figure 9) are
net consumers of ecosystem services. The protected areas in Perak, Pahang, Sarawak, and Sabah, in contrast,
are net providers of ecosystem services.
45An Exploration of Nature-Related Financial Risks in Malaysia
46 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
To assess nature-related financial risks for prudential purposes, there is a need to go beyond exposure
analysis and identify those risk scenarios that can materially affect banks’ balance sheets. The
scenarios should provide a coherent narrative for adverse events that produce severe economic and financial
damage while at the same describing a set of plausible futures. In practice, macroprudential authorities and
micro prudential supervisors often work with scenarios that have yearly probabilities of occurring between 1 in
10 to 1 in 1,000 years, to reflect that distributions of event occurrences might shift with growing climate change
or nature-related risks.
In contrast to climate-related scenarios, however, nature-related risks are less well understood and to
a higher degree multidimensional.68 For example, ENCORE identifies 21 different ecosystem services and
27 different drivers of environmental change. This poses challenges for the development of nature-related
financial risk scenarios and more research is needed on this matter.
A preliminary set of scenarios were developed for this report based on ENCORE, stakeholder interviews,
and an explorative analysis of drivers of nature-related financial risk scenarios in Malaysia.69 The
scenarios capture current banking sector exposure in case of adverse events, such as floods or storms, far-
reaching ecosystem service deterioration, or sudden policy changes, that could affect a combination of different
ecosystem services and thus a multitude of economic sectors. The analysis above considered Malaysian banking
sector exposure to nature risks in sectors and individual or entire ecosystem services. The scenarios for this
section are not projections of business-as-usual, but rather state the current financial exposure if identified
ecosystem services defaulted.
The identification of 21 physical and 7 transition risk scenarios shows the range of the banking sector’s
commercial loans portfolio exposure. Exposure ranges from 44 percent (reduced ecosystem services due
to continued high resource use, pollution, and urban sprawl) to 0.5 percent (species decline due to excessive
hunting) (Figure 26). Scenarios with the highest banking sector exposure are those that would affect a wide
range of sectors, such as a general deterioration of ecosystem services for example due to high resource
use, pollution, and urban sprawl (44 percent) or high rates of deforestation (30 percent). Exposure was also
high regarding scenarios that could affect firms’ costs and business models in multiple sectors, for example
sudden and unexpected climate policy introduction (38 percent), regulatory restriction of water pollution (17
percent), and sudden increase in the price of water (removal of subsidies / market dynamics) (17 percent). Some
physical risk scenarios were only expected to directly affect a few sectors with banking sector exposure. These
included reduced agricultural yields and water pollution due to intense agri- and aquaculture (2.5 percent),
animal disease outbreak (0.8 percent), and severe reduction in available fish stock (0.7 percent).
Sectors that are exposed in almost every physical and transition risk scenario are the agricultural,
forestry, and fishing sectors as they have a high and direct dependence on multiple ecosystem services.
Further, the electricity sector would be affected in multiple scenarios as it is highly dependent on regulating
ecosystem services such as flood and storm protection and climate regulation. Drivers that could lead to the
most severe scenarios in terms of Malaysian banking sector loan exposure are land- and sea use change,
Nature-related risks are often interconnected (e.g., soil erosion, groundwater depletion, biodiversity loss), caused by multiple anthropogenic drivers (e.g.,
intensive agriculture, deforestation, pollution), while acting on multiple scales (from local ecosystems to planetary processes), while interacting with climate
change (Kedward et al. 2020).
See Appendix Section A4 and A5 for details. Appendix Section A4 provides a high-level analysis of the five core drivers of biodiversity and nature loss,
land- and sea-use change, extensive natural resource use and exploitation, climate change, pollution, and invasive species spread (IBPES 2019), as well as
governance and policy uncertainty related issues in the context of Malaysia. Appendix Section A5 describes core findings of the interviews in detail.
68
69
2.4 Physical and Transition Risk Scenarios
47An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
Figure 26: Identified nature-related financial risk scenarios by banking sector exposure
Source: ENCORE, BNM, interviews, WB calculations.
Note: Dark blue scenarios are nature-related financial transition risk scenarios, light blue scenarios are nature-related financial physical risk scenarios. Exposure
amounts are based on the share of corporate loans to economic sectors that could be directly affected in the scenario under consideration.
Reduced ecosystem services due to resource overuse, pollution and urban sprawl
Sudden and unexpected climate policy introduction
Ecosystem services deterioration due to deforestation
Regulatory restriction of water pollution
Sudden increase in the price of water
Severe reduction in available timber
Increase in sea surface temperature
Changed ocean current and circulation
Severe �ooding occurrence
Severe storm occurrence
Extension of protected areas
Increased ocean acidi�cation
Regulatory restriction of non-sustainable pesticides
Regulatory restriction of non-sustainable fertilizers
Lower clean water availability due to continously high water pollution
Lower water availability for other ecosystem services
Severe drought occurrence
Reduced agricultural yields and water pollution
Atmospheric pollution causing deterioration of ecosystem services
Unmanaged waste disposal and soil pollution affecting habitats
Severe wild�re occurrence
Species decline due to excessive hunting
Invasive species sprawl
Animal disease outbreak
Species decline due to genetic modi�cation
Severe reduction in available �sh stock
Pest outbreak
Regulatory / market backlash against non-sustainable forestry
N
at
ur
e-
re
la
te
d
�
na
nc
ia
l r
is
k
sc
en
ar
io
Share of total commercial loans outstanding (%)
0 20 40
natural resource use and exploitation, and climate change. Further, governance is an important scenario driver,
especially with respect to transition risk.
Within the environmental risk dimension of the ESG framework on sustainability, nature-related risks
complement and partly overlap with those risks associated with climate change. For example, this study
found that two important nature-related risk factors to which Malaysian banks have exposure are: (1) imposition
of more stringent climate policies and (2) efforts to preserve nature’s function as a store of CO2. However, there
are highly relevant risk factors not directly related to climate change – including extensive water use, land use,
and pollution other than GHGs.
This report restricts itself to a ‘possibility range’ of nature-related risk scenarios. The reported scenarios
are not projections of a business-as-usual scenario. They constitute a range of possible nature-risk scenarios for
Malaysia. The materialization and degree of risk depends on vulnerability, likelihood of occurrence, and indirect
impacts, which require further research. In general, the likelihood and financial consequences of specific nature-
related risk scenarios are challenging to determine given the complexity, non-linearity, and endogeneity of
causal relationships (Svartzman et al. 2021; NGFS 2021; Kedward et al. 2020). Likelihood of occurrence would
depend on the current conditions of scenario relevant aspects such as natural assets or policy regulation as
well as an uncertainty range, considering nature and policy related factors as well as shared socioeconomic
pathways.70 There exists a wide range of models that could assess impacts of scenarios of drivers of biodiversity
and ecosystem service-related issues (Kim et al. 2018; Lade et al. 2021; Schaphoff et al. 2018) but important
knowledge gaps specifically with respect to economic and financial impacts remain (IPBES 2016). Studies on
nature-related risks from diverse countries can help fill these gaps (See Box 3).
See O’Neill et al. (2014) for discussion of shared socioeconomic pathways and their use.70
48 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 2 - Exposure Assessment
Central banks around the world are increasingly beginning to investigate biodiversity and
other nature-related impacts and dependencies of financial systems. Initial studies by central
banks including the Netherlands (van Toor et al. 2020), France (Svartzman et al. 2021), and
Brazil (Calice et al. 2021) were recently published. In each country, the studies indicate material
exposures to risks resulting from biodiversity loss.
Results from these countries are not necessarily directly comparable to those of Malaysia
but are described here as additional context. This is due to differences in: 1) economic
structures, 2) level of biodiversity (Brazil is classified as megadiverse like Malaysia but France
and the Netherlands are not), 3) study scope and methodologies applied (only Malaysia looks at
transition risk from ENCORE drivers of environmental impacts), and 4) scope of data used for
the analysis (each study relied on the ENCORE database for data on ecosystem services, but in
the Netherlands this covered not only banks’ corporate loan portfolio, as in Malaysia, but also
other parts of the financial system).
• The Netherlands: Van Toor et al. (2020) find that financial institutions have material
exposures to risks resulting from biodiversity loss and that the sector finances companies
that have an impact on biodiversity. Dutch financial institutions have provided EUR 510
billion in finance (36 percent of the portfolio of investments by Dutch financial institutions)
to companies that are highly or very highly dependent on one or more ecosystem services.
Financial institutions also have exposure of EUR 28 billion to companies operating in areas
that are protected or that might come under protection and EUR 96 billion of investments in,
or loans to, companies involved in environmental controversies with negative consequences
for ecosystem services or biodiversity.
• France: Svartzman et al. (2021) also find substantial exposures to biodiversity risks in its
estimates of dependencies and impacts of the French financial system on biodiversity. 42
percent of the value of securities held by French financial institutions comes from issuers that
are highly or very highly dependent on one or more ecosystem services. The accumulated
terrestrial biodiversity footprint of these securities is comparable to the loss of at least
130,000 km² of “pristine” nature, which corresponds to the complete artificialization of 24
percent of the area of metropolitan France.
• Brazil: Results in Calice et al. (2021) also suggest that exposures to biodiversity loss
and related economic costs are material. 46 percent of Brazilian banks’ non-financial
corporate loan portfolio is concentrated in sectors highly or very highly dependent on
one or more ecosystem service. Output losses associated with the collapse in ecosystem
services could translate into a cumulative long-term increase in corporate non-performing
loans of 9 percentage points. 15 percent of Brazilian banks’ corporate loan portfolio is to
firms potentially operating in protected areas, which could increase to 25 percent should
conservation gaps close, and 38 percent should all priority areas become protected. Finally,
7 percent of corporate loans are to firms with recorded environmental controversies.
BOX 3
Context for nature-related risks to the
financial sector: Findings from the Netherlands,
France, and Brazil
49An Exploration of Nature-Related Financial Risks in Malaysia
Potential Actions to
Address Nature-Related
Financial Risks
CHAPTER 3
50 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 3 - Potential Actions to Address Nature-related Financial Risks
Based on the initial assessment on nature-related financial risks to the financial sector in Malaysia
and the exposures identified, further steps could be considered by financial sector regulators and
supervisors in Malaysia in tandem with its ongoing climate change initiatives to effectively manage
nature-related financial risks. Although the discussion on nature-related financial risks is still at a nascent
stage compared to climate-related financial risks, BNM, as part of its mandate to promote monetary and financial
stability conducive to the sustainable growth of the Malaysian economy, could take a proactive approach
to gradually build its internal regulatory and supervisory capacity in identifying, assessing, monitoring, and
managing nature-related financial risks.
Efforts to address nature-related financial risks could follow a similar roadmap as used to address
climate-related financial risks, where BNM has adopted a phased strategy. Initial efforts could focus
first on increasing awareness of nature-related financial risks and capacity building. Later efforts could enhance
existing regulatory and supervisory measures, in line with the evolving global regulatory and supervisory good
practices, to which BNM could also help contribute knowledge development and regulatory discourse on
nature-related financial risks in the region and globally – as part of bodies such as the NGFS.
Four domains where actions could be undertaken are: (1) Raising awareness, stakeholder engagement, and
policy discourse on understanding nature-related financial risks, (2) Enhancing capacity building of relevant
stakeholders, (3) Strengthening macroeconomic surveillance capacity and risk identification, and (4) Developing
regulatory and supervisory requirements, described in further detail below.71 Actions are categorized according
to intensity of effort, recognizing that resources are scarce in any central bank and trade-offs will need to be
made in allocating resources to nature-related risks, particularly relevant during this COVID-19 period.
While this report focuses on actions that are largely in the domain or sphere of influence of BNM as
a central bank, it recognizes that national governments bear primary responsibility and have broader
tools to address biodiversity loss and climate change in an integrated manner. Additional actions could
be considered by other Malaysian authorities as the country moves towards a net-zero economy. For instance,
the Ministry of Environment and Water could better coordinate alignment between upcoming climate policies,
such as the Long-term Low Emissions Development Strategy, with the action plans and targets of the National
Policy on Biological Diversity. Delineating nature-positive low carbon pathways would be an important step to
avoid potentially negative trade-offs from climate mitigation strategies that could have detrimental impacts on
biodiversity and ecosystem health (e.g., poorly designed low-carbon infrastructure or energy projects). Such
broader efforts to promote integrated approaches to nature-related risks would lend greater impetus and
impact to financial sector actions.
1. Raising awareness, stakeholder engagement, and policy
discourse on understanding nature-related financial risks:
• Socialize key themes from this report with key stakeholders: As part of the broader discourse in
Malaysia on nature and biodiversity, and in parallel with other efforts to support climate action, BNM could
socialize findings of this report with government agency stakeholders such as the Ministry of Environment
and Water and the Ministry of Energy and Natural Resources. BNM could also encourage engagement of
state-level agencies and the broader community of non-government and financial sector professionals,
including its supervised financial institutions.
See also the recent World Bank report (2021c) for more universal recommendations on nature-related actions.71
51An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 3 - Potential Actions to Address Nature-related Financial Risks
• Contribute to knowledge programs that raise awareness of nature-related financial risks: BNM could
share its understanding of nature-related financial risks within knowledge programs on climate change
and other relevant themes as part of its efforts to address emerging risks.
• Advocate and work closely with the government to ensure nature-related financial risks are
considered in relevant policies and investment decisions. Complementary actions could include
encouraging the public and private sector to consider the value and price of ecosystem services and
relevant policies in investment decisions. Natural capital accounting (as, for instance, proposed by the UN
System of Environmental Economic Accounting)72 provides a more comprehensive stocktake of a country’s
natural wealth (WB 2021a). It can support government, regulators, and private sector participants to better
manage natural assets and inform investment and development decisions for conservation, restoration,
and sustainable use of nature.
• Encourage and support the government towards developing a cohesive national strategy to
address nature-related risks along with climate change: Plans to address nature-related financial risks
for the wider financial sector should be designed to leverage synergies with ongoing efforts for climate
change. Coordinated efforts would support timely and smooth implementation and support effective
prioritization amidst multiple competing priorities. It would also avoid unintended consequences such as
detracting efforts from ongoing climate change implementation.
2. Enhancing capacity building of relevant stakeholders:
• Expand capacity building and stakeholder engagement with key working groups for the financial
sector: Existing capacity building and stakeholder engagement programs under the JC3 could be
leveraged and expanded to include increased awareness of nature-related risks with other stakeholders.
• Collaborate with key knowledge partners to build understanding and tools for nature-related
financial risks. Further collaboration with conservation organizations, ecologists, and interdisciplinary
academic researchers can help to strengthen understanding and tools for assessing nature-related risks.
• Support development of incentives and instruments to mobilize private finance for the protection
and management of biodiversity and ecosystem services. A key challenge is to attract private finance
for the conservation of nature, particularly when financial returns to investment are low. Along with other
stakeholders, BNM could support the development of short-term financial incentives for companies to
implement their sustainability strategies or to drive nature-smart investments73 and disseminate relevant
information on borrowers, incentives, and instruments for greater mobilization of private finance for
protection and management of biodiversity and ecosystem services (see Box 4).
• Provide financial sector perspectives to government to expand existing government grants/funds
related to climate change to encompass goals relevant to protection of biodiversity and ecosystem
services: Over time, BNM and other stakeholders could advocate expanding existing funds for mitigating
the impacts of climate change to encompass goals that reduce nature-related risks. In addition, DFIs have
https://seea.un.org/
A range of instruments to encourage private finance, including the sustainability linked loan tying interest rates to a company’s reduction of biodiversity impact
and associated risk and incentives to bridge the gap between public and private financing, are discussed in the World Bank report, Mobilizing Private Finance
for Nature (2020).
72
73
52 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 3 - Potential Actions to Address Nature-related Financial Risks
One of the key issues hampering protection of nature in Malaysia has been the lack of
funds available for habitat and species conservation activities. State governors are often
landowners of key areas but have traditionally been reliant on revenues from natural resource
extraction practices such as timber harvesting, mining, and agricultural development that can
be detrimental to ecosystems.
Governments and regulators can help harness the power of the financial sector to mobilize
private finance at a scale to protect nature. The 2021 WB Report on Mobilizing Private Finance
for Nature highlighted a set of ideas including: (1) environmental fiscal reforms: using reforms as
part of COVID-19 crisis recovery plans, reforming agricultural subsidies and land ownership with
detrimental impacts, (2) national data provision: supporting the integration of nature-related
criteria in financial decisions by adopting national capital accounting practices and providing
relevant data as a public good, (3) establishing a task force for nature-related financial disclosure
(TNFD) (discussed in Box 5) to provide a framework for reporting and risk assessment, (4)
identifying companies with the greatest negative impact on nature, and v) providing catalytic
capital from multilateral development banks and government to funds and other financial
instruments to finance nature.
Financial incentives can help drive the transition to a nature-smart economy. For example, in
2019, Bunge, one of the world’s largest agricultural producers, took out its first sustainability-
linked loan. The interest rate was tied to the company reducing its biodiversity impact and
associated risks, namely increasing traceability for its main agricultural commodities, and
adopting sustainable practices across its wider soybean and palm oil supply chain. These
instruments have the potential to help drive the transition to a nature-smart economy by offering
short-term financial incentives for companies to implement their sustainability strategies.
Enabling financial infrastructure can also help green finance. In 2020, the Central Bank of
Brazil launched the sustainability pillar of its strategic plan which included the creation of a
Sustainable Rural Credit Bureau. This will be associated with the rural credit information system
and contain information on farmers’ sustainable practices as part of efforts to mitigate social,
environmental, and climate risks in the financial system. Rural credit beneficiaries can make
information registered in the new system (replacing its existing rural credit and agricultural
operations system) available to any interested party. Several of the 270 data fields collect and
verify information on the environmental and sustainability practices of each operation. A set
of parameters associated with the sustainability of rural projects will be prepared, which will
allow agricultural policy makers to assess the possibility of granting additional incentives to the
financing of these projects (Banco Central Do Brasil 2021).
BOX 4
Mobilizing private finance for nature
a mandate to support national development objectives and may show substantial exposure to nature-
related financial risks. Given their proximity to government and status as regulated entities, their funding
could also be leveraged to mobilize private capital towards green finance and provide a demonstration
effect of how sustainable finance could be mainstreamed within their own operations.
53An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 3 - Potential Actions to Address Nature-related Financial Risks
3. Strengthening macroeconomic surveillance capacity and risk
identification
• Improve understanding of interacting factors between climate and nature-related financial risks: In
the near-term, BNM could consider further developing its understanding of relevant scenarios, transmission
channels, and modelling methodologies, while continuing to monitor exposures to nature-related risks
periodically. This work could be informed by the developing global discourse on nature-related financial
risks, and could also influence it, given Malaysia’s relatively unique status as a megadiverse country with
high dependence on its ecosystem services.
• Incorporate a basic concept of nature-related financial risks in existing plans for a surveillance
framework on climate risks: This element could be incorporated where both risks have strong synergies,
such as deforestation and disaster resilience, without requiring an additional surveillance framework
related to nature-related risks.
• Improve data collection relevant to managing nature-related financial risks: Stronger collaboration
and coordination amongst interdisciplinary stakeholders such as ministries, regulators, the private sector,
and academics and experts from economic and natural sciences disciplines can help to fill gaps in
data needed to manage both climate and nature-related risks and support sharing of proprietary data,
particularly at local levels. Specifically, this could focus on building capacity to provide data on economic
impacts under different nature-related physical and transition risk scenarios (parallel to similar efforts
on climate-related risks). This could help identify the risks and opportunities that are most relevant for
Malaysia and complement the global data obtained from ENCORE. Government authorities could also
establish centralized environmental databases (e.g., forest cover and protected area maps, emissions
data, water stress maps, etc.) that are accessible and frequently updated as a public good to support
wider monitoring efforts. This process could also leverage ongoing work by the JC3 subcommittee
on data needs, which has undertaken a stakeholder consultation process to identify and prioritize the
collection of climate data for uses such as exposure quantification, investment and lending decisions, and
macroeconomic and financial stability modeling. Indicators on biodiversity are among the data that could
be considered for prioritized collection. Building these data over time, not only for the banking sector,
but also for non-bank financial institutions exposed to nature-related risks (e.g., insurance/takaful) could
provide a clearer picture of nature-related risks in the financial system.
• Consider nature-related financial risks as part of high-level reference scenarios for Malaysia: In the
medium to long term, Malaysia could develop stress testing for nature-related scenarios alongside those
being developed to examine climate-related risks.
• Consider supervisory deep dives at select banks that are deemed at higher risk: These supervisory
efforts could look at banks whose data indicates a greater level of risk, for example those who are financing
activities in (future) protected areas.
54 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 3 - Potential Actions to Address Nature-related Financial Risks
4. Enhancing regulatory and supervisory guidance related to
nature-related financial risks
• Enhance existing guidance in relevant taxonomies and frameworks to include findings on nature-
related financial risks: BNM could expand guidance for biodiversity or nature-related aspects in its CCPT
(BNM 2021) and Value-based Intermediation and Impact Assessment Framework (VBIAF) (BNM 2019) to
include more prominent considerations of nature-related financial risks. The CCPT adopts the principle
of ’do no significant harm to the environment‘, which means that an economic activity must protect
healthy ecosystems and biodiversity in order to satisfy the principle’s assessment criteria. Similarly, the
ASEAN Taxonomy for Sustainable Finance has also recognized the protection of healthy ecosystems
and biodiversity as a key environmental objective in its consultative draft. Guidance could be expanded,
for example by incorporating the concepts of drivers of environmental impacts and dependencies on
ecosystem services in the assessment process.
• Signal expectations for supervised financial institutions to understand the most relevant nature-
related financial risks faced by their institution: Based on the findings of this study, BNM could facilitate
further analysis and deep dives on potential risk exposures that stand out or indicate baseline practices
that could be adopted by financial institutions to identify high exposures to nature-related financial risks.
• Enhance climate-related regulatory guidance on risk management and voluntary disclosures with
specific aspects of nature-related financial risks: BNM could also consider efforts to enhance regulatory
guidance on climate-related disclosures with voluntary disclosure guidance on nature-related financial
risks, such as those being piloted by the TNFD (described in Box 5).
• Communicate regulatory and supervisory expectations on managing nature-related financial risk
along with climate change risks for supervised institutions: In the longer term, as diagnostics mature
and international guidance develops, regulatory and supervisory expectations and requirements could
be formulated in line with evolving good practices. For institutions that have high exposures to vulnerable
sectors or regions, BNM could communicate additional expectations and include consideration of nature-
related financial risks as part of the supervisory process.
• Develop a monitoring system for new credit to be compliant with climate and nature-related
regulations: Such a system could include mechanisms for checking whether business activities will take
place in (future) protected areas. As described in Box 4, Brazil is developing a Sustainable Rural Credit
Bureau which will be associated with the rural credit information system and contain information on
farmers’ sustainable practices as part of efforts to mitigate social, environmental, and climate risks in the
financial system.
55An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 3 - Potential Actions to Address Nature-related Financial Risks
Following the global push for companies to disclose their climate-related risks and
opportunities, momentum has recently been building behind the nature-related disclosure
agenda. The TCFD four pillars framework has become the most used framework globally for
corporations and other organizations disclosure on climate criteria. A TNFD was formally launched
in June 2021 with the mandate to build a similar framework for nature. The mission of the TNFD
is, “to develop and deliver a risk management and disclosure framework for organizations to
report and act on evolving nature-related risks, which aims to support a shift in global financial
flows away from nature-negative outcomes and toward nature-positive outcomes.”
The TNFD has committed to working closely together with standard setting and disclosure
mechanism bodies to promote global consistency for nature-related reporting, building upon
the structure and foundation of the TCFD. The TNFD aspires to ensure the two frameworks
will be comprehensive in their coverage of climate and nature-related financial risks, and
complementary in their usability and adoption by market participants. The G7 Finance Ministers
and G20 Sustainable Finance Roadmap have endorsed the TNFD, and the governments of
Switzerland, the United Kingdom (UK), France, the Netherlands, and Australia are its funding
partners.
The TNFD will go through five phases of work from 2021 to 2023: Build, Test, Consult,
Disseminate, and Uptake. According to its website, “The TNFD will not create a new disclosure
standard, but rather establish and promote the adoption of an integrated risk management and
disclosure framework that aggregates the best tools and materials.” The TNFD is taking an open
innovation approach similar to the iterative innovation models used in the technology sector.
The TNFD aims to share the initial high-level architecture of the framework shortly, to enable
early pilot testing and consultation, and then evolve and develop the framework further with
feedback from the market and relevant experts, given the complexity and urgency of the task
of tackling nature-related risks. A beta version of the framework will be released in March 2022.
The most explicit biodiversity disclosure requirements to date have been imposed by France.
Article 173-VI of France’s Energy Transition and Green Growth Law, which went into effect in
January 2016, requires investors to disclose how they factor ESG criteria and carbon-related
aspects into their investment policies. The French Parliament amended Article 173 to require
the disclosure of biodiversity impacts starting in 2021 (Ernst and Young 2017). This prompted
French investors to start to develop better data on nature-related impacts and dependencies
(Mirova 2020). Other European governments are following suit, including the UK, which
pledged in its Green Finance Strategy (2019), to “work with international partners to catalyze
market-led action on enhancing nature-related financial disclosures” (Her Majesty’s Treasury
UK Government 2019). The DNB’s June 2020 report on risks to the financial sector from
biodiversity loss calls for the development of a biodiversity risk disclosure framework (van Toor
et al. 2020). The EU Taxonomy of Sustainable Activities also creates pressure for disclosure.
Conservation and restoration of biodiversity and ecosystems is one of the categories of the
taxonomy. Additionally, all investments under the taxonomy are required to ‘do no harm’ under
its six categories of environmental objectives (European Commission 2020).
BOX 5
Nature-related disclosure developments
Source: Prepared by World Bank and TNFD secretariat staff
56 An Exploration of Nature-Related Financial Risks in Malaysia
57An Exploration of Nature-Related Financial Risks in Malaysia
Conclusions
CHAPTER 4
58 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 4 - Conclusions
4.1 Key Findings
This report provides a first assessment of nature-related financial risks for the Malaysian banking
sector, examining their lending exposure to businesses which depend on and impact nature and its
ecosystem services. Nature-related financial risks for Malaysian banks are examined using a conventional risk
management approach which focuses on risk identification, risk assessment, and risk mitigation with a focus
on exposures to sectors at risk. Better understanding of nature-related risks is key to align capital allocation,
including loan origination, with Malaysian and global sustainability goals. Better understanding of nature-
related financial risks is also important for prudential supervision, to identify any emerging risks on the books
of banks and other financial institutions.
Nature-related risks in Malaysia center around the deterioration of natural assets and ecosystems
tied to water use, climate regulation, GHG emissions, and deforestation, which could have implications
for the Malaysian banking sector.
• About 54 percent of Malaysian banks’ commercial lending portfolio could currently be exposed to
physical risk, being highly or very highly dependent on well-functioning ecosystem services. Dependency
on surface water (29 percent), climate regulation (26 percent), and flood and storm protection (16 percent)
stand out specifically. At the same time, current banks’ lending portfolio allocation is also exposed to
significant transition risk, if the government introduced unexpected nature-related policies or if consumer
preferences were to change (both domestically and abroad).
• About 87 percent of Malaysian banks’ commercial lending portfolio could currently be exposed to sectors
that strongly impact ecosystem services, thus facing a higher level of transition risk. The strongest impact
drivers in this analysis were GHG emissions (61 percent of total lending portfolio), water use (55 percent),
and terrestrial ecosystem use (43 percent).
Findings suggest substantial differences between individual banks in their exposure to sectors that
depend highly on ecosystem services and that highly impact natural assets and ecosystem services.
Those differences can be explained by different target sectors of lending which individual banks lend to;
construction lending, for instance, is strongly dependent on surface water, climate regulation and flood and
storm protection, and generally has strong environmental impacts via terrestrial ecosystem use, freshwater use,
and GHG emissions. For ecosystem services, exposures to one or more highly or very highly dependent sectors
range between 5 and 83 percent of the total commercial loan portfolio for individual banks. For environmental
change, exposures to highly or very highly contributing sectors range between 28 and 100 percent. This
indicates a necessity for more in-depth analysis of individual banks’ portfolio composition and assessment of
respective implications for financial stability.
Transition risk exposure from lending in potentially to-be-protected areas seems currently limited to
less than 1 percent of outstanding loans in our sample, although limitations in the analysis, such as
data restrictions, suggest this could be a conservative estimate. The analysis shows that most Malaysian
bank loans are in areas that are already well developed. Less than one percent of Malaysian banks’ commercial
lending portfolio (RM 329 million, USD 78 million) is estimated to go to firms in currently non-protected KBA.
However, due to data limitations, this may be a somewhat conservative estimate and exposures may be higher.
There may also be an important role for more indirect exposures through supply chain linkages among firms
in and outside protected areas. Also, it could be important to monitor new loan origination practices towards
both currently protected areas and areas that may become protected in the future.
59An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 4 - Conclusions
This report develops a first set of twenty-one nature-related physical and seven transition risk
scenarios, using ENCORE and stakeholder interviews, that show potentially high but heterogenous
banking sector exposure. This serves as a ‘possibility range’ of potential nature-related risk scenarios
and related banking sector exposure, given data and knowledge gaps in assessing likelihood and financial
consequences. Scenarios with the highest banking sector exposure are those that would affect a wide range of
sectors such as a general deterioration of ecosystem services:
• Reduced ecosystem services due to continued high resource use, pollution, and urban sprawl: 44 percent
of Malaysian banking sector’s commercial lending portfolio
• Ecosystem service deterioration due to continued high rates of deforestation: 30 percent
• Policies that could affect firms’ costs and business models in multiple sectors (sudden and unexpected
climate policy introduction): 38 percent.
The agricultural, forestry, and fishing sectors are exposed to almost every physical and transition risk
scenario as they have a high and direct dependence on multiple ecosystem services. Some physical risk
scenarios are expected to directly affect only a few sectors, which constrain banking sector exposure.74
This analysis indicates that the financial sector has an indirect, yet important, two-way relationship
with nature. Recent research by the WB shows that significant benefits could emerge from aligning policy
responses to the nature and biodiversity crisis, including economic stimulus as well as climate change mitigation
and adaptation (Johnson et al. 2021). Banks’ lending behavior is an important determinant of the effectiveness
of policies and of the degree to which nature-related risks could emerge. Their financing impacts the drivers
of environmental change while being dependent on nature and its ecosystem services, constituting a double
materiality (European Commission 2019, Oman and Svartzman 2021).
Thus, banks’ lending behavior has an impact on their financial physical, transition, and liability risk
exposures. By aligning their lending exposure to sectors and activities that benefit nature or do no harm, banks
could in turn lower their risk exposure. In some cases, this could even increase economic and financial returns.
For example, a WB study (2017) indicates that reducing overfishing and overcapacity by 40 percent, could result
in more fish eventually being caught, allowing the recovery of more than USD 80 billion in “sunken billions” (loss
of potential economic rents in global fisheries) while rebuilding the global fish stock.
Those scenarios include amongst others “Reduced agricultural yields and water pollution due to intense agri- and aquaculture” (2.5 percent), “Animal disease
outbreak” (0.8 percent), and “Severe reduction in available fish stock (0.7 percent).
74
The findings of this report could inform and facilitate further policy discussions to better understand
the impacts of nature-related financial risks on the financial sector and economy. BNM, as financial
regulator, could act as a central coordinator for a financial sector action plan, working closely with multiple
stakeholders and in line with the government’s national biodiversity strategy. Further actions related to nature-
related financial risks could be developed that are cohesive and integrated within its existing climate change
strategy. These would consider: (1) national policy discussion and direction on nature-related risks, (2) further
4.2 Potential Actions to Address Challenges
of Nature-Related Financial Risks
60 An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 4 - Conclusions
At the local level understanding is more advanced. 75
The exposure analysis conducted in this report is a step towards a fully-fledged nature stress-test.
However, addressing certain limitations and knowledge gaps would require further research across multiple
stakeholders from natural science, finance, the economy, and society. The analysis in this report can provide
initial insights and a general understanding of potential risks that might become more likely in the future
and that supervisors should consider within their financial stability mandate. More research is necessary to
further refine exposure estimates from the ENCORE tool. A better understanding is needed of economic and
financial vulnerabilities, scenario analysis needs to be refined, and methodologies are required to account for
the economic and societal relevance of sectors beyond GDP and the share of financial exposure.
While it is understood that some activities negatively affect nature and its ecosystem services (Oliver
et al. 2015, Folke et al. 2016), it is unclear when and how this could result in severe economic and
financial losses.75 Like in a Jenga game, where it is the players’ goal to remove a block from a tower in each
round without making the tower fall, the ongoing pressure on nature reduces its resilience, threatening collapse.
Cascading and feedback effects from interactions between different ecosystems could thereby amplify human
impacts (Lade et al. 2020). Sudden shocks to ecosystem services could lead to strong economic and financial
risks. They could also result in high-risk materialization, especially if economic vulnerability is high, if substitutes
for economic production are expensive or non-existent, and damage to nature is irreversible.
Beyond direct impacts, such as for the agricultural sector, indirect impacts could emerge via supply
chains that could result in even larger economic and financial risks for the economy. Information is
needed on the potential economic and societal relevance of certain sectors beyond their GDP share or direct
financial sector exposure. Agriculture for instance constitutes a relatively small share of GDP and even smaller
share of Malaysian banks’ lending; yet strongly reduced agricultural yields could have severe social implications
on food security, and food imports might not be able to compensate for the decline. Social implications like this
could emerge from the collapse of ecosystem services and could become a critical risk to the macroeconomy.
The reported scenarios should be considered as a range of possible nature-related financial risk
scenarios for Malaysia, whereas the materialization and degree of risk depends on vulnerability,
likelihood of occurrence, and indirect impacts. The scenarios are not projections of a business-as-usual
4.3 Areas for Future Exploration
development of nature-related financial risk methodologies and analyses, (3) progress of ongoing climate
change initiatives and determined linkages with nature-related financial risks, and (4) evolving practices and
standards from the global financial regulatory and supervisory community.
Key areas for actions to manage nature-related financial risks include, (1) raising awareness
and policy discourse, (2) enhancing capacity building of relevant stakeholders, (3) enhancing
macroeconomic surveillance capacity and risk identification, and (4) developing regulatory and
supervisory requirements. Section 3 and Figure 4 in this report depict recommended actions that could be
considered by BNM (and relevant stakeholders such as ministries with responsibility for environmental issues,
state-level agencies, and financial institutions) in more detail. Recommended actions differ by the level of
policy intervention intensity, recognizing the need for prioritization in this challenging pandemic period.
61An Exploration of Nature-Related Financial Risks in Malaysia
Chapter 4 - Conclusions
scenario, but rather state the current financial exposure if the affected ecosystem services of this range of
identified scenarios defaulted. Indeed, the likelihood and financial consequences of specific nature-related
risk scenarios are challenging to determine given the complexity, non-linearity, and endogeneity of causal
relationships (Svartzman et al. 2021; NGFS 2021; Kedward et al. 2020). Yet, an analysis of the main drivers of
nature-related risks, such as land- and sea use change, nature use and exploitation, climate change, pollution,
invasive species, governance, and policy uncertainty, indicates potential sources for nature-related financial
risk scenarios.
Several areas merit further analysis to support the identification and assessment of nature-related
financial risks. Global nature and biodiversity work programs are progressing but started later than similar
work on climate-related financial risks, and are both broader in scope and more complex in their causal
relationships.76 Information is lacking on the likelihood and severity of adverse scenarios related to biodiversity
loss as well as their economic and financial impact. The analysis in this report could also be complemented by
the development of a comprehensive set of scenarios to be used in assessing nature-related financial risks and
a better understanding of how scenarios lead to adverse economic and financial outcomes (e.g., transmission
channels). Additionally, the development of models to understand the quantitative impact of scenarios and
transmission channels on financial institutions, including banks and non-bank financial institutions, would
enhance the knowledge of future risks to the financial system due to nature-related risks.
For example, ENCORE identifies 21 different ecosystem services and 27 different drivers of environmental change. The likelihood of the occurrence of a
specific scenario is challenging to determine given the complexity, non-linearity, and endogeneity of nature-related risks (Svartzman et al. 2021, Kedward et
al. 2020, NGFS 2021).
76
62 An Exploration of Nature-Related Financial Risks in Malaysia
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67An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
68 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
The physical and sectoral transition risk exposure analysis presented in this report is conducted
by using the ENCORE biodiversity tool.77 ENCORE is a database that maps sector-based impacts and
dependencies on ecosystem services for sectors of the economy. Box 1 in the main text outlines ENCORE’s
assumptions regarding the materiality of ecosystem services for businesses, both with respect to dependencies
and impacts. ENCORE thus allows a detailed assessment of the interactions of the economy with the natural
environment and thus an exposure analysis of the Malaysian banking sectors’ commercial loan portfolio to
potential nature-related physical and transition risks. ENCORE’s database consists of 86 business processes
and 21 ecosystem services (see Appendix Table A4), such as clean and reliable supplies of water, carbon
sequestration, and pollination. It further contains 11 impact drivers on nature and ecosystem services, such as
terrestrial ecosystem use and GHG emissions (See Appendix Table A5).
Data on outstanding commercial loans (unpublished) for the analysis was provided by BNM. The data
covers 61 Malaysian banks (26 commercial banks, 16 Islamic banks, 10 investment banks, and 9 DFIs [6 regulated
under the DFI Act and 3 not]) at the end of December 2020. The loan data is given at NACE Revision 2 at the
4-digit level. The commercial loans outstanding in the sample stands at RM 733 billion representing 90 percent
of the total commercial loans portfolio. Table A1 summarizes the data sets that inform the analysis in this report.
A.1 Methodology
https://encore.naturalcapital.finance/en/explore77
Table A1: Underlying data for analysis in this report
Type of Analysis Data sources
Dependencies on Ecosystem Services • ENCORE (Natural Capital Finance Alliance 2021)
• BNM commercial loans data
Impacts on Ecosystem Services • ENCORE (Natural Capital Finance Alliance 2021)
• BNM commercial loans data
Activities in key biodiversity areas • Key biodiversity areas (IBAT)
• Protected Areas (UNEP-WCMC 2021)
• BNM postal-code based lending data for
commercial non-residential and residential property
purchase.
Physical and transition risk scenarios • ENCORE (Natural Capital Finance Alliance 2021)
• BNM commercial loans data
• Interviews
• Additional reports and biophysical datasets
Source: World Bank
69An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
The analysis follows closely the approach proposed by DNB (van Toor et al. 2020), consisting of several
steps of data reclassification and remapping (Figure A1). Reclassification and remapping are needed
to align sector classification of the lending data with sector classification used in ENCORE. Additionally,
we extend the DNB analysis that focused on nature-related sectoral physical risk, by also assessing banks’
portfolio impacts on ecosystem services and natural assets. As such we can also examine sectoral transition
risk exposure of Malaysian banks, using a similar methodology. First, we reclassify the banks’ lending data from
NACE Revision 2 at the 2-digit level to business processes which are used in ENCORE. For the mapping we rely
on the reclassification typology by DNB, as ENCORE only provides sectoral mapping from economic sectors
given at the Global Industry Classification Standard to business processes. As several sectors could be linked
to more than one business process, weights need to be assigned. We follow the DNB approach in assigning
equal weighting according to the number of business processes. For instance, A2 “forestry and logging” would
map to both, “large-scale forestry” and “small-scale forestry” and we assign each of the business processes a
weight of 50 percent of lending that goes to “forestry and logging” (see Table A2).
NACE REV2 Sector Business Process Weight
A2 – Forestry and logging
Large-scale forestry 0.5
Small-scale forestry 0.5
Following the DNB approach, we focus the analysis on relationships between economic sectors and
ecosystem services with high or very high dependencies only, as the degradation of those ecosystem
services is likely to have a strong detrimental impact on firms’ business processes. Likewise, we only
consider linkages of economic sectors and drivers of environmental change with a high or very high impact.
Second, we map business processes to dependencies on ecosystem services (physical risk) or impact
drivers on nature loss (transition risk). Several business processes depend highly or very highly on more
than one ecosystem service or affect nature highly or very highly via more than one impact driver. In those
cases, we use equal weighting according to the number of ecosystem services for sectors. For example, for
business processes (e.g., processed food and drink production) that highly or very highly depend on two
ecosystem services such as surface water supply and climate regulation, for one RM of lending, half is allocated
to surface water supply and half for climate regulation (Table A3). For assessing the exposure of Malaysian
banks to individual ecosystem services (Figure 13 and Figure 17), an unweighted approach is applied. This
attributes one RM for every RM of lending to the respective ecosystem service. This approach, however, does
not allow us to add different ecosystem service dependencies in banks’ portfolios as the sum would exceed
the original portfolio size.
Table A2: Weighting example for mapping economic sectors to business process
Source: World Bank
70 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
Table A3: Weighting example for mapping business processes to ecosystem services
Business Process Ecosystem Service
Weight
Unweighted Weighted
Processed food and drink
production
Surface water 1 0.5
Ground water 1 0.5
Source: World Bank
The reclassification allows us to map sectoral lending (NACE) to business processes in ENCORE
which again are linked to ecosystem service dependencies (physical risk) or impact drivers (transition
risk). Those, in turn, further affect natural assets such as species, habitats, and water. We show the nature-
related physical and transition exposures of the Malaysian banks’ commercial lending portfolio in the following
subsections with respect to natural asset dependencies and impacts and ecosystem service dependencies
and impacts, most exposed economic sectors in Malaysian banks’ commercial lending portfolio, and the
distribution exposure to impacts and dependencies amongst individual banks.
Figure A1: Practical steps to assess sectoral physical and transition risk exposure
Reclassifying
and mapping data
Setting weights
for relative
importance of
ecosystem services
Adjusting data
structure to assess
and plot exposure
on several levels
1.
2. 3.
Source: World Bank
ENCORE is a global tool and thereby subject to several caveats. Ecosystem service dependencies and
the state of the natural assets differ by country and require a geographical and sectoral context to refine the
assessment provided by ENCORE. For instance, the dependency of construction sectors on flood and storm
protection as an ecosystem service might depend on the prevalence of floods and storms in the specific country
context. As such a global average, as applied by ENCORE, could over- or underestimate the dependency and
impacts of specifics sectors. Furthermore, ENCORE focuses on direct nature-related impacts and dependencies
for the various sectors of the economy. Thus, ENCORE can give a comprehensive view on the key first-order
nature-related impacts and dependencies at the level of sectors of the economy. Estimates provided in the
previous sections should however be considered as conservative, as the ENCORE tool only includes direct
reliance of sectors on ecosystem services, whereas indirect dependencies that could stem from downstream
supply chains are not captured. Furthermore, the currently applied equal weighting approach in case of multiple
sector- or ecosystem service linkages, strongly influences the exposure results.78 Additional analysis is needed
to contextualize and refine the analysis with respect to substitutability and adaptability options that could
inform those weights by incorporating country specifics (see Table A2 and A3). The ENCORE analysis could
be complementary to assessments of other key biodiversity-specific indicators at the local level and develop
One could argue, however, that in absence of more detailed information on the production process of Malaysian firms, this approach is conservative as it caps
the exposure towards one ecosystem service to its relative share of the entire lending portfolio.
78
71An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
an understanding of the cross-sectoral linkages of upstream and downstream value chains amongst different
sectors. This combined approach could inform potential nature-related vulnerabilities of economic sectors of
the Malaysian economy, that could become sources of financial risk for the Malaysian banking sector.
The analysis in this report depicts the exposure of Malaysian banks to sectors that are potentially
exposed to nature-related physical and transition risks. However, the analysis does not provide information
on the potential economic and societal relevance of certain sectors. Agriculture for instance constitutes a
relatively small share of GDP and even smaller share in Malaysian banks’ lending; yet strongly reduced
agricultural yields could have severe social implications on food security, and food imports could potentially
not compensate for the decline. Social implications like this could emerge from ecosystem service collapse and
could become a critical risk to the macroeconomy, but go beyond the scope of this analysis.
For the analysis of activities in KBA, we map postal code based lending data for commercial non-
residential and residential property purchases (excluding household loans) to KBA (Figure A2). KBA
could potentially be designated as protected in the future and it is thus relevant to see banks’ financial
exposure to those areas. We use the IBAT, developed by the UN Environment Program World Conservation
Monitoring Centre, International Union for Conservation of Nature, Conservation International, and Birdlife
International, to compare the currently protected areas in Malaysia with KBA79 that are not yet protected.
The gap between the protected areas and KBA we call “currently non-protected KBA” and is intended to
provide a proxy for areas that could become protected in the future. For Malaysia as a whole, protecting
those currently non-protected KBA would increase the share of protected areas of total land area to about 24
percent. However, KBA relevance is not equally distributed across Malaysian states (Figure 23). States such as
Perak, Pahang, Kedah, and Selangor are biodiversity hotspots, with KBA making almost up to 50 percent of
Perak’s land area for instance. While Malaysia has seen ambitious efforts in stepping-up protected areas since
the 2000s (UNEP-WCMC 2021), a large share of KBA in Malaysian states is currently non-protected (see light
blue bars in Figure 23 as a share of dark blue bars). As such, firms currently operating in those regions could be
restricted, with implications for their financing banks.
For the analysis we use (unpublished) postal code level commercial non-residential and residential
property purchase lending data (excluding households) of Malaysian banks, provided by BNM. The
sample comprises loans outstanding and the location of loan utilization as of December 2020 and covers about
5 percent of the overall commercial lending data sample. In the absence of geospatial datasets that could
provide a postal code level resolution of areas in Malaysia, we rely on a workaround by assigning each postal
code (at its centroid) a longitude and latitude coordinate80 that we transform into a coordinate reference system,
in this case the WGS8481 format. During that exercise, some lending contracts had to be dropped, however,
as no coordinates existed for the respective postal code in our dataset. We then compare if those postal
code coordinates lie within the currently non-protected KBA areas to assess the financial lending exposure
of Malaysian banks in those areas. This approach has limitations,82 resulting in the below reported spatial
exposures being conservative estimates.
KBA are defined to be sites that contribute significantly to maintain global biodiversity, in terrestrial and maritime sites (IBAT, 2021).
This exercise was conducted manually using the dataset provided at https://www.back4app.com/database/back4app/zip-codes-all-countries-in-the-world/
malaysia-zip-code
The WGS84 is a widely used coordinate reference system in geospatial mapping, often used in cartography, geodesy, and satellite navigation including GPS.
It would benefit from the availability of postal code level shapefiles for Malaysia.
79
80
81
82
72 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
See Appendix Section 4 and 5 for details. 83
Figure A2: Practical steps to assess activities in Key Biodiversity Areas
Source: World Bank
Reclassifying
and mapping data
Assessing share
of protected and
non-protected KBA
per state
Matching
datasets to assess
spatial transition
risk exposure
1.
2. 3.
We also explore a first non-exhaustive set of nature-related risk scenarios for Malaysia (see Table A1).
This is based on interviews (the conclusions of which are summarized in Section A5), datasets such as ENCORE
and the WB Terrestrial Biodiversity Indicators, and publicly and non-publicly available reports from Malaysian
stakeholders.83 They are, however, not projections of a business-as-usual scenario, but rather state the financial
exposure if the affected ecosystem services of this range of identified scenarios would default. Similar to the
University of Cambridge Institute for Sustainability Leadership (2021) scenario classification, we categorize
scenarios according to types of risk, driver of risk, and sectors, natural assets, and ecosystem services where
the risk scenario would originate. Scenario types can be classified as posing physical risk (e.g., the depletion of
fisheries) or transition risk (e.g., the creation of new protected areas). Transition risk scenarios can entail policies
aiming to protect biodiversity (regulatory risk), technological changes, and changes in consumer preferences
(including reputational risk).
Both risk scenario types can have either local or nation-wide direct impact. Indirect impacts, which are
not covered here, could induce spillovers to previously not directly affected regions. For physical risk scenarios,
ENCORE provides affected natural assets and ecosystem services. This serves as a basis for assessing banking
sector exposure to economic sectors that highly or very highly depend on those ecosystem services. It should
be noted, however, that ENCORE only captures direct impacts from dependencies, whereas indirect impacts
that could stem from supply chains or macroeconomic and financial feedback effects are not covered. Further,
only impacts via affected ecosystem exposure are considered. For instance, typhoons might destroy production
facilities and houses, however, this analysis only captures the exposure of the banking sector to firms that might
be faced with deteriorated ecosystem services after a severe typhoon. Sectors that are likely to face a direct
transition risk exposure are either classified according to ENCORE (e.g., in case of water regulation risks),
according to the climate-policy relevant sector classification (Battiston et al. 2017) in case of a climate policy
scenario, or with respect to informed and conservative author judgement (e.g., pesticide and fertilizer scenario).
Given the novelty of the topic some data limitations exist. Those limitations include 1) bank lending data
beyond non-financial corporations (e.g., households and financial sector institutions), 2) additional financial
instruments such as equity, bonds, and sukuks, 3) data on financial exposure of other financial institutions than
banks such as insurance companies or pension funds, 4) a higher financial data coverage of location specific
lending and investments, 5) higher granularity of spatial data ideally at asset level, and 6) input-output data for
capturing indirect financial exposure of economic sectors (e.g., manufacturing via mining).
73An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
A.2 ENCORE Definitions
Table A4: List of ecosystem services included in the ENCORE database with their description
No. Ecosystem Service Ecosystem service description
1 Animal-based energy Physical labor is provided by domesticated or commercial species,
including oxen, horses, donkeys, goats, and elephants. These can
be grouped as draught animals, pack animals, and mounts.
2 Bio-remediation Bio-remediation is a natural process whereby living organisms
such as micro-organisms, plants, algae, and some animals degrade,
reduce, and/or detoxify contaminants.
3 Buffering and attenuation of
mass flows
Buffering and attenuation of mass flows allows the transport and
storage of sediment by rivers, lakes, and seas.
4 Climate regulation Global climate regulation is provided by nature through the long-
term storage of carbon dioxide in soils, vegetable biomass, and
the oceans. At a regional level, the climate is regulated by ocean
currents and winds while, at local and micro-levels, vegetation can
modify temperatures, humidity, and wind speeds.
5 Dilution by atmosphere and
ecosystems
Water, both fresh and saline, and the atmosphere can dilute the
gases, fluids, and solid waste produced by human activity.
6 Disease control Ecosystems play important roles in regulation of diseases for
human populations as well as for wild and domesticated flora and
fauna.
7 Fibers and other materials Fibers and other materials from plants, algae, and animals are
directly used or processed for a variety of purposes. This includes
wood, timber, and fibers which are not further processed, as well
as material for production, such as cellulose, cotton, and dyes, and
plant, animal, and algal material for fodder and fertilizer use.
8 Filtration Filtering, sequestering, storing, and accumulating pollutants is
carried out by a range of organisms including, algae, animals,
microorganisms, and vascular and non-vascular plants.
9 Flood and storm protection Flood and storm protection is provided by the sheltering, buffering,
and attenuating effects of natural and planted vegetation.
10 Genetic materials Genetic material is understood to be deoxyribonucleic acid (DNA)
and all biota including plants, animals, and algae.
11 Ground water Groundwater is water stored underground in aquifers made of
permeable rocks, soil, and sand. The water that contributes to
groundwater sources originates from rainfall, snow melts, and
water flow from natural freshwater resources.
12 Maintain nursery habitats Nurseries are habitats that make a significantly high contribution
to the reproduction of individuals from a particular species,
where juveniles occur at higher densities, avoid predation more
successfully, or grow faster than in other habitats.
13 Mass stabilization and erosion
control
Mass stabilization and erosion control is delivered through
vegetation cover protected and stabilizing terrestrial, coastal, and
marine ecosystems, coastal wetlands, and dunes. Vegetation on
slopes also prevents avalanches and landslides, and mangroves,
sea grass, and macroalgae provide erosion protection of coasts and
sediments.
74 An Exploration of Nature-Related Financial Risks in Malaysia
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No. Ecosystem Service Ecosystem service description
14 Mediation of sensory impacts Vegetation is the main (natural) barrier used to reduce noise and
light pollution, limiting the impact it can have on human health and
the environment.
15 Pest control Pest control and invasive alien species management is provided
through direct introduction and maintenance of populations of the
predators of the pest or the invasive species, landscaping areas to
encourage habitats for pest reduction, and the manufacture of a
family of natural biocides based on natural toxins to pests.
16 Pollination Pollination services are provided by three main mechanisms:
animals, water, and wind. Most plants depend to some extent on
animals that act as vectors, or pollinators, to perform the transfer
of pollen.
17 Soil quality Soil quality is provided through weathering processes, which
maintain bio-geochemical conditions of soils including fertility
and soil structure, and decomposition and fixing processes, which
enables nitrogen fixing, nitrification, and mineralization of dead
organic material.
18 Surface water Surface water is provided through freshwater resources from
collected precipitation and water flow from natural sources.
19 Ventilation Ventilation provided by natural or planted vegetation is vital for
good indoor air quality and without it there are long term health
implications for building occupants due to the build-up of volatile
organic compounds, airborne bacteria, and molds.
20 Water flow maintenance The hydrological cycle, also called water cycle or hydrologic
cycle, is the system that enables circulation of water through the
Earth’s atmosphere, land, and oceans. The hydrological cycle is
responsible for recharge of groundwater sources (i.e. aquifers) and
maintenance of surface water flows.
21 Water quality Water quality is provided by maintaining the chemical condition
of freshwaters, including rivers, streams, lakes, and ground water
sources, and salt waters to ensure favorable living conditions for
biota.
Source: ENCORE, Natural Capital Finance Alliance 2021
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Table A5: List of impact drivers included in the ENCORE database with their description
No. Impact Drivers Description
1 Disturbances Examples include decibels and duration of noise, lumens and
duration of light, at site of impact.
2 Freshwater ecosystem use Examples include area of wetland, ponds, lakes, streams, rivers, or
peatland necessary to provide ecosystem services such as water
purification, fish spawning, areas of infrastructure necessary to use
rivers and lakes such as bridges, dams, and flood barriers, etc.
3 GHG emissions Examples include volume of carbon dioxide (CO2), methane
(CH4), nitrous oxide (N2O), Sulphur hexafluoride (SF6),
Hydrofluorocarbons, (HFCs) and perfluorocarbons (PFCs), etc.
4 Marine ecosystem use Examples include area of aquaculture by type, area of seabed
mining by type, etc.
5 Non-GHG air pollutants Examples include volume of fine particulate matter (PM2.5) and
coarse particulate matter (PM10), Volatile Organic Compounds,
mono-nitrogen oxides (NO and NO2, commonly referred to as
NOx), Sulphur dioxide (SO2), Carbon monoxide (CO), etc.
6 Other resource use Examples include volume of mineral extracted, volume of wild-
caught fish by species, number of wild-caught mammals by
species, etc.
7 Soil pollutants Examples include volume of waste matter discharged and retained
in soil over a given period.
8 Solid waste Examples include volume of waste by classification (i.e.,
nonhazardous, hazardous, and radioactive), by specific material
constituents (e.g., lead, plastic), or by disposal method (e.g., landfill,
incineration, recycling, specialist processing).
9 Terrestrial ecosystem use Examples include area of agriculture by type, area of forest
plantation by type, area of open cast mine by type, etc.
10 Water pollutants Examples include volume discharged to receiving water body of
nutrients (e.g., nitrates and phosphates) or other substances (e.g.,
heavy metals and chemicals).
11 Water use Examples include volume of groundwater consumed, volume of
surface water consumed, etc.
Source: ENCORE, Natural Capital Finance Alliance 2021
76 An Exploration of Nature-Related Financial Risks in Malaysia
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Table A6: List of drivers of environmental change included in the ENCORE database with
their description
No. Driver of environmental
change
Description
1 Diseases Harmful pathogens and microbes that are originally found within
the ecosystem(s) in question, but have become “out-of-balance” or
“released” directly or indirectly due to human activities.
2 Droughts Periods in which rainfall falls below the normal range of variation.
3 Earthquakes Earthquakes manifest themselves by shaking and displacing or
disrupting the ground. They may also cause associated events such as
tsunamis, landslides, or even volcanic activity.
4 Fire Suppression or increase in fire frequency and/or intensity outside of its
natural range of variation.
5 Flooding Extreme precipitation events leading to the submergence of dry land.
6 Landslides Landslide events leading to geological changes.
7 Habitat modification Major changes in habitat composition and location, for example
deforestation.
8 Human modification of
genetic material
Human altered or transported organisms or genes.
9 Human movement Migration by people from one place to another with the intentions of
settling, permanently or temporarily in a new location.
10 Industrial or domestic
activities
Non-agricultural human activities including non-consumptive use of
resources.
11 Industrial or domestic
construction
Process of constructing a building or infrastructure for industrial or
domestic purposes.
12 Intensive agriculture and
aquaculture
Threats from farming and ranching as a result of agricultural expansion
and intensification, including silviculture, mariculture, and aquaculture
(includes the impacts of any fencing around farmed areas).
13 Invasive species Harmful plants, animals, pathogens, and other microbes not originally
found within the ecosystem(s) in question and directly or indirectly
introduced and spread into it by human activities.
14 Ocean acidification Changes to the ocean chemistry which occurs when carbon dioxide is
absorbed from the atmosphere and reacts with seawater to produce
acid.
15 Ocean current and
circulation
Large scale movement of waters in the ocean basins.
16 Overfishing The harvesting of aquatic wild animals or plants at a rate that is
greater than their capacity for regeneration. Harvesting can occur for
commercial, recreation, subsistence, research, or cultural purposes, or
for control/persecution reasons; accidental mortality/bycatch are also
included.
17 Overharvesting The harvesting of plants, fungi, trees, and other woody vegetation,
and other non-timber/non-animal products at a rate that is greater
than their capacity for regeneration. The harvesting can occur for
commercial, recreation, subsistence, research or cultural purposes, or
for control reasons.
18 Overhunting The killing or trapping of terrestrial wild animals or animal products at
a rate that is greater than their capacity for regeneration. The killing or
trapping can occur for commercial, recreation, subsistence, research,
or cultural purposes, or for control/persecution reasons; includes
accidental mortality/bycatch.
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No. Driver of environmental
change
Description
19 Pests Harmful plants or animals that are originally found within the
ecosystem(s) in question, but have become “out-of-balance” or
“released” directly or indirectly due to human activities.
20 Pollution Threats arising from the introduction of contaminants into the natural
environment.
21 Population changes Changes in species populations over time and space.
22 Sea level rise Increase in global mean sea level as a result of an increase in the volume
of water in the world’s oceans or heat dilation.
23 Sea surface temperature Periods in which sea surface temperatures exceed or go below the
normal range of variation.
24 Storms Extreme precipitation and/or wind events.
25 Volcanoes Volcanic events which may lead to changes in natural capital assets.
26 Water abstraction Changing water flow patterns from their natural range of variation due
to human activities.
27 Weather conditions Weather conditions outside of the natural range of variation.
Source: ENCORE, Natural Capital Finance Alliance 2021
A.3 Reputational Risk
Malaysian banks could also be exposed to reputational risk arising from financing companies whose
operations negatively impact the country’s biodiversity and the ecosystem services it sustains. The
UEBT Biodiversity Barometer (UEBT 2020), an annual survey on biodiversity awareness which has surveyed more
than 74,000 people since 2009, shows that consumer awareness of biodiversity has increased consistently over
the last decade (see Figure A3) (UEBR 2020). This trend is likely to continue as policymakers are increasingly
seeking to harness the power of civil society in reversing the biodiversity loss and its impact on ecosystems,
species, and people. For instance, the first target of Malaysia’s National Policy on Biological Diversity 2016-2025
is to raise the awareness of biodiversity among Malaysians and the steps they can take to conserve and use it
sustainably (MyBIS 2016). Reputation loss could translate into lower revenues and profits for firms engaging in
controversial activities as customers might prefer more sustainable products. Most controversies with respect
to biodiversity and land-use are related to agricultural products as shown by the MSCI ESG Controversies
database (see Figure A4),84 of which 7 are recorded for Malaysia, all with respect to biodiversity loss and
land-use change (see Figure A5). Banks that finance controversial firms could also lose reputation themselves,
impacting banks’ customer and investors’ relations.85 Both firm and banks’ reputation loss, could pose financial
risks for Malaysian banks (NGFS 2021).
The MSCI ESG Controversies database records the instances of negative environmental impact resulting from a company’s product or operations. See https://
www.msci.com/documents/1296102/1636401/ESG_Controversies_Factsheet.pdf/4dfb3240-b5ed-0770-62c8-159c2ff785a0 for the methodology.
The annual fossil fuel finance report by a group of NGOs, which states fossil fuel financing activities of the largest banks globally and receives a lot attention,
is an example of potential reputational concerns with respect to climate change (RAN et al. 2021).
84
85
78 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
Figure A3: Awareness of biodiversity among surveyed individuals in the UEBT Biodiversity
Barometer
Source: Based on UEBT Biodiversity Barometer
Figure A4: Number of controversies globally as reported in MSCI ESG Controversy Database
Source: Based on MSCI ESG Controversy Database
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2009 2012 2015 2020
0 2 4 6 8 10 12
Other Sectors
Diversi�ed Chemicals
Electric Utilities
Steel
Construction & Engineering
Multi-Sector Holdings
Paper Products
Trading Companies & Distributors
Fertilizers & Agricultural Chemicals
Diversi�ed Metals & Mining
Independent Power Producers
Packaged Foods & Meats
Gold
Agricultural Products
Red Orange Yellow
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Appendix
A.4 Drivers of Nature-Related Financial Risk
Scenarios in Malaysia
This section provides an overview of relevant data regarding the drivers of nature-related financial
risk scenarios in Malaysia. The IPBES (2019) identifies five main drivers of biodiversity and nature loss,
namely land- and sea use change, natural resource use and exploitation, climate change, pollution, and invasive
species. Furthermore, governance and policy uncertainty can drive transition risk scenarios as well as physical
risk scenarios. The following subsections shed a light on selected aspects of those different drivers of nature-
related financial risks based on insights from stakeholder interviews as well as global and local nature and
biodiversity datasets for Malaysia. This is intended to provide an initial assessment of the risk materiality of
nature-related financial risks for the Malaysian banking sector.
A.4.1 Land and Sea Use Change
Land use change in Malaysia strongly impacts forest and peatland cover in Malaysia. Between 2000
and 2019, large areas around the coast of Sarawak, Johor, and Pahang saw significant losses in rain forest
(Figure A6)86 often cleared to set up oil palm plantations (Figure 21). In three decades between 1975 and 2005,
Malaysia lost 4.6 million hectares of forest cover, a 20 percent reduction of forest land (Wicke et al. 2011).
According to Global Forest Watch, Malaysia lost 29% of its tree cover between 2001 and 2020, releasing 4.82Gt of CO2e emissions (Global annual CO2
emissions stand at 33Gt in 2021 according to the International Energy Agency, 2021).
86
Figure A5: Number of controversies linked to biodiversity and land use for different sectors in
Malaysia as reported in MSCI ESG Controversy Database
Source: Based on MSCI ESG Controversy Database
Red Orange Yellow
0 1 2 3 4 5 6
Casinos & Gaming
Construction & Engineering
Agricultural Products
80 An Exploration of Nature-Related Financial Risks in Malaysia
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https://www.worldwildlife.org/stories/endangered-species-threatened-by-unsustainable-palm-oil-production
https://www.100jutapokok.gov.my/
The MSA compares the actual abundance of native species in an ecosystem with the theoretical ‘original state’ of that ecosystem without any disturbance from
human activities.
87
88
89
Further, between 1990 and 2005, about 55 percent expansion of palm oil, the biggest agricultural export of
Malaysia, came at the expense of the forests- mostly species-rich and carbon-rich tropical forests (Koh et al.
2008). This widespread replacement of natural forests with monoculture palm plantations has reduced the
overall plant diversity and threatened many animal species dependent on such forests including orangutans
and Bornean elephants.87 The growth in oil palm plantations has also been responsible for a considerable loss
of mangroves in Malaysia, estimated to be 2.8 percent of the total mangrove habitat area between 2000 and
2012 (Richards et al. 2016). This loss of mangroves may lead to a weakened natural protection against cyclones
and tsunamis (Alongi 2008). Certain regions, especially in Sarawak and Sabah, have been reforested thanks to
strong efforts of private and public initiatives in Malaysia with the 100 million tree-planting campaign expected
to provide another push.88 At the same time, forests are also an important habitat for species, thus supporting
biodiversity, which is typically lower in reforested areas as compared to primary forests (Cunningham et al.
2015). Agriculturally driven land-use change, especially when planting monocultures such as oil palms, could
increase the risk for agricultural productivity and stability, especially with respect to pollinator dependence
(Aizen et al. 2019).
Figure A6: Forest cover, forest loss, and forest gain between 2000 and 2019 in Malaysia
Source: Based on Hansen et al. 2015 and Humanitarian Data Exchange 2021
Malaysia is home to some of the world’s most important biodiversity hotspots, whereas ecosystems
and species are increasingly coming under pressure. Mean species abundance (MSA) is an indicator that
measures the local terrestrial biodiversity intactness, for which we use estimates from the GLOBIO model
(Schipper et al. 2019).89 MSA differs strongly across Malaysian regions. Regions with intact or protected
rainforest show high MSA, meaning that human pressures such as land use, road disturbance, fragmentation,
hunting, atmospheric nitrogen deposition, and climate change are limited. Also, a continued growth in the
quarrying of limestone has come at the cost of an excessive exploitation of karsts- biodiversity reservoirs that
can restock degraded environments (Clements et al, 2006). Limestone is a key ingredient in the production of
cement, of which Malaysia is the fifth largest exporter in the world (WITS 2021). Urban regions such as Kuala
Lumpur and regions that have a large cultivated agricultural sector such as palm oil (e.g., Johor) show low values
of MSA (Figure A7a), meaning that pressures on biodiversity are high.
Forest cover Forest loss (2000 - 2019) Forest gain (2000 - 2012)
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Endangered species risk, stemming from the WB’s terrestrial biodiversity indicators, also differs across
regions. Regions in the North of Peninsular Malaysia show highest numbers of endangered species (Figure
A7b) because they host some of the most biodiverse rainforests, while at the same time facing strong land use
change pressures. Land conversion from forests to crop land or oil palm plantations has been particularly high in
those regions in recent years (growth in oil palm plantation area between 2018 and 2020 4 percent for Pahang,
8 percent for Kelantan, and 6 percent for Terengganu (MPOB 2021), see Figure 21 for a map of current extent of
oil palm plantations in Malaysia). The rainforests in Sarawak and Sabah on Borneo are still relatively untouched,
showing a high MSA and having a lower number of endangered species. Sabah also shows the largest state
area share that is currently protected (Figure 22a), followed by Pahang, with large areas of its rainforests in
the North being protected. In total about 13 percent of Malaysian state area is currently protected, according
to data from UNEP-WCMC (2021), falling potentially short of a 30x30 goal that is currently being discussed
internationally. The percentage of area protected varies across states, however. Some endangered species
hotspots, such as Kedah and Kelantan, currently show only limited area protection, indicating potential regions
that could see protected area expansion efforts in the future.
Figure A7:
a) Mean species abundance in 2015 by district in Malaysia
b) Number of endangered species 2019 by district in Malaysia
Source: Based on Schipper et al. 2019 (Globio), WB Terrestrial Biodiversity Indicators (2019), and Humanitarian Data Exchange 2021
0.7
0.6
0.5
0.4
0.3
16
14
12
10
8
6
4
82 An Exploration of Nature-Related Financial Risks in Malaysia
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Several nature-related financial physical and transition risk scenarios could be driven by land- and
sea use change and the accompanying loss in ecosystems and species (Table A7). Scenarios with
highest banking sector loan exposure are urban sprawl (44 percent) and deforestation (30 percent) by inducing
ecosystem service reduction. Further, reduced availability of timber (16 percent) as well as severe flooding
occurrence (10 percent) as trees and mangroves cannot provide flood and storm protection show a high
exposure of Malaysian banks. Further, transition risk scenarios such as an expansion of protected areas (8.4
percent) or stronger forestry regulation (0.7 percent) show a high potential risk exposure of the Malaysian
banking sector.
A.4.2 Natural Resource Use and Exploitation
Continuous overexploitation of renewable and non-renewable resources such as fisheries, timber, and
mineral extraction could drive certain nature-related financial risk scenarios. By 2030, six additional
inhabitants are expected in Malaysia, whereas the urbanization rate is expected to increase from 76 percent
in 2017 to 86 percent in 2050 (ERE Consulting Group, 2021). In the past, population growth and urbanization,
were accompanied by higher infrastructure needs and consumption levels, increasing the terrestrial footprint
in Malaysia (Figure A8). Mineral extraction is also expected to increase further in the next decade to support
the construction and industry sectors (ERE Consulting Group, 2021). Furthermore, Malaysia has experienced a
strong growth in non-metallic mineral extraction such as sand and gravel between 2015 and 2019. Silica sand
and sand, for instance, have significant impacts towards river morphology, as well as sensitive freshwater and
wetland ecosystems (ERE Consulting Group, 2021). As such, those activities would need to be accompanied
by careful measures for ecosystem and nature protection, to avoid the materialization of nature-related risk
scenarios such as “Reduced ecosystem services due to continued high resource use, pollution, and urban
sprawl”. Fish stock is already relatively stretched in Malaysia with a deteriorating trend that could eventually
lead to a fish stock collapse if current patterns continue.
Figure A8: Change in Malaysian terrestrial footprint between 2000 and 2013 by district.
Source: Based on UN Biodiversity Lab90, Venter et al. 2016, and Williams et al. 2020, Humanitarian Data Exchange 2021
Note: The terrestrial human footprint entails several granular and recent bottom-up survey information data sets to measure direct and indirect human pressures on
the environment (built environments, population density, electric infrastructure, crop lands and pasture lands, roads, railways, and navigable waterways). Footprint
scores range from 0-50, whereas here the net change between 2000 and 2013 is shown for Malaysia. A value of five thus means that the terrestrial human footprint
increased by a score of five between 2000 and 2013.
https://unbiodiversitylab.org/90
1
5
4
3
2
0
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The nature-related financial risk exposure analysis shows a strong impact (about 15 percent) and
high dependency (about 30 percent) on water. Similarly, a water-related financial risk scenario, either due
to higher water pollution or stricter water regulation, shows a strong exposure of the Malaysian banking sector
with about 17 percent of its lending portfolio. Specifically, the real estate and construction sectors strongly
depend on the services provided by surface water, ground water, and water flow maintenance for operability.
In recent years, Malaysia water consumption levels have steadily increased, from 6.4 million liters per day in
2015 to 6.8 million liters per day in 2019 (ERE Consulting Group, 2021). The strong use and pollution of water
has implications for the water cycle that could potentially lead to an overall deterioration of its availability and
usability for ecosystem services provisioning. Population growth could further increase consumption levels and
growing climate change could impact currently stable irrigation patterns. In 2030, the World Resource Institute
Aqueduct model projects some districts in Malaysia to have a threefold water stress level compared to today
if no measures are taken (Figure A9). In response, the Malaysia government might increase water extraction
and storage facilities, which could again feed back onto ecosystems and biodiversity, especially freshwater
communities.
Nature-related financial physical risk scenarios that could specifically be susceptible to
overexploitation of resources are urban sprawl (potentially affecting 44 percent of Malaysian bank
lending) and deforestation (30 percent) by inducing ecosystem service reduction (Table A7). Further,
severe timber reduction (16 percent), reduced water availability (6 percent), and reduced agricultural yields
(2.5 percent) could pose financial risk exposure in case of continued overexploitation.
Figure A9: Aqueduct Malaysia water stress projections in 2030
Source: Based on WRI2021, Humanitarian Data Exchange 2021
3.0
2.5
2.0
1.5
C
ha
ng
e
in
w
at
er
s
tr
es
s
in
2
03
0
84 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
A.4.3 Climate Change
The rich vegetation in Malaysia also provides an important ecosystem service for climate regulation by
sequestering large amounts of carbon; however, forest loss and conversion of peatlands in the past 20
years has reduced this potential. The loss of 29 percent of Malaysia’s forest cover between 2000 and 2020
alone released 4.8Gt of CO2 equivalent (CO2e) emissions.91 Currently about 17 percent of Malaysian banking
sector’s lending portfolio depends on climate regulation, thus posing a strong financial risk if this ecosystem
service deteriorates. Especially the rainforests in Perak, Pahang, and Kelantan as well as on Borneo stand out as
storages for carbon with their large area shares of rainforests. Further, the peatland areas of Selangor, Pahang
and Sarawak are important sources for carbon storage (Page and Rieley 2018). Converted land for crops and oil
palm plantations, however, has less carbon storage potential (Figure A10), especially in states such as Johor and
the Southern districts of Pahang, that host some of the country’s largest oil palm plantation areas.
Figure A10: Vegetation carbon storage by district in Malaysia
Global annual CO2e emissions stand at 33Gt in 2021 according to International Energy Agency, 2021. CO2 emissions per capita in Malaysia increased from 5.2
tons CO2e in 2000 to 7.6 tons CO2e in 2018 (Climate Watch, 2020)
https://aries.integratedmodelling.org/aries-for-seea-explorer/
91
92
Source: Based on UN System of Environmental-Economic Accounting (SEEA) 202192 and Humanitarian Data Exchange 2021
225
200
175
150
125
100
75
50
25
0
Nature also plays an important role for flood and storm protection, on which more than 5 percent of
commercial lending in Malaysia depends. Especially sectors such as construction, telecommunication, and
electricity provision are sensitive to disruptions from extreme weather events, that could be moderated by
intact rainforests and mangroves. Mangroves, covering more than half a million hectares of vast shoreline in
Malaysia, offer protection from waves and tsunamis and can prevent shoreline erosion (Alongi, 2008). Flood and
storm protection become even more relevant with growing climate change as it is expected to lead to higher
intensity and frequency of extreme weather events such as flooding and cyclones (IPCC, 2021). According to
data by the ThinkHazard! Platform developed by the Global Facility for Disaster Reduction and Recovery, large
parts of Malaysia are especially prone to flooding risk, including river (Figure A11a) and urban flooding risk
(Figure A11b), potentially posing a risk to the financial sector. Coastal flooding (Figure A11c) is at high risk at
the Eastern Coast of Peninsular Malaysia and in South Sarawak. Already over the past decades, the frequency
and extremity of flood events have increased in Malaysia, with more expected given ongoing climate change
(World Bank Group/Asian Development Bank 2021). The northeastern coast of Peninsular Malaysia and the East
85An Exploration of Nature-Related Financial Risks in Malaysia
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Figure A11:
a) River flood risk in Malaysia by district
b) Urban flood risk in Malaysia by district
c) Coastal flood risk in Malaysia by district
High Medium Low Very low No data
High Medium Low Very low No data
High Medium Low Very low No data
86 An Exploration of Nature-Related Financial Risks in Malaysia
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https://thinkhazard.org/en/report/153-malaysia93
A.4.4 Pollution
Pollution from run-off and pesticides from agriculture, untreated waste, industry and mining pollutants,
oil spills, and plastics is an ongoing issue in Malaysia (see Figure 10), posing increasing pressures on
the health of its ecosystems and a potential risk for the Malaysian banking sector. Malaysian banks
have a direct exposure between 2 and 44 percent of their loan portfolio to pollution related financial risk
scenarios. Ongoing pollution could thus pose a risk for the Malaysian financial sector, if certain tipping points
for ecosystem health (e.g., atmosphere, forests, freshwater) are crossed. Malaysia’s waste management systems
are currently inadequate for dealing with the amount of waste produced (Kaza et al., 2018), particularly plastic
waste (Chen et al. 2021). About 85 percent of solid waste is currently put into sanitary and unsanitary landfill
sites (Chen et al. 2021). Plastic is a particular issue, especially as Malaysia is the world’s largest plastic importer
since 2017 (Chen et al. 2021). Plastic waste is rarely recycled, but often burned illegally, resulting in the release
of toxic substances (Timbuong and Tang, 2019). The Malaysian government has introduced several policies
of Borneo are also strongly exposed to cyclone risk (Figure A11d). Climate change also impacts biodiversity
and ecosystems through regular coral bleaching occurrences, changes in ecosystem structure and function and
altered species distribution (ERE Consulting Group, 2021).
Nature-related financial physical risk scenarios that could specifically be susceptible to climate change
impacts are reduced ecosystem service (44 percent). This could be a slow but steady process (Table
A7). Climate change affects ecosystems either abruptly or chronically, which could deteriorate their ability to
sustain ecosystem services. As such climate change could drive nature-related financial risk scenarios such as
an increase in sea surface temperature (16 percent), changed ocean current and circulation (16 percent), severe
flooding occurrence (10 percent), severe cyclone occurrence (9 percent), and increased ocean acidification
(8 percent).
d) Cyclone risk in Malaysia by district
Source: Based on ThinkHazard! 2021,93 and Humanitarian Data Exchange 2021
High Medium Low Very low No data
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to address this problem, such as issuance of plastic waste import permits; however, insufficient solid waste
management remains one of the main environmental problems in Malaysia (Moh and Manaf, 2017).
Water pollution in combination with increasing water consumption threatens freshwater abundance
in Malaysia. Main sources of water pollution in Malaysia are urban, agricultural, and forest land use (Camara et
al. 2019). Furthermore, aquaculture or fertilizer runoff can contribute to eutrophication which can lead to lower
species richness and biodiversity as it affects fish and other aquatic organisms (Er et al. 2018).
Air pollution has increased in Malaysia with industrial expansion that released many harmful particles
into the atmosphere (Usmani et al. 2020). Recently haze has also become a prevalent issue in Malaysia
stemming from forest fires in Malaysia and Indonesia, with significant effects on air quality (Mead et al., 2018).
Air pollution threatens ecosystems such as species and forests. However, it also poses a direct threat to humans,
with 6.4 million deaths in 2016 attributed to air pollution worldwide (WHO 2017) and strong human health
impacts in Malaysia (Qureshi et al. 2015).
Continuously high levels of pollution could eventually be a driver of nature-related financial risk
scenarios with a considerable potential risk exposure for Malaysian banks. Potential scenarios could
be a reduction in ecosystem services due to continued high resource use, pollution, and urban sprawl (44
percent), increased ocean acidification (8 percent), lower clean water availability due to continuously high-water
pollution (7.1 percent), unmanaged waste disposal and soil pollution strongly affecting productivity of habitats
(2.4 percent), and atmospheric pollution causing deterioration of ecosystem services (1.7 percent).
A.4.5 Invasive Species and Diseases
Invasive species are another IPBES identified driver of nature-related financial risk scenarios in
Malaysia. The spread of invasive alien species can have detrimental impacts for nature, humans, animals, and
plants, while also posing risks for the economy and financial sector. Globalization and accompanying trade
and tourism increase, as well as growing climate change, caused higher numbers of invasive species (MyBIS
2018). Malaysia Biodiversity Information System (MyBIS) provided in its 2018 list of invasive alien species an
overview of potential threats. For instance, S. molesta is a water plant that affects aquatic ecosystems by
weaving themselves into a thick, floating mat, which blocks oxygen and light from the water. As a result, this
pest could threaten cultivated aquatic crops and potentially clog irrigation and drinking water lines. Another
example is the red palm weevil disease, which strongly impacts the Malaysian coconut industry. Infected palms
need to be removed and replanted, causing high economic costs. Furthermore, some diseases such as foot
and mouth disease might directly affect animals, having a devastating impact on individual farmers and the
rural community. Malaysia is aware of the invasive species and disease threat and is developing strategies for
containing potential risks (MyBIS 2021), however, as the example of COVID-19 demonstrated, such diseases
can spread quickly around the globe. Sectors such as agriculture, forestry, and aquaculture could be strongly
impacted in such scenarios, exposing the Malaysian banking sector to potential financial risk.
Nature-related financial risk exposure of Malaysian banks to potential invasive species driven
scenarios such as invasive species sprawl (1 percent) and species decline due to human genetic
modification (0.7 percent) is relatively low. However, in a globalized world invasive species and diseases
could spread relatively quickly around the globe thus being a quite likely scenario.
88 An Exploration of Nature-Related Financial Risks in Malaysia
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A.4.6 Governance Issues
Governance challenges could be a driver of nature-related financial risk scenarios. Conflicting priorities
across national policies and the state development agenda as well as restricted capacity and capability of
enforcement and implementation could hinder effective policies to avoid physical risk materialization.
Furthermore, lack of clarity around accountability and responsibility could pose transition risk as an orderly
implementation of policies could be impeded. The implementation of strict forestry policies and regulation as a
scenario could for instance cause severe risks for Malaysian banks (0.7 percent) in case of an uncoordinated and
sudden implementation. The Malaysia 2020 Forestry Policy could serve as an example. This aims to regulate
forest management in the three major regions of Malaysia; yet it currently lacks an effective implementation
framework (ERE Consulting Group, 2021). Each region in Malaysia has its own administrative framework and
jurisdiction which hinder effective monitoring and cross-checking to ensure parity of efforts across different
regions. Sabah Forest Policy, for example, highlights specific land area commitments for conservation and
protected area management, while Peninsular Malaysia and Sarawak policies provide less detail. This could
result in unbalanced expectations and responsibilities to achieve the country’s target of preserving at least 50
percent of total forest cover spread across the three regions (ERE Consulting Group, 2021).
Governance issues can be a driver for several nature-related financial risk scenarios with a high
exposure of Malaysian banks. Those scenarios entail all transition risk scenarios such as “sudden and
unexpected climate policy introduction” (38 percent), “regulatory restriction of water pollution” (17 percent),
“sudden increase in the price of water (removal of subsidies / market dynamics) (17 percent)”, “extension
of protected areas” (8 percent), and regulatory restriction of non-sustainable pesticides and fertilizers” (7.4
percent) as the design, implementation, and enforcement of policies could be a significant driver of transition
risk. In contrast, orderly introduced policies might lead to lower transition risk as firms and banks can anticipate
potential policy implications.
A.4.7 Policy Uncertainty
Erratic and contradictory policy and regulatory signals by the government could increase policy
uncertainty. Policy uncertainty is another driver of nature-related financial risk scenarios as it can impede
firms from implementing transformative changes in business operations to reduce their nature impacts. Costly
and long-term strategies might not be pursued, which could increase physical risk likelihood as current highly
impacting business models are continued and transition risk, as no preparation has been conducted in case of
sudden nature-related policy introduction.
89An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
Engagements with local environmental specialists from government and non-governmental
organizations were conducted to get a more complete understanding of nature-related financial
risks impacting Malaysia’s financial system. Semi-structured interviews were conducted with several key
stakeholders including a government ministry, a government agency, two non-governmental organizations
and a research firm.94 The main objectives of the interviews were to obtain insights from the key stakeholders
on (1) the preliminary findings of the report, (2) potential policy changes that may impact transition risk, and (3)
relevant on-going research and initiatives that could further contribute to the analytical understanding of this
study. The feedback received from the stakeholders is broadly summarized as follows:
• At the policy level, focus on nature-related risks and their impacts to the economy and people is
garnering increased interest at the federal-level as well as at certain state-level where nature-
related businesses have a significant impact. While policies, including legislations and regulations
to manage nature-related resources can be considered comprehensive, policy implementation
coordination at the ministerial-level and state-level could be deemed fragmented and hence limiting
the implementation effectiveness. Malaysia’s recognition as a highly biodiverse country attracts strong
stakeholder activism and financial support by both local and international activists, which plays a critical
role in policy implementation oversight.
• Quantification and modelling of economic costs of nature-related loss to the economy and
people are limited. One of the key action plans under the National Biodiversity Action Plan 2016-2025,
is establishing the necessary tools and mechanisms to facilitate the recognition of the economic value
of biodiversity and ecosystem services. From the reported 456 studies that estimated economic values
86 percent of them are in relation to the forest ecosystem.95 Implementation of payment for ecosystem
services (PES) is also limited with one example being payment for watershed services implemented in the
state of Perak. In terms of scenario validation, nature and climate-related events are being monitored by
relevant ministries but are yet to be used in any economic modelling for policy decision-making purposes.
• Limited data availability and data sharing amongst key stakeholders may hamper the development
of a more robust multidisciplinary research program that is necessary for Malaysia’s capacity
building. Local nature-related data are mostly proprietary in nature generated by both public and private
actors. However, the availability of these data to the public differs greatly by type of ecosystems. For
example, data on forest ecosystems are more widely available compared to water services.
Based on the observations above, addressing nature-related financial risks may present unique
challenges to financial sector players, particularly with respect to understanding the complex and
multidisciplinary nature of the subject. Closer engagement with key stakeholders would be imperative to
facilitate meaningful progress in managing nature-related financial risks by the financial sector players.
Interviews were conducted with the Ministry of Energy and Natural Resources, the World Wildlife Fund, Forests and Finance, PE Research and Akademi Sains
Malaysia.
https://www.dosm.gov.my/v1/uploads/files/7_Publication/Technical_Paper/MyStats/2017/1(a)-2_Prof_Awang_Noor_Abd_Ghani.pdf
94
95
A.5 Interviews with Experts Focused on
Biodiversity in Malaysia
90 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
A.6 Full List of Explorative Nature-Related
Risk Scenarios
Table A7: List of possible nature-related financial physical and transition risk scenarios
Risk scenario Source Driver Type of
risk
Affected natural
assets
Affected ecosystem services/
economic sectors
Share
of total
lending
Number of
sectors affected
(unconditional)
Animal
disease
outbreak
ENCORE Overexploitation,
Changing use of
sea and land
Physical
risk
Species Animal-based energy, fibers and
other materials, pollination
0.80% 5
Severe
drought
occurrence
ENCORE Climate change,
Changing use of
sea and land
Physical
risk
Habitats, Soils
and sediments,
Species, Water
Buffering and attenuation of mass
flows, Fibers and other materials,
Mass stabilization and erosion
control, Soil quality, Animal-based
energy, Pollination, Water quality
3.70% 13
Severe
wildfire
occurrence
ENCORE Climate change,
Changing use of
sea and land
Physical
risk
Habitats, Soils and
sediments
Fibers and other materials, Mass
stabilization and erosion control
1.70% 7
Severe
flooding
occurrence
ENCORE Climate change,
Changing use of
sea and land
Physical
risk
Habitats, Land
geomorphology,
Soils and
sediments,
Species, Water
Buffering and attenuation of mass
flows, Fibers and other materials,
Flood and Storm protection, Mass
stabilization and erosion control,
Soil quality, Pollination,
9.60% 16
Pest outbreak ENCORE Overexploitation,
Changing use of
sea and land
Physical
risk
Species Fibers and other materials,
pollination
0.70% 5
Severe storm
occurrence
ENCORE Climate change,
Changing use of
sea and land
Physical
risk
Habitats, Soils
and sediments,
Species, Water
Buffering and attenuation of mass
flows, fibers and other materials,
flood and storm protection,
maintenance of nursery habitats,
mass stabilization and erosion
control, pollination, water quality,
Dilution by atmosphere and
ecosystems
9.40% 37
Ecosystem
service
deterioration
due to
continued
high rates of
deforestation
ENCORE Overexploitation,
Changing use of
sea and land
Physical
risk
Atmosphere,
Habitats, Land
geomorphology,
Minerals, Soils
and sediments,
Species, Water
Climate regulation, mediation of
sensory impacts, pollination, soil
quality, water flow maintenance,
bio-remediation, buffering and
attenuation of mass flows, fibers
and other materials, filtration,
flood and storm protection,
maintenance of nursery habitats,
pest control, water flow
maintenance, soil quality, disease
control, Ventilation, ground water
30.40% 42
Species
decline due
to human
genetic
modification
ENCORE Invasive non-
native species
Physical
risk
Species Fibers and other materials, Genetic
materials, Pollination
0.70% 5
Reduced
ecosystem
services due
to continued
high resource
use, pollution
and urban
sprawl
ENCORE Pollution,
Climate Change,
Overexploitation,
Change and sea
and land use
Physical
risk
Atmosphere,
Habitats, Land
geomorphology,
Ocean
geomorphology,
Soils and
sediments, Water
Dilution by atmosphere and
ecosystems, buffering and
attenuation of mass flows, Climate
regulation, flood and storm
protection, maintenance of nursery
habitats, mass stabilization and
erosion control, surface water
44.10% 49
91An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
Risk scenario Source Driver Type of
risk
Affected natural
assets
Affected ecosystem services/
economic sectors
Share
of total
lending
Number of
sectors affected
(unconditional)
Reduced
agricultural
yields
and water
pollution due
to intense
agri- and
aquaculture
ENCORE Overexploitation Physical
risk
Soils and
sediments,
Species, Water
Buffering and attenuation of
mass flows, soil quality, disease
control, fibers and other materials,
maintenance of nursery habitats,
pest control, pollination
2.50% 6
Invasive
species sprawl
ENCORE Invasive non-
native species
Physical
risk
Species, Water Bio-remediation, Fibers and other
materials, Maintenance of nursery
habitats, Pollination, Water quality
1% 10
Increased
ocean
acidification
ENCORE Climate change,
Pollution
Physical
risk
Habitats, species,
water
Flood and storm protection,
maintenance of nursery habitats,
mass stabilization and erosion
control, water quality
8% 19
Changed
ocean
current and
circulation
ENCORE Climate change Physical
risk
Habitats, water Climate regulation, maintenance
of nursery habitats, dilution by
atmosphere and ecosystems,
water quality
15.90% 26
Severe
reduction in
available fish
stock
ENCORE Overexploitation Physical
risk
Species Fibers and other materials,
maintenance of nursery habitats,
pollination
0.70% 5
Severe
reduction
in available
timber
ENCORE Overexploitation,
Changing use of
sea and land
Physical
risk
Soils and
sediments,
Species
Climate regulation, fibers and
other materials, pollination
16.20% 22
Species
decline due
to excessive
hunting
ENCORE Overexploitation Physical
risk
Species Pest control, pollination 1.70% 13
Atmospheric
pollution
causing
deterioration
of ecosystem
services
ENCORE Pollution, Climate
Change
Physical
risk
Atmosphere Mediation of sensory impacts,
pollination, soil quality, water flow
maintenance
2.40% 15
Unmanaged
waste
disposal and
soil pollution
strongly
affecting
productivity
of habitats
ENCORE Pollution Physical
risk
Habitat, species,
soils and
sediments
Bio-remediation, fibers and other
materials, filtration, maintenance
of nursery habitats, mediation of
sensory impacts, soil quality, water
flow maintenance, pollination,
water quality
2.40% 15
Lower
clean water
availability
due to
continuously
high water
pollution
ENCORE Pollution Physical
risk
Water Dilution by atmosphere and
ecosystems, ground water,
maintenance of nursery habitats,
mediation of sensory impacts,
pollination, soil quality, water flow
maintenance, water quality
7.10% 29
Increase in
sea surface
temperature
ENCORE Climate Change Physical
risk
Habitats, soils
and sediments,
species, water
Climate regulation, fibers and
other materials
16% 22
Lower water
availability
for other
ecosystem
services
ENCORE Pollution,
Climate Change,
Overexploitation,
Change and sea
and land use
Physical
risk
Water Ground water, water flow
maintenance, dilution by
atmosphere and ecosystem
6% 29
Regulatory
/ market
backlash
against non-
sustainable
forestry
Interviews Governance,
Policy
uncertainty,
Consumer
sentiments
Transition
risk
Forestry and logging, Manufacture
of wood and products of wood
and cork, except furniture;
manufacture of articles of straw
and plaiting materials, Manufacture
of furniture
0.70% 3
92 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
Risk scenario Source Driver Type of
risk
Affected natural
assets
Affected ecosystem services/
economic sectors
Share
of total
lending
Number of
sectors affected
(unconditional)
Extension of
protected
areas
Interviews Governance,
Policy
uncertainty
Transition
risk
Forestry and logging, Crops and
animal production, hunting and
related service activities, Fishing
and Aquaculture, Extraction of
crude petroleum and natural gas,
Mining of metal ores, Other mining
and quarrying, Mining Support
Service Activities, Manufacture
of food products, Manufacture
of beverages, Manufacture of
tobacco products, Manufacture
of wood and products of wood
and cork, except furniture;
manufacture of articles of straw
and plaiting materials, Manufacture
of furniture
8.40% 10
Regulatory
restriction
of non-
sustainable
pesticides
ENCORE Governance,
Policy
uncertainty
Transition
risk
Crops and animal production,
hunting and related service
activities, Fishing and Aquaculture,
Manufacture of food products,
Manufacture of beverages,
Manufacture of tobacco products,
Manufacture of chemicals and
chemical products
7.40% 6
Regulatory
restriction
of non-
sustainable
fertilizers
ENCORE Governance,
Policy
uncertainty
Transition
risk
Crops and animal production,
hunting and related service
activities, Fishing and Aquaculture,
Manufacture of food products,
Manufacture of beverages,
Manufacture of tobacco products,
Manufacture of chemicals and
chemical products
7.40% 6
Regulatory
restriction
of water
pollution
Interviews Governance,
Policy
uncertainty
Transition
risk
Manufacture of food products,
Crops and animal production,
hunting and related service
activities, Accommodation, Other
manufacturing, Manufacture of
rubber and plastic products,
Manufacture of fabricated metal
products, except machinery and
equipment, Manufacture of other
non-metallic mineral products,
Manufacture of wood and products
of wood and cork, except furniture;
manufacture of articles of straw
and plaiting materials, Manufacture
of textiles, Water transport,
Manufacture of paper and paper
products, Manufacture of basic
metals, Electricity, gas, steam and
air conditioning supply, Mining
support service activities, Mining
of metal ores, Water collection,
treatment and supply, Waste
collection, treatment and disposal
activities; materials recovery,
Manufacture of beverages,
Manufacture of chemicals and
chemical products, Other mining
and quarrying, Extraction of
crude petroleum and natural gas,
Forestry and logging, Manufacture
of wearing apparel, Manufacture
of tobacco products, Manufacture
of leather and related products,
Mining of coal and lignite, Fishing
and Aquaculture, Remediation
activities and other waste
management services, Sewerage
16.80% 29
93An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
Risk scenario Source Driver Type of
risk
Affected natural
assets
Affected ecosystem services/
economic sectors
Share
of total
lending
Number of
sectors affected
(unconditional)
Sudden and
unexpected
climate policy
introduction
ENCORE Governance,
Policy
uncertainty
Transition
risk
Crops and animal production,
hunting and related service
activities, Forestry and logging,
Fishing and Aquaculture, Mining
of coal and lignite, Extraction
of crude petroleum and natural
gas, Mining of metal ores,
Manufacture of beverages, Other
manufacturing, Manufacture of
furniture, Manufacture of other
transport equipment, Manufacture
of motor vehicles, trailers and
semi-trailers, Manufacture of
machinery and equipment
n.e.c., Manufacture of electrical
equipment, Manufacture of
computer, electronic and optical
products, Manufacture of basic
metals, Manufacture of other
non-metallic mineral products,
Manufacture of rubber and plastic
products, Manufacture of basic
pharmaceutical products and
pharmaceutical preparations,
Manufacture of textiles,
Manufacture of leather and related
products, Manufacture of paper
and paper products, Manufacture
of chemicals and chemical
products, Manufacture of coke
and refined petroleum products,
Manufacture of wearing apparel,
Mining support service activities,
Water collection, treatment and
supply, Electricity, gas, steam
and air conditioning supply,
Sewerage, Waste collection,
treatment and disposal activities;
materials recovery, Construction
of buildings, Civil engineering,
Wholesale and retail trade and
repair of motor vehicles and
motorcycles, Land transport
and transport via pipelines,
Water transport, Air transport,
Warehousing and support
activities for transportation,
Postal and courier activities,
Accommodation, Financial service
activities, except insurance and
pension funding, Insurance,
reinsurance and pension funding,
except compulsory social security,
Activities auxiliary to financial
services and insurance activities,
Real estate activities
37.60% 30
94 An Exploration of Nature-Related Financial Risks in Malaysia
Appendix
Risk scenario Source Driver Type of
risk
Affected natural
assets
Affected ecosystem services/
economic sectors
Share
of total
lending
Number of
sectors affected
(unconditional)
Sudden
increase in the
price of water
(removal of
subsidies
/ market
dynamics)
Interviews Governance,
Policy
uncertainty
Transition
risk
Manufacture of food products,
Crops and animal production,
hunting and related service
activities, Accommodation, Other
manufacturing, Manufacture of
rubber and plastic products,
Manufacture of fabricated metal
products, except machinery and
equipment, Manufacture of other
non-metallic mineral products,
Manufacture of wood and products
of wood and cork, except furniture;
manufacture of articles of straw
and plaiting materials, Manufacture
of textiles, Water transport,
Manufacture of paper and paper
products, Manufacture of basic
metals, Electricity, gas, steam and
air conditioning supply, Mining
support service activities, Mining
of metal ores, Water collection,
treatment and supply, Waste
collection, treatment and disposal
activities; materials recovery,
Manufacture of beverages,
Manufacture of chemicals and
chemical products, Other mining
and quarrying, Extraction of
crude petroleum and natural gas,
Forestry and logging, Manufacture
of wearing apparel, Manufacture
of tobacco products, Manufacture
of leather and related products,
Mining of coal and lignite, Fishing
and Aquaculture, Remediation
activities and other waste
management services, Sewerage
16.80% 29
95An Exploration of Nature-Related Financial Risks in Malaysia
CONNECT WITH US
wbg.org/Malaysia
@WorldBankMalaysia
@WB_AsiaPacific
http://bit.ly/WB_blogsMY
www.bnm.gov.my
@bnm.official
@banknegaramalaysia
@BNM_official
BNM Official
Bank Negara Malaysia
Title
Table of Contents
Acknowledgements
List of Figures
List of Boxes
Acronyms and Abbreviations
Executive Summary
ES.1 Introduction
ES.2 Key Findings
ES.3 Potential Actions to Address Challenges of Nature-Related Financial Risks
Chapter 1. Biodiversity, Nature, and Banking in Malaysia
1.1 The Malaysian Banking Sector
1.2 Malaysia, a Biodiversity Hotspot
1.3 Nature-Related Financial Risks
Chapter 2. Exposure Assessment
2.1 Dependency on Ecosystem Services
2.2 Impacts on Ecosystem Services
2.3 Activities in Key Biodiversity Areas
2.4 Physical and Transition Risk Scenarios
Chapter 3. Potential Actions to Address Nature-Related Financial Risks
Chapter 4. Conclusions
4.1 Key Findings
4.2 Potential Actions to Address Challenges of Nature-Related Financial Risks
4.3 Areas for Future Exploration
References
Appendix
A.1 Methodology
A.2 ENCORE Definitions
A.3 Reputational Risk
A.4 Drivers of Nature-Related Financial Risk Scenarios in Malaysia
A.4.1 Land and Sea Use Change
A.4.2 Natural Resource Use and Exploitation
A.4.3 Climate Change
A.4.4 Pollution
A.4.5 Invasive Species and Diseases
A.4.6 Governance Issues
A.4.7 Policy Uncertainty
A.5 Interviews with Experts Focused on Biodiversity in Malaysia
A.6 Full List of Explorative Nature-Related Risk Scenarios
| Press Release |
30 Nov 2023 | Monetary and Financial Developments in October 2023 | https://www.bnm.gov.my/-/monetary-and-financial-developments-in-october-2023 | https://www.bnm.gov.my/documents/20124/12592033/i_en.pdf | null |
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Monetary and Financial Developments in October 2023
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Monetary and Financial Developments in October 2023
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30 Nov 2023
Headline inflation edged lower to 1.8% in October
Headline inflation edged lower to 1.8% (September 2023: 1.9%) driven largely by lower fresh food inflation (1.2%; September 2023: 1.6%).
Meanwhile, core inflation[1] was lower at 2.4% (September 2023: 2.5%) during the month.
In particular, the moderation was due to lower inflation for selected services including food away from home and repair and maintenance for personal transport.Smaller contraction in exports
Exports contracted at a slower pace (-4.4%; September 2023: -13.8%), reflecting improvement in both manufactured and commodities exports.
Manufactured exports recorded smaller declines in both electrical and electronics (E&E) and non-E&E exports. Meanwhile, commodities exports were supported by improved palm oil exports.
Looking ahead, exports are expected to gradually improve towards the end of the year. Downside risks remain, stemming from weaker external demand.
Sustained growth in credit to the private non-financial sector
Credit to the private non-financial sector[2],[3] grew by 4.2% as at end-October (September 2023: 4.2%), underpinned by higher outstanding household loan growth amid slower growth in credit to businesses.
Outstanding business loans expanded by 1% (September 2023: 1.6%), due mainly to more moderate growth in working capital loans among non-small and medium enterprises (non-SMEs). Growth in outstanding loans to SMEs, however, remained forthcoming (6.9%; September 2023: 6.7%). Meanwhile, the growth in outstanding corporate bonds was sustained at 5% (September 2023: 5%).
For households, outstanding loan growth improved slightly to 5.6% (September 2023: 5.4%), supported by higher growth across most loan purposes. This reflected higher demand for household loans, particularly for the purchase of houses, cars and personal use.
Domestic financial markets were mostly affected by global investor sentiments
Global financial conditions were affected mainly by the rise in the 10-year United States (US) treasury yield as strong US economic data led to growing investor expectations of a higher policy rate environment.
Against this backdrop, the 10-year Malaysian Government Securities (MGS) yield increased by 14 basis points (bps) (regional[4] average: +22 bps) while the ringgit depreciated by 1.6% against the US dollar (regional average: -0.3%).
The FBM KLCI increased by 1.3% amid improved domestic equity market sentiments post-Budget 2024.
Banks remained well-capitalised to support economic growth
Capital ratios were broadly stable, supportive of banks’ financial intermediation activities and bolstering their ability to withstand unexpected losses.
The banking system excess capital buffer[5] remained healthy at RM132.6 billion.
Banks maintained strong liquidity and funding positions
The banking system continued to record healthy liquidity buffers with the aggregate Liquidity Coverage Ratio at 150.8% (September 2023: 151.5%).
The aggregate loan-to-fund ratio remained largely stable at 82.2% (September 2023: 82.5%).
[1] Core inflation is computed by excluding price-volatile and price-administered items.
[2] Comprises loans to households and non-financial corporations from the banking system and development financial institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
[3] Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
[4] Regional countries comprise: Singapore, Thailand, Philippines, Indonesia, and South Korea.
[5] Refers to total capital above the regulatory minimum, which includes the capital conservation buffer (2.5%) and bank-specific higher minimum requirements.
Monthly Highlights [PDF] Related Assets
Monthly Highlights & Statistics in October 2023
Bank Negara Malaysia
30 November 2023
© Bank Negara Malaysia, 2023. All rights reserved.
|
Monthly Highlights May 2023
Monthly Highlights
Headline inflation declined further to 2.8% in May
May 2023
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation moderated to 2.8% (April 2023:
3.3%). This decline was largely due to non-core
CPI components, particularly lower inflation for
fuel (-0.2 percentage points, ppt) and fresh food
(-0.1ppt).
• Core inflation also declined slightly to 3.5% (April
2023: 3.6%) amid lower inflation for
communication services.
3.3
2.8
3.6 3.5
0.00
2.00
4.00
0.0
2.0
4.0
J
a
n
-2
2
F
e
b
-2
2
M
a
r-
2
2
A
p
r-
2
2
M
a
y
-2
2
J
u
n
-2
2
J
u
l-
2
2
A
u
g
-2
2
S
e
p
-2
2
O
c
t-
2
2
N
o
v
-2
2
D
e
c
-2
2
J
a
n
-2
3
F
e
b
-2
3
M
a
r-
2
3
A
p
r-
2
3
M
a
y
-2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
1.6
5.1
4.6
0
1
2
3
4
5
6
7
May-22 Sep-22 Jan-23 May-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Credit to the Private Non-Financial Sector1,2
1
Growth in credit to the private non-financial sector improved in May
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
Contribution to growth (ppt)
• Credit to the private non-financial sector expanded
by 4.0% as at end-May (April 2023: 3.7%), driven
mainly by higher growth in credit to businesses
(2.8%; April 2023: 2.5%).
• Outstanding corporate bonds grew by 4.6% (April
2023: 4.4%), while outstanding business loans
expanded by 1.6% (April 2023: 1.0%). The higher
business loan growth reflected improvement in
loans for both working capital and investments to
SMEs and non-SMEs.
• In the household segment, outstanding loan
growth was sustained at 5.1% (April 2023: 5.0%),
supported by higher growth across most loan
purposes. Of note, household loan growth
continued to be driven by loans for the purchase of
houses and cars, which grew by 7.0% and 8.4%,
respectively (April 2023: 6.8% and 8.0%).
2.7 2.6 2.5 2.6
0.7 0.7 0.3 0.5
1.1 0.9
0.9 1.0
4.5 4.2
3.7 4.0
Feb-23 Mar-23 Apr-23 May-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Index of wholesale and retail trade growth moderated in April
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded more moderately by 4.7% in
April 2023 (March 2023: 9.4%). The lower growth
was due mainly to the decline in the motor vehicle
segment.
• However, the retail segment continued to record a
double-digit growth of 10.0% (March 2023:
13.8%), supported by sales in non-specialised and
other specialised stores1.
• On a month-on-month seasonally adjusted basis,
the index increased at a faster pace of 6.5%
(March 2023: -0.9%).
1 Other goods in specialised stores includes clothing, footwear,
pharmaceuticals, cosmetics, watches, jewellery and optical goods.
10.6
9.4
4.7
-2
3
8
13
18
23
28
33
Apr-22 Jun-22 Aug-22 Oct-22 Dec-22 Feb-23 Apr-23
ppt, %yoy
Motor vehicles Retail Wholesale
Index of Wholesale and Retail Trade
Monthly Highlights
2
May 2023
Domestic financial markets were largely affected by external factors
Financial Market Performance in May 2023
-18.0
-0.5
-1.1
-3.0
-2.0
-3.4
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-20 -15 -10 -5 0
May-23 Apr-23
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
1Regional countries comprise Singapore, Thailand, Philippines, Indonesia, and Korea
Source: Bank Negara Malaysia, Bursa Malaysia
• Global investors maintained a risk-off approach
throughout May, as concerns over the impact of the
US debt ceiling crisis and the weaker-than-
expected rebound in China’s economy weighed on
global financial markets.
• As a result, the ringgit depreciated against the US
dollar by 3.4% (regional1 average: -1.2%). Similarly,
the FBM KLCI declined by 2.0% (regional1 average:
-1.3%).
• Nonetheless, the 10-year MGS yields decreased
slightly by 3 basis points, supported by non-resident
inflows into the domestic bond market.
Banks maintained strong liquidity and funding positions to support intermediation
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
151.2% (April 2023: 154.3%).
• The aggregate loan-to-fund ratio remained stable at
81.8% (April 2023: 82.1%).
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.8
151.2
0
40
80
120
160
70
75
80
85
90
95
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
A
p
r
2
3
M
a
y
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
remained broadly unchanged at 1.80% (April
2023: 1.78%) and 1.10% (April 2023: 1.10%),
respectively.
• Loan loss coverage ratio (including regulatory
reserves) remained at a prudent level of 114.1%
of impaired loans, with total provisions accounting
for 1.7% of total loans.
%
1.8
1.1
1.7
0.5
1.0
1.5
2.0
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
A
p
r
2
3
M
a
y
2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
April 2023 Monthly Highlights
Slide 1
Slide 2
| Press Release |
30 Nov 2023 | Detailed Disclosure of International Reserves as at end-October 2023 | https://www.bnm.gov.my/-/detailed-disclosure-of-international-reserves-as-at-end-october-2023-1 | null | null |
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Detailed Disclosure of International Reserves as at end-October 2023
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Detailed Disclosure of International Reserves as at end-October 2023
Embargo :
For immediate release
Not for publication or broadcast before
1200 on
Thursday, 30 November 2023
30 Nov 2023
In accordance with the International Monetary Fund (IMF) Special Data Dissemination Standard (SDDS) format, the detailed breakdown of international reserves provides forward-looking information on the size, composition and usability of reserves and other foreign currency assets, and the expected and potential future inflows and outflows of foreign exchange of the Federal Government and Bank Negara Malaysia over the next 12-month period.
The detailed breakdown of international reserves based on the SDDS format is shown in Tables I, II, III and IV.
As shown in Table I, official reserve assets amounted to USD108,539.1 million, while other foreign currency assets amounted to USD1.6 million as at end-October 2023.
As shown in Table II, for the next 12 months, the pre-determined short-term outflows of foreign currency loans, securities and deposits, which include among others, scheduled repayment of external borrowings by the Government and the maturity of foreign currency Bank Negara Interbank Bills, amounted to USD16,481.1 million. The net short forward positions amounted to USD25,060.6 million as at end-October 2023, reflecting the management of ringgit liquidity in the money market. In line with the practice adopted since April 2006, the data excludes projected foreign currency inflows arising from interest income and the drawdown of project loans. Projected foreign currency inflows amount to USD2,194.1 million in the next 12 months.
As shown in Table III, the only contingent short-term net drain on foreign currency assets are Government guarantees of foreign currency debt due within one year, amounting to USD369.4 million. There are no foreign currency loans with embedded options, no undrawn, unconditional credit lines provided by or to other central banks, international organisations, banks and other financial institutions. Bank Negara Malaysia also does not engage in foreign currency options vis-à-vis ringgit.
Overall, the detailed breakdown of international reserves under the IMF SDDS format indicates that as at end-October 2023, Malaysia’s international reserves remain usable. Related Assets
International Reserves and Foreign Currency Liquidity (31 October 2023)
Bank Negara Malaysia
30 November 2023
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |
22 Nov 2023 | International Reserves of Bank Negara Malaysia as at 15 November 2023 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-15-november-2023 | https://www.bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf | null |
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International Reserves of Bank Negara Malaysia as at 15 November 2023
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International Reserves of Bank Negara Malaysia as at 15 November 2023
Embargo :
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1500 on
Wednesday, 22 November 2023
22 Nov 2023
The international reserves of Bank Negara Malaysia amounted to USD110.5 billion as at 15 November 2023. The reserves position is sufficient to finance 5.3 months of imports of goods and services[1], and is 1.0 time the total short-term external debt.
[1] Under the previous import coverage measure, reserves are sufficient to finance 7.0 months of retained imports of goods. For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27, which can be accessed at bnm.gov.my/-/quarterly-bulletin-4q-2021 Related Assets
BNM Statement of Assets & Liabilities - 15 November 2023
Bank Negara Malaysia
22 November 2023
© Bank Negara Malaysia, 2023. All rights reserved.
|
Monthly Highlights
Headline inflation declined to 3.4% in March
March 2023
1
3.7 3.4
3.9 3.8
0.00
2.00
4.00
0.0
2.0
4.0
J
a
n
-2
2
F
e
b
-2
2
M
a
r-
2
2
A
p
r-
2
2
M
a
y
-2
2
J
u
n
-2
2
J
u
l-
2
2
A
u
g
-2
2
S
e
p
-2
2
O
c
t-
2
2
N
o
v
-2
2
D
e
c
-2
2
J
a
n
-2
3
F
e
b
-2
3
M
a
r-
2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation declined to 3.4% in March
(February: 3.7%) due mainly to lower inflation for
fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation moderated slightly to 3.8% during
the month (February: 3.9%), driven largely by
lower inflation for food away from home.
1
Robust growth in volume index driven by retail and motor vehicles
Index of Wholesale and Retail Trade
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded by 10.6% in February 2023
(January: 8.5%).
• The higher growth was driven mainly by retail
sales in non-specialised stores (e.g., department
stores) followed by continued strength in
purchases of motor vehicles amid the ongoing
fulfilment of backlog orders.
• On a month-on-month seasonally adjusted basis,
the index accelerated by 5.5% (January: 0.2%).
9.5 8.510.6
0
10
20
30
40
Feb-
22
Mar-
22
Apr-
22
May-
22
Jun-
22
Jul-
22
Aug-
22
Sep-
22
Oct-
22
Nov-
22
Dec-
22
Jan-
23
Feb-
23
ppt, %yoy
Motor vehicles Retail Wholesale
2.4
5.2
4.4
0
1
2
3
4
5
6
7
Mar-22 Jul-22 Nov-22 Mar-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Growth in credit to the private non-financial sector moderated
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
2.7 2.6 2.7 2.6
1.0 0.6 0.7 0.7
1.0
1.1 1.1 0.9
4.7 4.3 4.5 4.2
Dec-22 Jan-23 Feb-23 Mar-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Contribution to growth (ppt)
• Credit to the private non-financial sector grew by
4.2% as at end-March (February: 4.5%), attributed
to slower growth in credit to businesses (3.2%;
February: 3.7%).
• While growth in outstanding corporate bonds
moderated (4.4%; February : 5.5%), outstanding
business loan growth was sustained at 2.4%
(February: 2.4%). This was supported by the
continued growth in both working capital (2.2%;
February: 1.9%) and investment-related loans
(4.3%; February: 4.2%).
• Outstanding household loan growth remained
broadly stable (5.2%; February: 5.3%), supported
by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan
growth for the purchase of securities (-6.9%;
February: -3.3%).
Credit to the Private Non-Financial Sector1,2
Monthly Highlights
March 2023
Domestic financial market conditions remained orderly
Financial Market Performance in March 2023
Source: Bank Negara Malaysia, Bursa Malaysia
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
11.0
-2.1
-5.3
0.0
-2.2
1.7
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-10 -5 0 5 10 15
Mar-23
Feb-23
• In March, global financial markets were affected by
the emergence of banking sector stress in some
major economies. As spillovers were contained thus
far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds
improved.
• In line with the performance of regional currencies,
the ringgit appreciated by 1.7% against the US
dollar. Conditions in the domestic bond market
also remained stable.
• The FBM KLCI declined by 2.2% during the month.
2
Banks maintained strong liquidity and funding positions to support intermediation
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.9
157.4
0
40
80
120
160
70
75
80
85
90
95
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
increased slightly to 1.8% (February-23: 1.8%) and
1.2% (February-23: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory
reserves) continue to record a prudent level of
110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
%
1.8
1.2
1.7
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
157.4% (February-23: 152.7%).
• The aggregate loan-to-fund ratio remained stable at
81.9% (February-23: 81.6%).
PRESS RELEASE
Ref. No.: 04/23/05 EMBARGO: Not for publication or
broadcast before 1500 hours on
Friday, 28 April 2023
Monthly Highlights – March 2023
Headline inflation declined to 3.4% in March
• Headline inflation declined to 3.4% in March (February: 3.7%) due mainly
to lower inflation for fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation1 moderated slightly to 3.8% during the month
(February: 3.9%), driven largely by lower inflation for food away from
home.
Robust growth in volume index driven by retail and motor vehicles
• The Index of Wholesale and Retail Trade (IOWRT) expanded by 10.6%
in February 2023 (January: 8.5%).
• The higher growth was driven mainly by retail sales in non-specialised
stores (e.g., department stores) followed by continued strength in
purchases of motor vehicles amid the ongoing fulfilment of backlog
orders.
• On a month-on-month seasonally adjusted basis, the index accelerated
by 5.5% (January: 0.2%).
1 Core inflation is computed by excluding price-volatile and price-administered items.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth in credit to the private non-financial sector2,3 moderated
• Credit to the private non-financial sector grew by 4.2% as at end-March
(February: 4.5%), attributed to slower growth in credit to businesses
(3.2%; February: 3.7%).
• While growth in outstanding corporate bonds moderated (4.4%;
February: 5.5%), outstanding business loan growth was sustained at
2.4% (February: 2.4%). This was supported by the continued growth in
both working capital (2.2%; February: 1.9%) and investment-related
loans (4.3%; February: 4.2%).
• Outstanding household loan growth remained broadly stable (5.2%;
February: 5.3%), supported by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan growth for the purchase of
securities (-6.9%; February: -3.3%).
Domestic financial market conditions remained orderly
• In March, global financial markets were affected by the emergence of
banking sector stress in some major economies. As spillovers were
contained thus far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds improved.
• In line with the performance of regional currencies, the ringgit
appreciated by 1.7% against the US dollar. Conditions in the domestic
bond market also remained stable.
• The FBM KLCI declined by 2.2% during the month.
Banks maintained strong liquidity and funding positions to support
intermediation
• Banks continued to record healthy liquidity buffers with the aggregate
Liquidity Coverage Ratio at 157.4% (February: 152.7%).
2 Comprises loans to households and non-financial corporations from the banking system and development financial
institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
3 Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced
to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
• The aggregate loan-to-fund ratio remained stable at 81.9%
(February: 81.6%).
Asset quality in the banking system remained intact
• Overall gross and net impaired loans ratios increased slightly to 1.8%
(February: 1.8%) and 1.2% (February: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory reserves) continues to
record a prudent level of 110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
Bank Negara Malaysia
28 April 2023
20230428_BNM Monthly Highlights-March_en
Slide 1
Slide 2
20230428_BNM PR_Monthly Highlights-Mar 2023_eng
| Press Release |
17 Nov 2023 | Launch of Cross-border Real-time Payment Systems Connectivity between Malaysia and Singapore | https://www.bnm.gov.my/-/mysg-pmt-en | null | null |
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Launch of Cross-border Real-time Payment Systems Connectivity between Malaysia and Singapore
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Launch of Cross-border Real-time Payment Systems Connectivity between Malaysia and Singapore
1806 on
Friday, 17 November 2023
Person-to-person (P2P) cross-border fund transfers are now enabled via DuitNow and PayNow
Users can transfer funds instantly between the two countries by using just the recipient’s mobile phone number or Virtual Payment Address (VPA)[1]
BNM Governor Datuk Abdul Rasheed Ghaffour (fifth from left) and MAS Managing Director Mr Ravi Menon (sixth from left) at the launch of the cross-border real-time payment systems connectivity between Malaysia and Singapore, accompanied by officials and industry players.
Bank Negara Malaysia (BNM) and the Monetary Authority of Singapore (MAS) have jointly launched the real-time payment systems linkage between Malaysia’s DuitNow and Singapore’s PayNow. The initiative follows the QR payment linkage announced on 31 March 2023 which enabled cross-border QR payments to merchants. BNM Governor Datuk Abdul Rasheed Ghaffour and MAS Managing Director Mr Ravi Menon marked the launch by executing live cross-border fund transfers to each other at the Singapore FinTech Festival today.
The DuitNow-PayNow linkage enables instant, secure and cost-effective P2P fund transfers and remittances between the two countries. This real-time payment systems linkage is also the first to include the participation of non-bank financial institutions from both countries, providing access to a broader group of users. Consumers of participating financial institutions[2] are now able to send and receive funds of up to RM3,000 or S$1,000 daily by using the recipient’s mobile phone number or VPA.
For users in Malaysia, the service will first be available for all Maybank, CIMB and TNG Digital’s users,[3] with other financial institutions gradually onboarded thereafter. The service will be made available to Singapore customers of Liquid Group, Maybank Singapore, OCBC and UOB under a phased approach, where these institutions will progressively increase the number of eligible user groups from today until end-January 2024. This is to support customers' familiarisation with the service.
The DuitNow-PayNow linkage is an outcome of extensive collaboration among the central banks, payment system operators,[4] scheme owners, and participating financial institutions of both countries. It is an important milestone in improving the cost, speed, access and transparency of cross-border payments. Users from both countries will benefit from the linkage’s cost-effectiveness, inclusivity and accessibility. It is also aligned with the objectives of the ASEAN Payment Connectivity Initiative and the G20 Roadmap for Enhancing Cross-border Payments. In 2022, P2P and remittance transactions between the two countries stood at RM7.8 billion/S$2.3 billion.
BNM Governor Datuk Abdul Rasheed Ghaffour said, “Cross-border payments that are fast, secure, and cost-efficient can provide immense benefits, especially for individuals and small businesses in countries with very close economic ties such as Malaysia and Singapore. The DuitNow-PayNow linkage enables us to reap these benefits towards our shared growth and prosperity, while laying the foundations for scalable cross-border payment networks across and beyond ASEAN.”
MAS Managing Director Mr Ravi Menon said, “The PayNow-DuitNow linkage is the culmination of a shared aspiration by Singapore and Malaysia to facilitate cross-border payments between our two countries. This linkage represents another step toward ASEAN’s vision for regional payments interconnectivity.”
[1] A Virtual Payment Address is an identifier used by Singapore non-bank financial institutions which are uniquely linked to a person’s bank account. An example of a LiquidPay VPA is +651234567#XNAP.
[2] Participants from Malaysia are CIMB Bank Malaysia Berhad, Malayan Banking Berhad and TNG Digital Sdn. Bhd. (non-bank financial institution). Participants from Singapore are Liquid Group (non-bank financial institution), Maybank Singapore, OCBC and UOB. Malaysia’s Hong Leong Bank Berhad and Singapore’s DBS will join at a later stage.
[3] For TNG Digital users, the service will be offered on a phased approach with outbound service (i.e., Malaysia to Singapore) to be available immediately and inbound service (Singapore to Malaysia) to be offered in December 2023.
[4] Payments Network Malaysia and Singapore’s Banking Computer Services Pte Ltd.
Bank Negara Malaysia
17 November 2023
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |
17 Nov 2023 | Economic and Financial Developments in Malaysia in the Third Quarter of 2023 | https://www.bnm.gov.my/-/qb23q3_en_pr | https://www.bnm.gov.my/documents/20124/12521489//qb23q3_slides.pdf, https://www.bnm.gov.my/documents/20124/12521489/qb23q3_en_table1.pdf, https://www.bnm.gov.my/documents/20124/12521489/qb23q3_transcript.pdf | null |
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Economic and Financial Developments in Malaysia in the Third Quarter of 2023
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Economic and Financial Developments in Malaysia in the Third Quarter of 2023
Embargo :
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1200 on
Friday, 17 November 2023
17 Nov 2023
The economy grew by 3.3% in the third quarter
The Malaysian economy expanded by 3.3% in the third quarter of 2023 (2Q 2023: 2.9%). Growth was anchored by resilient domestic demand. Household spending remained supported by continued growth in employment and wages. Meanwhile, investment activity was underpinned by the progress of multi-year projects and capacity expansion by firms. Exports remained soft amid prolonged weakness in external demand. This, however, was partially offset by the recovery in inbound tourism. On the supply side, the services, construction and agriculture sectors remained supportive of growth. This was partly offset by the decline in production in the manufacturing sector given the weakness in demand for electrical and electronic (E&E) products and lower production of refined petroleum products. On a quarter-on-quarter seasonally adjusted basis, the economy grew by 2.6% (2Q 2023: 1.5%). Overall, the Malaysian economy expanded by 3.9% in the first three quarters of 2023.
Headline inflation continued to moderate to 2% (2Q 2023: 2.8%) during the quarter. The moderation was recorded in both non-core inflation and core inflation. For non-core inflation, fresh food and fuel contributed to the decline. Core inflation declined further to 2.5% (2Q 2023: 3.4%) but remained above its long-term average (2011-2019 average: 2%). The moderation in core inflation was largely contributed by selected services, including food away from home, expenditure in restaurants and cafés, and personal transport repair and maintenance. Inflation pervasiveness declined as the share of Consumer Price Index (CPI) items recording monthly price increases moderated to 40.8% during the quarter (2Q 2023: 42.7%), below the third quarter long-term (2011-2019) average of 44.5%.
Exchange rate developments
Domestic financial conditions were driven mainly by evolving expectations over the global monetary policy path. In particular, the strength of the US job markets has prompted expectations for a tighter-for-longer policy stance by the US Federal Reserve and subsequently higher US and global interest rates. In contrast, the People’s Bank of China undertook further monetary policy easing to address weaker-than-expected growth in China, which dampened investor sentiments towards the region.
Against this backdrop, the US dollar appreciation extended into the quarter, and the Malaysian ringgit ended up depreciating by 0.2% alongside other regional currencies. However, the ringgit appreciated by 1.4% against a basket of major trading partner currencies, as indicated by the ringgit nominal effective exchange rate (NEER).
Financing conditions
The growth in credit to the private non-financial sector improved to 4.2% (2Q 2023: 3.7%), supported by higher growth in business loans (1.6%; 2Q 2023: 0.5%) while outstanding corporate bonds growth was sustained at 5% (2Q 2023: 4.9%). The higher business loan growth was driven mainly by improving growth in working capital loans to non-SMEs. Of note, SME loan growth remained forthcoming (6.7%; 2Q 2023: 6.4%). For households, outstanding loans expanded by 5.4% (2Q 2023: 5.1%), reflecting steady growth across key purposes.
Going forward, growth will remain resilient despite external headwinds on account of firm domestic demand
BNM Governor Datuk Abdul Rasheed Ghaffour says, "Despite the challenging global environment, the Malaysian economy is projected to expand by around 4% in 2023 and 4% – 5% in 2024. Growth will continue to be driven by the expansion in domestic demand amid steady employment and income prospects, particularly in domestic-oriented sectors. This growth performance along with other favourable economic developments would provide support to the ringgit.”
Improvements in tourist arrivals and spending are expected to continue. Investment will be supported by further progress of multi-year infrastructure projects and the implementation of catalytic initiatives. Measures under Budget 2024 will also provide additional impetus to economic activity. The growth outlook remains subject to downside risks stemming primarily from weaker- than-expected external demand as well as larger and more protracted declines in commodity production. However, there are upside risk factors such as stronger-than-expected tourism activity, a stronger recovery from the E&E downcycle, and faster implementation of existing and new investment projects.
Headline and core inflation to remain moderate for the remainder of 2023
As expected, both headline and core inflation have been declining throughout the year, mainly due to milder cost conditions. This would likely continue for the remainder of 2023. Overall, headline inflation is expected to average between 2.5% and 3% in 2023. Going forward, risks to the inflation outlook remain highly subject to changes to domestic policy on subsidies and price controls, as well as global commodity prices and financial market developments.
See also:
Press Conference Slides (PDF)
Press Conference Presentation Transcript
Press Conference Video
Publication: Quarterly Bulletin Third Quarter 2023
Table 1: GDP by Expenditure Components and Economic ActivityBank Negara Malaysia
17 November 2023
© Bank Negara Malaysia, 2023. All rights reserved.
|
Sorotan Bulanan
2.6
5.7
4.6
0
1
2
3
4
5
6
7
Nov-22 Mac-23 Jul-23 Nov-23
Pinjaman perniagaan
Perniagaan isi rumah
Bon korporat
144.8
0.9
-5
0
5
10
15
20
115
120
125
130
135
140
145
150
Ja
n-
22
Fe
b-
22
M
ac
-2
2
Ap
r-2
2
M
ei
-2
2
Ju
n-
22
Ju
l-2
2
O
go
-2
2
Se
p-
22
O
kt
-2
2
N
ov
-2
2
D
is
-2
2
Ja
n-
23
Fe
b-
23
M
ac
-2
3
Ap
r-2
3
M
ei
-2
3
Ju
n-
23
Ju
l-2
3
O
go
-2
3
Se
p-
23
O
kt
-2
3
Indeks Pengeluaran Perindustrian Perkilangan
IPI Perkilangan (2015=100) - skala kiri
Pertumbuhan Tahun ke Tahun IPI Perkilangan (%) - skala kanan
Pengeluaran perkilangan meningkat sebanyak 0.9% pada bulan Oktober 2023
November 2023
• Indeks pengeluaran perindustrian (IPI) perkilangan
meningkat sebanyak 0.9% secara tahunan pada
bulan Oktober 2023 (September 2023: 0.4%),
disokong oleh kelompok sektor berasaskan dalam
negeri yang terus bertambah baik, terutamanya
kelengkapan pengangkutan serta makanan, minuman
dan tembakau.
• Peningkatan ini lebih daripada mengimbangi
pertumbuhan kelompok berorientasikan eksport yang
terus lemah berikutan pengeluaran komponen
semikonduktor yang lebih rendah dan
penyelenggaraan loji penapisan minyak yang
digerakkan semula secara beransur-ansur.
Sumber: Jabatan Perangkaan Malaysia
1
Sumbangan kepada pertumbuhan
(mata peratusan)
• Kredit kepada sektor swasta bukan kewangan
meningkat sebanyak 4.6% pada akhir bulan November
(Oktober 2023: 4.2%), didorong terutamanya oleh
peningkatan kredit kepada perniagaan yang lebih tinggi
(3.5%; Oktober 2023: 2.8%).
• Pinjaman perniagaan terkumpul berkembang sebanyak
2.6% (Oktober 2023: 1.1%), disokong oleh pertumbuhan
pinjaman modal kerja yang lebih tinggi. Yang ketara,
pertumbuhan pinjaman terkumpul kepada PKS kekal
menggalakkan (7.9%; Oktober 2023: 7.2%). Sementara
itu, pertumbuhan bon korporat terkumpul berkurang
sedikit kepada 4.6% (Oktober 2023: 5.0%).
• Pertumbuhan pinjaman terkumpul bagi isi rumah
adalah stabil (5.7%; Oktober 2023: 5.6%), disokong
oleh pertumbuhan yang mampan bagi kebanyakan
tujuan pinjaman. Pertumbuhan pinjaman isi rumah
terus didorong oleh pinjaman untuk pembelian rumah
dan kenderaan, masing-masing meningkat sebanyak
7.6% dan 9.4%, (Oktober 2023: 7.6% dan 9.1%).
2.7 2.7 2.8 2.8
0.2 0.5 0.3 0.80.9 1.1 1.1 1.0
3.8 4.2 4.2 4.6
Ogo-23 Sep-23 Okt-23 Nov-23
Bon Korporat
Pinjaman Perniagaan
Pinjaman Isi Rumah
Kredit kepada Sektor Swasta
Bukan Kewangan
Pertumbuhan kredit kepada sektor swasta bukan kewangan yang lebih tinggi
Inflasi keseluruhan menurun kepada 1.5% pada bulan November
• Inflasi keseluruhan terus menurun kepada 1.5% pada
bulan November (Oktober 2023: 1.8%), didorong oleh
inflasi yang lebih rendah bagi inflasi teras (2.0%;
Oktober 2023: 2.4%) dan inflasi makanan segar
(0.1%; Oktober 2023: 1.2%).
• Yang ketara, inflasi teras yang lebih rendah didorong
sebahagian besarnya oleh makanan di luar rumah
(3.9%; Oktober 2023: 5.6%).
Sumbangan kepada Inflasi
Sumbangan mata peratusan %, tahun ke tahun
1 Pengiraan inflasi teras tidak termasuk barangan yang harganya tidak menentu
dan barangan yang harganya ditadbir.
Sumber: Jabatan Perangkaan Malaysia dan anggaran Bank Negara Malaysia
1.8 1.5
2.42.0
0.0
2.0
4.0
0.0
2.0
4.0
O
go
-2
2
Se
p-
22
O
kt
-2
2
N
ov
-2
2
D
is
-2
2
Ja
n-
23
Fe
b-
23
M
ac
-2
3
Ap
r-2
3
M
ei
-2
3
Ju
n-
23
Ju
l-2
3
O
go
-2
3
Se
p-
23
O
kt
-2
3
N
ov
-2
3
Makanan & minuman bukan alkohol (29.5%) Perumahan & utiliti (23.8%)
Pengangkutan (14.6%) Lain-lain (32.1%)
Inflasi keseluruhan (skala kanan) Inflasi teras¹ (skala kanan)
Pertumbuhan tahunan (%)
Kredit kepada Sektor Swasta Bukan Kewangan1,2
1 Terdiri daripada pinjaman kepada isi rumah dan syarikat bukan kewangan oleh
sistem perbankan dan institusi kewangan pembangunan (IKP) serta bon korporat
yang diterbitkan oleh syarikat bukan kewangan (termasuk kertas jangka pendek).
2 Mulai penerbitan Sorotan dan Perangkaan Bulanan (Monthly Highlights and
Statistics, MHS) bulan Disember 2022, siri ini diperkenalkan untuk meningkatkan
kualiti data pembiayaan. Siri data baharu ini tersedia dalam Jadual 2.18.MHS.
Sumber: Bank Negara Malaysia
Sorotan Bulanan
November 2023
2
Prestasi Pasaran Kewangan pada bulan November 2023
14.0
1.3
-1.6
-30.0
0.7
2.4
MGS 10 tahun
(mata asas, bulan ke bulan)
Ekuiti
(%, bulan ke bulan)
Ringgit
(%, bulan ke bulan)
-33 -26 -19 -12 -5 2 9 16
Nov-23 Okt-23
Nota: Data kadar pertukaran ialah kadar pada pukul 12.00 tengah hari di
Pasaran Tukaran Asing Antara Bank Kuala Lumpur
*Negara serantau terdiri daripada: Singapura, Thailand, Filipina, Indonesia
dan Korea
Sumber: Bank Negara Malaysia dan Bursa Malaysia
Pasaran kewangan domestik terus dipengaruhi oleh sentimen pelabur global
Permodalan sistem perbankan kekal kukuh untuk menyokong pertumbuhan ekonomi
• Kedudukan modal bank-bank kekal kukuh bagi
menghadapi kemungkinan kejutan serta menyokong
pertumbuhan kredit pengantaraan dalam ekonomi.
• Sistem perbankan mencatatkan lebihan penampan
modal1 sebanyak RM134.1 bilion pada bulan
November 2023 (Oktober 2023: RM132.9 bilion).
Kecukupan Modal Sistem Perbankan
14.5
15.0
18.1
8
10
12
14
16
18
20
N
ov
-2
2
D
is
-2
2
Ja
n-
23
Fe
b-
23
M
ac
-2
3
Ap
r-2
3
M
ei
-2
3
Ju
n-
23
Ju
l-2
3
O
go
-2
3
Se
p-
23
O
kt
-2
3
N
ov
-2
3
Nisbah Modal Ekuiti Biasa Kumpulan 1
Nisbah Modal Kumpulan 1
Nisbah Jumlah Modal
%
1 Merujuk jumlah modal melebihi tahap pengawalseliaan minimum, yang
meliputi keperluan penampan pengekalan modal (2.5%) dan keperluan
minimum bank tertentu yang lebih tinggi.
Daya tahan sistem perbankan terus disokong oleh kualiti aset yang mantap
Kualiti Aset Sistem Perbankan
Sumber: Bank Negara Malaysia
• Nisbah pinjaman terjejas kasar dan bersih keseluruhan
sebahagian besarnya kekal stabil, masing-masing
pada 1.7% dan 1.0%.
• Nisbah perlindungan kerugian pinjaman (termasuk
rizab pengawalseliaan) kekal pada tahap berhemat
sebanyak 119.7% daripada pinjaman terjejas dengan
jumlah peruntukan mencakupi 1.6% daripada jumlah
pinjaman.
%
1.7
1.0
1.6
0.4
0.8
1.2
1.6
2.0
N
ov
-2
2
D
is
-2
2
Ja
n-
23
Fe
b-
23
M
ac
-2
3
Ap
r-2
3
M
ei
-2
3
Ju
n-
23
Ju
l-2
3
O
go
-2
3
Se
p-
23
O
kt
-2
3
N
ov
-2
3
Nisbah Jumlah Peruntukan kepada Jumlah Pinjaman
Nisbah Pinjaman Terjejas Kasar
Nisbah Pinjaman Terjejas Bersih
Sumber: Bank Negara Malaysia
• Keadaan pasaran global didorong oleh jangkaan
pasaran kewangan bahawa kadar faedah di negara
maju telah mencapai tahap tertinggi. Mencerminkan
sentimen pelabur ini, kadar hasil bon global menurun
manakala pasaran ekuiti global didagangkan dengan
lebih tinggi.
• Berlatarkan keadaan ini, ringgit menambah nilai
sebanyak 2.4% berbanding dengan dolar AS
(purata serantau*: +3.2%), manakala kadar hasil
MGS 10 tahun menurun sebanyak 30 mata asas
(purata serantau*: -49 mata asas) berikutan aliran
masuk dana bukan pemastautin ke dalam pasaran
bon domestik.
• FBM KLCI juga didagangkan lebih tinggi sebanyak
0.7%, sejajar dengan pasaran saham lain
(purata serantau* : 3.3%).
SIARAN AKHBAR
No. Ruj.: 12/23/08 EMBARGO: Tidak boleh dicetak
atau disiarkan sebelum pukul 1500
hari Jumaat, 29 Disember 2023
Sorotan Bulanan – November 2023
Inflasi keseluruhan menurun kepada 1.5% pada bulan November
• Inflasi keseluruhan terus menurun kepada 1.5% pada bulan November
(Oktober 2023: 1.8%), didorong oleh inflasi yang lebih rendah bagi inflasi
teras1 (2.0%; Oktober 2023: 2.4%) dan inflasi makanan segar (0.1%; Oktober
2023: 1.2%).
• Yang ketara, inflasi teras yang lebih rendah didorong sebahagian besarnya
oleh makanan di luar rumah (3.9%; Oktober 2023: 5.6%).
Pengeluaran perkilangan meningkat sebanyak 0.9% pada bulan Oktober
2023
• Indeks pengeluaran perindustrian (IPI) perkilangan meningkat sebanyak
0.9% secara tahunan pada bulan Oktober 2023 (September 2023: 0.4%),
disokong oleh kelompok sektor berasaskan dalam negeri yang terus
bertambah baik, terutamanya kelengkapan pengangkutan serta makanan,
minuman dan tembakau.
• Peningkatan ini lebih daripada mengimbangi pertumbuhan kelompok
berorientasikan eksport yang terus lemah berikutan pengeluaran komponen
semikonduktor yang lebih rendah dan penyelenggaraan loji penapisan
minyak yang digerakkan semula secara beransur-ansur.
1 Pengiraan inflasi teras tidak termasuk barangan yang harganya tidak menentu dan barangan yang harganya
ditadbir.
D i t e r b i t k a n o l e h :
J a b a t a n K o m u n i k a s i S t r a t e g i k , T i n g k a t 1 4 , B l o k B , B a n g u n a n B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m e l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Pertumbuhan kredit kepada sektor swasta bukan kewangan2,3 yang lebih
tinggi
• Kredit kepada sektor swasta bukan kewangan meningkat sebanyak 4.6%
pada akhir bulan November (Oktober 2023: 4.2%), didorong terutamanya
oleh peningkatan kredit kepada perniagaan yang lebih tinggi (3.5%; Oktober
2023: 2.8%).
• Pinjaman perniagaan terkumpul berkembang sebanyak 2.6% (Oktober 2023:
1.1%), disokong oleh pertumbuhan pinjaman modal kerja yang lebih tinggi.
Yang ketara, pertumbuhan pinjaman terkumpul kepada PKS kekal
menggalakkan (7.9%; Oktober 2023: 7.2%). Sementara itu, pertumbuhan
bon korporat terkumpul berkurang sedikit kepada 4.6% (Oktober 2023:
5.0%).
• Pertumbuhan pinjaman terkumpul bagi isi rumah adalah stabil (5.7%;
Oktober 2023: 5.6%), disokong oleh pertumbuhan yang mampan bagi
kebanyakan tujuan pinjaman. Pertumbuhan pinjaman isi rumah terus
didorong oleh pinjaman untuk pembelian rumah dan kenderaan, masing-
masing meningkat sebanyak 7.6% dan 9.4%, (Oktober 2023: 7.6% dan
9.1%).
Pasaran kewangan domestik terus dipengaruhi oleh sentimen pelabur
global
• Keadaan pasaran global didorong oleh jangkaan pasaran kewangan bahawa
kadar faedah di negara maju telah mencapai tahap tertinggi. Mencerminkan
sentimen pelabur ini, kadar hasil bon global menurun manakala pasaran
ekuiti global didagangkan dengan lebih tinggi.
• Berlatarkan keadaan ini, ringgit menambah nilai sebanyak 2.4% berbanding
dengan dolar AS (purata serantau4: +3.2%), manakala kadar hasil MGS 10
tahun menurun sebanyak 30 mata asas (purata serantau4: -49 mata asas)
2 Terdiri daripada pinjaman kepada isi rumah dan syarikat bukan kewangan oleh sistem perbankan dan institusi
kewangan pembangunan (IKP) serta bon korporat yang diterbitkan oleh syarikat bukan kewangan (termasuk kertas
jangka pendek).
3 Mulai penerbitan Sorotan dan Perangkaan Bulanan (Monthly Highlights and Statistics, MHS) bulan Disember 2022,
siri ini diperkenalkan untuk meningkatkan kualiti data pembiayaan. Siri data baharu ini tersedia dalam Jadual 2.18
MHS.
4 Negara serantau terdiri daripada Singapura, Thailand, Filipina, Indonesia dan Korea.
D i t e r b i t k a n o l e h :
J a b a t a n K o m u n i k a s i S t r a t e g i k , T i n g k a t 1 4 , B l o k B , B a n g u n a n B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m e l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
berikutan aliran masuk dana bukan pemastautin ke dalam pasaran bon
domestik.
• FBM KLCI juga didagangkan lebih tinggi sebanyak 0.7%, sejajar dengan
pasaran saham lain (purata serantau4: 3.3%).
Permodalan sistem perbankan kekal kukuh untuk menyokong
pertumbuhan ekonomi
• Kedudukan modal bank-bank kekal kukuh bagi menghadapi kemungkinan
kejutan serta menyokong pertumbuhan kredit pengantaraan dalam ekonomi.
• Sistem perbankan mencatatkan lebihan penampan modal5 sebanyak
RM134.1 bilion pada bulan November 2023 (Oktober 2023: RM132.9 bilion).
Daya tahan sistem perbankan terus disokong oleh kualiti aset yang
mantap
• Nisbah pinjaman terjejas kasar dan bersih keseluruhan sebahagian besarnya
kekal stabil, masing-masing pada 1.7% dan 1.0%.
• Nisbah perlindungan kerugian pinjaman (termasuk rizab pengawalseliaan)
kekal pada tahap berhemat sebanyak 119.7% daripada pinjaman terjejas
dengan jumlah peruntukan mencakupi 1.6% daripada jumlah pinjaman.
Bank Negara Malaysia
29 Disember 2023
5 Merujuk jumlah modal melebihi tahap pengawalseliaan minimum, yang meliputi keperluan penampan pengekalan
modal (2.5%) dan keperluan minimum bank tertentu yang lebih tinggi.
20231229_BNM Monthly Highlights Nov 2023_BM
Slide Number 1
Slide Number 2
20231229_BNM PR_Monthly Highlights Nov 2023_BM
25Quarterly Bulletin | 3Q 2023
Annex
Share
2022
(%)
2022 2023
3Q 4Q Year 1Q 2Q 3Q
Annual growth (%)
Aggregate Domestic Demand (excluding stocks)
Private sector
Consumption
Investment
Public sector
Consumption
Investment
Net Exports
Exports of Goods and Services
Imports of Goods and Services
93.1
75.5
60.2
15.3
17.6
13.2
4.4
5.5
74.6
69.1
13.2
14.4
14.8
13.2
7.9
6.5
13.1
26.2
21.5
21.1
6.8
7.8
7.3
10.3
3.9
3.0
6.0
23.0
8.6
7.2
9.2
10.3
11.2
7.2
4.7
4.5
5.3
-1.0
14.5
15.9
4.6
5.6
5.9
4.7
-0.3
-2.2
5.7
54.4
-3.3
-6.5
4.5
4.5
4.3
5.1
4.6
3.8
7.9
-3.7
-9.4
-9.7
4.8
4.5
4.6
4.5
6.2
5.8
7.5
-22.7
-12.0
-11.1
Real GDP 100.0 14.1 7.1 8.7 5.6 2.9 3.3
GDP (q-o-q growth, seasonally adjusted) - 2.2 -1.7 - 0.9 1.5 2.6
Note: Figures may not add up due to rounding and exclusion of stocks.
Source: Department of Statistics, Malaysia
Table 1: GDP by Expenditure Components (at constant 2015 prices)
Share
2022
(%)
2022 2023
3Q 4Q 1Q 2Q 3Q
Annual growth (%)
Services
Manufacturing
Agriculture
Mining
Construction
58.3
24.1
6.6
6.4
3.5
16.7
13.1
1.2
9.1
15.3
9.1
3.9
1.1
6.3
10.1
7.3
3.2
1.0
2.4
7.4
4.7
0.1
-1.0
-2.3
6.2
5.0
-0.1
0.8
-0.1
7.2
Real GDP 100.0 14.1 7.1 5.6 2.9 3.3
Note: Numbers do not add up due to rounding and exclusion of import duties component.
Source: Department of Statistics, Malaysia
Table 2: GDP by Economic Activity (at constant 2015 prices)
PRESS RELEASE
EMBARGO: For immediate release
ECONOMIC AND FINANCIAL DEVELOPMENTS IN MALAYSIA
IN THE THIRD QUARTER OF 2023
Press Conference Presentation Transcript
Moderate global growth in 3Q 2023
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Global growth in the third quarter of 2023 was moderate, weighed by higher
interest rates and elevated inflation. China’s growth showed early signs of
improvement as consumption rose, though its property market remained weak.
While global core inflation continued to moderate, headline inflation edged up
albeit temporarily, partly due to higher commodity prices. Regional exports
showed tentative signs of recovery. This was in line with a nascent turnaround
in the global E&E sector. However, headwinds remain due to moderating
demand conditions, shift in consumption from goods to services, and ongoing
trade restrictions.”
Malaysia’s GDP grew by 3.3% in 3Q 2023
Ketua Perangkawan Malaysia Dato’ Sri Dr. Mohd Uzir Mahidin berkata,
“Pada suku ketiga 2023, ekonomi Malaysia berkembang 3.3%, disokong oleh
peningkatan permintaan dalam negeri, pasaran buruh yang terus bertambah
baik, serta aktiviti pelancongan dan pembinaan yang semakin rancak. Namun,
permintaan luar negeri yang lemah dan pengeluaran perlombongan yang lebih
rendah telah menjejaskan pertumbuhan ekonomi negara. Dari segi
pertumbuhan suku tahun ke suku tahun pelarasan musim, KDNK
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
menunjukkan momentum pertumbuhan yang lebih kukuh iaitu mencatatkan
sebanyak 2.6%, iaitu peningkatan berterusan sejak suku keempat. Manakala
melihat kepada KDNK bulanan, pertumbuhan KDNK pada bulan Julai adalah
sebanyak 4.2%, pada bulan Ogos 3.2%, dan pada bulan September 2.5%.”
Chief Statistician of Malaysia Dato’ Sri Dr. Mohd Uzir Mahidin said, “In the
third quarter of 2023, the Malaysian economy grew by 3.3%, supported by
expansion in domestic demand, continued improvement in labour market
conditions, and rising tourism and construction activities. However, the weaker
external demand and lower mining production has weighed on growth. On
seasonally adjusted quarter-on-quarter basis, GDP this quarter showed a
stronger growth momentum of 2.6%, which is a continued improvement since
the fourth quarter of 2022.”
Expansion in domestic demand, with services and construction sectors
supporting growth
Chief Statistician of Malaysia Dato’ Sri Dr. Mohd Uzir Mahidin said, “On
the expenditure side, expansion in domestic demand was driven by both
private and public sector spending. Higher private consumption growth
benefited from favourable labour market conditions, with expansion in both
necessities and discretionary spending. Growth in investments reflects
continued capacity expansion by businesses, as well as fixed asset spending
by the Government and capital expenditure by public corporations. However,
net exports continued to contract as weaker external demand weighed on
goods exports growth.
“Looking at the supply side, growth is driven mainly by the services sector and
construction sector. Growth in the services sector improved across both
consumer- and business-related subsectors. The sector also continued to
benefit from improving tourism-related spending.
“For the construction sector, growth was supported by the progress of
ongoing large infrastructure and small-scale projects.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
“Meanwhile, the manufacturing sector recorded a marginal contraction mainly
on account of further weakness in E&E cluster and lower production of refined
petroleum products.”
Continued current account surplus and FDI inflows
Chief Statistician of Malaysia Dato’ Sri Dr. Mohd Uzir Mahidin, said,
“Malaysia’s Current Account Balance (CAB) in the third quarter of 2023
recorded a continued surplus of RM9.1 billion, equivalent to 2 per cent of the
GDP, mainly supported by goods surplus, followed by lower deficit in the
Services and Secondary income account. The Services account recorded a
lower deficit of RM10.3 billion in the third quarter of 2023, supported by the
continued recovery in inbound tourism and construction.
“On the income front, the Primary income account posted higher deficit of
RM11 billion, mainly due to higher income generated by foreign companies in
Malaysia. Meanwhile, the Secondary income account registered a lower
deficit of RM2.2 billion.
“During this quarter, foreign direct investment (FDI) posted a higher net inflow
of RM7.2 billion as against RM3.1 billion in the preceding quarter. The higher
FDI inflows were supported by larger inflows in debt instruments and
continued equity injections from foreign investors. The largest recipient of FDI
was the services sector, mainly in financial and mining & quarrying sectors.
Hong Kong, China and the United Kingdom were the primary sources of FDI
during this quarter.
“In the meantime, direct investment abroad (DIA) outflows expanded to
RM13.4 billion, particularly in services sector. The top three destinations of
DIA were Indonesia, Angola and Vietnam.”
Further expansion in domestic demand and improvement in external
demand to support growth in 2024
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “As
we can observe from the GDP performance in the third quarter, the impact of
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
weaker external demand on the economy was cushioned by the resilience of
domestic demand.
“Looking ahead, Malaysia’s economy is expected to grow between 4% – 5% in
2024, underpinned by continued expansion in domestic demand, and
improvement in external demand.
“The key factors driving growth are: first, better employment and
income prospects, which will help strengthen domestic demand; second, the
realisation and progress of multi-year projects; third, improvement in the global
tech cycle, which is expected to lead to higher trade activities; and fourth,
continued increase in tourist arrivals, which will spur growth in tourism-
related sectors.”
Household spending to remain as anchor of growth
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Household spending will remain the anchor for growth, and this is driven by
continued employment and improvement in income levels, sound financial
buffers, and support from targeted government measures.”
Favourable labour market conditions going forward
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“The favourable labour market conditions is the key driver for household
spending.
“Unemployment rate declined to 3.4% in the third quarter and is expected to
improve further by the end of 2023. The gradual decline in unemployment was
driven mainly by continued expansion in employment.
“Going forward, strong job creation data suggests that employment will
continue to expand. Furthermore, labour participation rate is also at a historical
high of 70.1%. These factors would support further growth in income and
consumer spending.”
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Investment activity will be supported by realisation of projects, easing
supply conditions and structural policy measures
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Looking ahead, investment activity will be supported by progress of new and
existing projects, for example in E&E manufacturing and data centres.
Investment would also be boosted by factors such as easing labour supply,
stabilisation of input cost, and implementation of structural policy measures
through the NIMP and NETR, which includes projects such as the Kasawari
Carbon Capture and Storage and EV charging stations.
“I must re-emphasise that these investments are not only important in
supporting immediate growth, but also to enhance Malaysia’s future growth
potential and competitiveness.
“In this regard, it is crucial to ensure that the high investment intentions and
plans are facilitated and realised.”
While exports declined, it exhibited relative resilience amidst a
challenging global landscape
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“While exports declined in 3Q 2023, as the slowdown in global trade in goods
and a high base in 3Q 2022, this is offset by the higher travel receipts during
the quarter.
“Notwithstanding this, Malaysia’s diversified exports structure has also partly
contributed to export resilience. This is reflected in our export performance,
which started to decline much later than some regional economies, with
smaller magnitude of contraction.
“There are also some signs of stabilisation in export growth as reflected in the
turnaround in the quarter-on-quarter seasonally adjusted export growth.”
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Exports to gradually recover going forward, supported by pick up in
global tech cycle and tourism activity
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Exports are expected to gradually recover in the near term. The global
semiconductor sales, which have been declining in 1H 2023, is showing some
signs of turn-around recently. The World Semiconductor Trade Statistics
(WSTS) is projecting a positive growth of 11.8% in 2024, as compared to a
contraction of 10.3% in 2023, which will help to lift our exports, especially in
E&E products.
“In addition, tourism-related activities are expected to pick up further. In
3Q 2023, travel receipts have reached 78% of the corresponding period in
2019. This is expected to continue to recover moving forward and return to
pre-pandemic level in 2024.”
Inbound tourism continues to recover towards pre-pandemic level, in
line with regional economies
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “As
of 1H 2023, tourist arrivals in Malaysia have reached about 70% of the pre-
pandemic level, in line with most economies in the region.
“The recovery is driven mainly by regional tourists from Singapore, Indonesia
and Thailand, with Chinese tourists having the largest room for catch up
growth in 2024, providing good prospects for Malaysia to benefit. Given this,
we should intensify our efforts towards ensuring Malaysia continues to be an
attractive global tourist destination.
“By the way, I should mention that although the chart on the RHS here shows
tourist arrival from China being an outlier, as we have explained earlier, this
owes much to factors such as the lack of flights and issues with passport
renewals in China when they reopened. These constraints are easing. The
latest figures which will be released soon will show a much improved figure.”
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth remains subject to risks from both external and domestic factors
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“The overall growth projection of 4% to 5% next year is subject to both upside
and downside risks.”
“On the global front, slower-than-expected recovery in external demand is the
key downside risk factor. On the domestic front, weaker labour market
conditions, more severe shocks on commodity production due to stronger
impact from El Nino, and prolonged plant maintenance could also potentially
weigh on the growth outlook.
“There are also upside risks from stronger-than-expected tourism activity;
faster recovery from tech cycle downturn as well as a larger impact from the
progress of multi-year investment projects and policy measures under national
master plans and blueprints that were announced recently by the
Government.”
Malaysia’s Economic Resilience: A Post-pandemic Analysis
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “As
of 2Q 2023, on a seasonally adjusted basis, Malaysia’s GDP had exceeded
pre-pandemic levels by more than 10%. The recovery was led mainly by the
manufacturing and services sectors.
“Despite the external challenges, Malaysia’s diversified exports and tourism
rebound have contributed to the country’s trade resilience. Furthermore, the
improving labour market provided job and income opportunities, especially for
the vulnerable segments.
“In essence, our economic fundamentals have enabled the country to weather
the current slowdown in external demand, and the outlook is for further
improvement in our growth prospects.”
Disinflation trend continued with lower headline and core inflation
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “In
line with the easing cost environment, headline inflation continued to trend
lower, averaging at 2% for the third quarter (2Q 2023: 2.8%). Much of this
downtrend was driven by lower core inflation, which contributed around half of
the decline during the third quarter. This also partly reflected effects from the
higher base in the third quarter of 2022.
“Core inflation moderated to 2.5% during the quarter (2Q 2023: 3.4%) mainly
due to lower inflation for core services, such as food away from home,
expenditure at restaurants and café, and repair and maintenance of personal
transport. The moderation in core inflation is expected to continue until end of
the year.”
Going forward, the inflation outlook remains highly subject to domestic
policy factors, global commodity prices and financial market
developments
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“For 2024, headline inflation is expected to average between 2.1% and 3.6%
based on the outlook by the Ministry of Finance. The wide range
partly accounts for some upside impact from proposed subsidy rationalisation
measures, where a more precise details of these policies are currently being
finalised. We will continuously evaluate their implications to the inflation
outlook going forward based on the final implementation of these policies.
“In addition to the domestic policy factors, risks to the inflation outlook could
also stem from global developments. Near-term upside risks include higher
global commodity prices from geopolitical conflicts and potential disruptions
from the El Nino weather phenomenon, as well as higher import prices amid
exchange rate pressures. These risks could be offset by more subdued global
commodity prices driven by weaker-than-expected global growth, as well as
more favourable weather conditions leading to lower pressure on food prices.”
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
The OPR was maintained at 3.00% at the November MPC meeting
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Turning to monetary policy, the MPC maintained the OPR at 3.00% at the
November 2023 MPC meeting.
“At the current OPR level, the MPC deemed that the monetary policy stance
remains supportive of the economy and is consistent with the current
assessment of the inflation and growth prospects.
“As I mentioned earlier, growth next year will be mainly driven by resilient
domestic expenditure. Inflation is also expected to remain modest.
“Going forward, the MPC will remain vigilant to ongoing developments to
inform the assessment on the outlook of domestic inflation and growth. The
MPC will ensure that the monetary policy stance remains conducive to
sustainable economic growth amid price stability.”
The ringgit depreciated in a strong USD environment
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“The ringgit depreciated against the US dollar in the third quarter. This trend
was also observed among other regional currencies, due primarily to external
factors including the US monetary policy path.
“Malaysia’s economy today is resilient notably in terms of our economic
fundamentals, robustness of our financial sector, and depth of our financial
markets. The persistently strong US dollar is therefore not expected to derail
Malaysia’s growth prospects.
“Going forward, global financial market uncertainties are expected to ease –
barring any new adverse developments such as heightening geopolitical
tensions – as financial markets expect the US policy rate to be reduced next
year. This should ease US dollar strength and thus reduce depreciation
pressure on the ringgit.”
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Portfolio investment recorded a net outflow amid external uncertainty
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“However, of late, we have experienced outflows from portfolio investment. In
the third quarter, portfolio investment recorded a net outflow of RM14.1 billion
compared to an inflow of RM8.1 billion in the second quarter of the year due
mainly to higher residents’ investments in equity and debt securities abroad.
“This also reflected the liquidation of domestic debt securities by non-resident
investors, which has partially offset non-residents’ acquisition of equity
securities in Malaysia.
“To ensure balanced two-way flows, we encourage domestic investors to seek
investment opportunities domestically, repatriate export and foreign income
and investment proceeds, and sequence foreign investments.
“Ongoing and future investment projects and structural policy measures will
enhance Malaysia’s future potential growth and competitiveness, which will
attract foreign investments. This will provide more sustainable support to the
ringgit in the longer-term.
“That being said, I want to emphasise that the Bank remains committed to
ensure the ringgit adjusts in an orderly manner and in the longer term, it
should reflect our economic fundamentals.”
Malaysian bond yields and equities rose
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “In
the bond market, bond yields on the 10-year MGS rose in line with regional
peers amid the increase in US bond yields. Investors were largely expecting
the US policy rate to remain higher-for-longer.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
“On domestic equity markets, the announcement of structural reforms,
including various national master plans, boosted prospects of corporate
earnings of companies in the KLCI.
“Such structural reforms reflect Malaysia’s ongoing policy imperatives. Greater
investor confidence in Malaysia’s growth prospects will eventually support a
real appreciation in the exchange rate as external uncertainties recede.”
Credit growth improved following expansion in business loans
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Turning to credit conditions, credit to the private non-financial sector
expanded by 4.2% as at end of the third quarter, driven mainly by higher
growth in business loans (1.6%; 2Q 2023: 0.5%), while the growth in
outstanding corporate bonds was sustained at 5.0% (2Q 2023: 4.9%). For
households, outstanding loans grew by 5.4% (2Q 2023: 5.1%), with sustained
growth recorded across key purposes.
“In terms of credit flows, loan disbursements have remained forthcoming
across both the business and household segments.”
Banks continued to meet SME financing needs in 3Q 2023
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Financing by banks and DFIs continued to support SMEs’ business needs in
the third quarter, with outstanding financing growing at 6.7%.
“Approval rates have been higher than the pre-pandemic levels, indicating
banks are meeting the strong financing demand for investment-related and
working capital purposes. Strong financing activity on both fronts reflect the
improved business activity and elevated cash flow needs amid a challenging
operating environment.
“In 3Q 2023, we saw financing disbursements sustained at high levels,
particularly for working capital purposes. Disbursement growth for working
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
capital purposes was primarily driven by the services sectors, notably in the
wholesale and retail trade, real estate and information and communication
sectors.”
Banks remain well-positioned to support financial intermediation needs
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Turning now to the banking system’s resilience. As indicated earlier, the
banking system continued to play an important role in supporting growth
during the quarter.
“Owing to their strong financial position, including high levels of capital and
liquidity buffers, banks remain well-positioned to support the financing needs
of the domestic economy.
“The quality of business and household loans remains sound, with the share of
loans with higher credit risk and borrowers receiving repayment assistance
moderating. Impairment ratios remain low and stable as well. These
improvements have been supported by prudent loan affordability assessments
by banks, which help to ensure that borrowers have buffers against rising
costs.
“Even with these stable levels of impairments, banks remain prudent in their
provisioning for potential loan losses, given an environment of rising costs and
uneven recovery.
“For borrowers who continue to face financial difficulties, I wish to emphasise
that bespoke loan repayment assistance from banks and AKPK remains
available.”
Malaysia’s macroeconomic fundamentals remain supportive of growth
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “Let
me iterate that Malaysia’s economic fundamentals remain strong and
supportive of growth moving forward.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
“GDP has exceeded its pre-pandemic levels, with continued improvement in
labour market conditions.
“Malaysia’s diversified exports destination and products will cushion the impact
from moderating global demand.
“Our external position remains strong despite the external headwinds, with
sustained net creditor position and continued surplus in the current account
balance.
“In addition, our deep financial markets and strong financial sector will
continue to ensure efficient financial intermediation and contribute towards
economic growth.”
Summary
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “In
summary, the Malaysian economy expanded by 3.3% in the third quarter of
2023, driven mainly by private sector expenditure. The 2.6% growth in
seasonally adjusted quarter-on-quarter number also indicates a positive
momentum in economic activity.”
“For 2024, growth is projected to improve to between 4% and 5%, anchored by
domestic demand.”
There are downside as well as upside risks to growth, stemming from both
external and domestic factors. Headline inflation is expected to average
between 2.1% and 3.6% for 2024.”
Bank Negara Malaysia
17 November 2023
| Press Release |
07 Nov 2023 | International Reserves of Bank Negara Malaysia as at 31 October 2023 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-31-october-2023 | https://www.bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf | null |
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International Reserves of Bank Negara Malaysia as at 31 October 2023
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International Reserves of Bank Negara Malaysia as at 31 October 2023
Embargo :
For immediate release
Not for publication or broadcast before
1500 on
Tuesday, 7 November 2023
7 Nov 2023
The international reserves of Bank Negara Malaysia amounted to USD108.5 billion as at 31 October 2023. The reserves position is sufficient to finance 5.1 months of imports of goods and services[1], and is 1.0 time the total short-term external debt.
[1] Under the previous import coverage measure, reserves is sufficient to finance 7.0 months of retained imports of goods. For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27, which can be accessed at Quarterly Bulletin 4Q2021 Related Assets
BNM Statement of Assets & Liabilities - 31 October 2023
Bank Negara Malaysia
7 November 2023
© Bank Negara Malaysia, 2023. All rights reserved.
|
Monthly Highlights
Headline inflation declined to 3.4% in March
March 2023
1
3.7 3.4
3.9 3.8
0.00
2.00
4.00
0.0
2.0
4.0
J
a
n
-2
2
F
e
b
-2
2
M
a
r-
2
2
A
p
r-
2
2
M
a
y
-2
2
J
u
n
-2
2
J
u
l-
2
2
A
u
g
-2
2
S
e
p
-2
2
O
c
t-
2
2
N
o
v
-2
2
D
e
c
-2
2
J
a
n
-2
3
F
e
b
-2
3
M
a
r-
2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation declined to 3.4% in March
(February: 3.7%) due mainly to lower inflation for
fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation moderated slightly to 3.8% during
the month (February: 3.9%), driven largely by
lower inflation for food away from home.
1
Robust growth in volume index driven by retail and motor vehicles
Index of Wholesale and Retail Trade
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded by 10.6% in February 2023
(January: 8.5%).
• The higher growth was driven mainly by retail
sales in non-specialised stores (e.g., department
stores) followed by continued strength in
purchases of motor vehicles amid the ongoing
fulfilment of backlog orders.
• On a month-on-month seasonally adjusted basis,
the index accelerated by 5.5% (January: 0.2%).
9.5 8.510.6
0
10
20
30
40
Feb-
22
Mar-
22
Apr-
22
May-
22
Jun-
22
Jul-
22
Aug-
22
Sep-
22
Oct-
22
Nov-
22
Dec-
22
Jan-
23
Feb-
23
ppt, %yoy
Motor vehicles Retail Wholesale
2.4
5.2
4.4
0
1
2
3
4
5
6
7
Mar-22 Jul-22 Nov-22 Mar-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Growth in credit to the private non-financial sector moderated
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
2.7 2.6 2.7 2.6
1.0 0.6 0.7 0.7
1.0
1.1 1.1 0.9
4.7 4.3 4.5 4.2
Dec-22 Jan-23 Feb-23 Mar-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Contribution to growth (ppt)
• Credit to the private non-financial sector grew by
4.2% as at end-March (February: 4.5%), attributed
to slower growth in credit to businesses (3.2%;
February: 3.7%).
• While growth in outstanding corporate bonds
moderated (4.4%; February : 5.5%), outstanding
business loan growth was sustained at 2.4%
(February: 2.4%). This was supported by the
continued growth in both working capital (2.2%;
February: 1.9%) and investment-related loans
(4.3%; February: 4.2%).
• Outstanding household loan growth remained
broadly stable (5.2%; February: 5.3%), supported
by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan
growth for the purchase of securities (-6.9%;
February: -3.3%).
Credit to the Private Non-Financial Sector1,2
Monthly Highlights
March 2023
Domestic financial market conditions remained orderly
Financial Market Performance in March 2023
Source: Bank Negara Malaysia, Bursa Malaysia
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
11.0
-2.1
-5.3
0.0
-2.2
1.7
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-10 -5 0 5 10 15
Mar-23
Feb-23
• In March, global financial markets were affected by
the emergence of banking sector stress in some
major economies. As spillovers were contained thus
far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds
improved.
• In line with the performance of regional currencies,
the ringgit appreciated by 1.7% against the US
dollar. Conditions in the domestic bond market
also remained stable.
• The FBM KLCI declined by 2.2% during the month.
2
Banks maintained strong liquidity and funding positions to support intermediation
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.9
157.4
0
40
80
120
160
70
75
80
85
90
95
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
increased slightly to 1.8% (February-23: 1.8%) and
1.2% (February-23: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory
reserves) continue to record a prudent level of
110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
%
1.8
1.2
1.7
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
157.4% (February-23: 152.7%).
• The aggregate loan-to-fund ratio remained stable at
81.9% (February-23: 81.6%).
PRESS RELEASE
Ref. No.: 04/23/05 EMBARGO: Not for publication or
broadcast before 1500 hours on
Friday, 28 April 2023
Monthly Highlights – March 2023
Headline inflation declined to 3.4% in March
• Headline inflation declined to 3.4% in March (February: 3.7%) due mainly
to lower inflation for fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation1 moderated slightly to 3.8% during the month
(February: 3.9%), driven largely by lower inflation for food away from
home.
Robust growth in volume index driven by retail and motor vehicles
• The Index of Wholesale and Retail Trade (IOWRT) expanded by 10.6%
in February 2023 (January: 8.5%).
• The higher growth was driven mainly by retail sales in non-specialised
stores (e.g., department stores) followed by continued strength in
purchases of motor vehicles amid the ongoing fulfilment of backlog
orders.
• On a month-on-month seasonally adjusted basis, the index accelerated
by 5.5% (January: 0.2%).
1 Core inflation is computed by excluding price-volatile and price-administered items.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth in credit to the private non-financial sector2,3 moderated
• Credit to the private non-financial sector grew by 4.2% as at end-March
(February: 4.5%), attributed to slower growth in credit to businesses
(3.2%; February: 3.7%).
• While growth in outstanding corporate bonds moderated (4.4%;
February: 5.5%), outstanding business loan growth was sustained at
2.4% (February: 2.4%). This was supported by the continued growth in
both working capital (2.2%; February: 1.9%) and investment-related
loans (4.3%; February: 4.2%).
• Outstanding household loan growth remained broadly stable (5.2%;
February: 5.3%), supported by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan growth for the purchase of
securities (-6.9%; February: -3.3%).
Domestic financial market conditions remained orderly
• In March, global financial markets were affected by the emergence of
banking sector stress in some major economies. As spillovers were
contained thus far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds improved.
• In line with the performance of regional currencies, the ringgit
appreciated by 1.7% against the US dollar. Conditions in the domestic
bond market also remained stable.
• The FBM KLCI declined by 2.2% during the month.
Banks maintained strong liquidity and funding positions to support
intermediation
• Banks continued to record healthy liquidity buffers with the aggregate
Liquidity Coverage Ratio at 157.4% (February: 152.7%).
2 Comprises loans to households and non-financial corporations from the banking system and development financial
institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
3 Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced
to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
• The aggregate loan-to-fund ratio remained stable at 81.9%
(February: 81.6%).
Asset quality in the banking system remained intact
• Overall gross and net impaired loans ratios increased slightly to 1.8%
(February: 1.8%) and 1.2% (February: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory reserves) continues to
record a prudent level of 110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
Bank Negara Malaysia
28 April 2023
20230428_BNM Monthly Highlights-March_en
Slide 1
Slide 2
20230428_BNM PR_Monthly Highlights-Mar 2023_eng
| Press Release |
02 Nov 2023 | Monetary Policy Statement | https://www.bnm.gov.my/-/monetary-policy-statement-02112023 | https://www.bnm.gov.my/documents/20124/12380720/MPS_Snapshot_2023_11_en.pdf | null |
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Monetary Policy Statement
Embargo :
For immediate release
Not for publication or broadcast before
1500 on
Thursday, 2 November 2023
2 Nov 2023
At its meeting today, the Monetary Policy Committee (MPC) of Bank Negara Malaysia decided to maintain the Overnight Policy Rate (OPR) at 3.00 percent.
The global economy continues to expand, driven by domestic demand amid strong labour market conditions. Some signs of recovery are emerging in the electrical and electronics (E&E) sector, but global trade remains soft partly due to the shift in spending from goods to services, and ongoing trade restrictions. Global growth remains weighed down by persistently elevated inflation and higher interest rates, with several major economies experiencing slowing growth momentum. There are early signs of improvement in China’s growth, though its property market remained weak. Global headline inflation edged up partly due to higher commodity prices, while core inflation continued to moderate. For most central banks, the monetary policy stance is likely to remain tight. The growth outlook remains subject to downside risks, mainly from higher-than-anticipated inflation outturns, an escalation of geopolitical tensions, and a sharp tightening in financial market conditions.
For the Malaysian economy, the advance GDP estimate points to an improvement in economic activity in the third quarter. Growth in 2024 will be driven mainly by resilient domestic expenditure, with some support emanating from the expected recovery in E&E exports. Continued employment and wage growth remain supportive of household spending. Tourist arrivals and spending are expected to improve further. Investment activity would be supported by continued progress of multi-year infrastructure projects, and implementation of catalytic initiatives under the national master plans. Measures under Budget 2024 will also provide additional impetus to economic activity. The growth outlook remains subject to downside risks stemming from weaker-than-expected external demand and larger and protracted declines in commodity production. Meanwhile, upside risks to growth mainly emanate from stronger-than-expected tourism activity, a stronger recovery from the E&E downcycle, and faster implementation of existing and new projects.
As expected, both headline and core inflation have moderated, mainly due to easing cost pressures. In the third quarter, headline and core inflation averaged at 2.0% and 2.5%, respectively. Going into 2024, inflation is expected to remain modest. Risks to the inflation outlook remain highly subject to changes to domestic policy on subsidies and price controls, as well as global commodity prices and financial market developments. Of note, the Government’s intention to review price controls and subsidies in 2024 will affect the outlook for inflation and demand conditions.
The expectations of a higher-for-longer interest rate environment in the US, and increased concerns over the escalation of geopolitical tensions have contributed to a persistently strong US dollar. This has affected other major and emerging market currencies, including the ringgit. Nevertheless, these developments are not expected to derail Malaysia's growth prospects. Bank Negara Malaysia will continue to manage risks of heightened volatility, including to provide liquidity, to ensure the orderly functioning of the domestic foreign exchange market. Financial institutions continue to operate with strong capital and liquidity buffers, with domestic financial conditions remaining conducive to sustain credit growth.
At the current OPR level, the monetary policy stance remains supportive of the economy and is consistent with the current assessment of the inflation and growth prospects. The MPC remains vigilant to ongoing developments to inform the assessment on the outlook of domestic inflation and growth. The MPC will ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability.
The meeting also approved the schedule of MPC meetings for 2024. In accordance with the Central Bank of Malaysia Act 2009, the MPC will convene six times during the year. The Monetary Policy Statement will be released at 3 p.m. on the final day of each MPC meeting.
Schedule of Monetary Policy Committee Meetings for 2024MPC Meeting No.
Dates
1st
23 and 24 January 2024 (Tuesday and Wednesday)
2nd
6 and 7 March 2024 (Wednesday and Thursday)
3rd
8 and 9 May 2024 (Wednesday and Thursday)
4th
10 and 11 July 2024 (Wednesday and Thursday)
5th
4 and 5 September 2024 (Wednesday and Thursday)
6th
5 and 6 November 2024 (Tuesday and Wednesday)
See also:
Monetary Policy Statement (MPS) Snapshot: November 2023
Frequently Asked QuestionsBank Negara Malaysia
2 November 2023
© Bank Negara Malaysia, 2023. All rights reserved.
|
PRESS RELEASE
EMBARGO: For immediate release
ECONOMIC AND FINANCIAL DEVELOPMENTS IN MALAYSIA
IN THE THIRD QUARTER OF 2023
Press Conference Presentation Transcript
Moderate global growth in 3Q 2023
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Global growth in the third quarter of 2023 was moderate, weighed by higher
interest rates and elevated inflation. China’s growth showed early signs of
improvement as consumption rose, though its property market remained weak.
While global core inflation continued to moderate, headline inflation edged up
albeit temporarily, partly due to higher commodity prices. Regional exports
showed tentative signs of recovery. This was in line with a nascent turnaround
in the global E&E sector. However, headwinds remain due to moderating
demand conditions, shift in consumption from goods to services, and ongoing
trade restrictions.”
Malaysia’s GDP grew by 3.3% in 3Q 2023
Ketua Perangkawan Malaysia Dato’ Sri Dr. Mohd Uzir Mahidin berkata,
“Pada suku ketiga 2023, ekonomi Malaysia berkembang 3.3%, disokong oleh
peningkatan permintaan dalam negeri, pasaran buruh yang terus bertambah
baik, serta aktiviti pelancongan dan pembinaan yang semakin rancak. Namun,
permintaan luar negeri yang lemah dan pengeluaran perlombongan yang lebih
rendah telah menjejaskan pertumbuhan ekonomi negara. Dari segi
pertumbuhan suku tahun ke suku tahun pelarasan musim, KDNK
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
menunjukkan momentum pertumbuhan yang lebih kukuh iaitu mencatatkan
sebanyak 2.6%, iaitu peningkatan berterusan sejak suku keempat. Manakala
melihat kepada KDNK bulanan, pertumbuhan KDNK pada bulan Julai adalah
sebanyak 4.2%, pada bulan Ogos 3.2%, dan pada bulan September 2.5%.”
Chief Statistician of Malaysia Dato’ Sri Dr. Mohd Uzir Mahidin said, “In the
third quarter of 2023, the Malaysian economy grew by 3.3%, supported by
expansion in domestic demand, continued improvement in labour market
conditions, and rising tourism and construction activities. However, the weaker
external demand and lower mining production has weighed on growth. On
seasonally adjusted quarter-on-quarter basis, GDP this quarter showed a
stronger growth momentum of 2.6%, which is a continued improvement since
the fourth quarter of 2022.”
Expansion in domestic demand, with services and construction sectors
supporting growth
Chief Statistician of Malaysia Dato’ Sri Dr. Mohd Uzir Mahidin said, “On
the expenditure side, expansion in domestic demand was driven by both
private and public sector spending. Higher private consumption growth
benefited from favourable labour market conditions, with expansion in both
necessities and discretionary spending. Growth in investments reflects
continued capacity expansion by businesses, as well as fixed asset spending
by the Government and capital expenditure by public corporations. However,
net exports continued to contract as weaker external demand weighed on
goods exports growth.
“Looking at the supply side, growth is driven mainly by the services sector and
construction sector. Growth in the services sector improved across both
consumer- and business-related subsectors. The sector also continued to
benefit from improving tourism-related spending.
“For the construction sector, growth was supported by the progress of
ongoing large infrastructure and small-scale projects.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
“Meanwhile, the manufacturing sector recorded a marginal contraction mainly
on account of further weakness in E&E cluster and lower production of refined
petroleum products.”
Continued current account surplus and FDI inflows
Chief Statistician of Malaysia Dato’ Sri Dr. Mohd Uzir Mahidin, said,
“Malaysia’s Current Account Balance (CAB) in the third quarter of 2023
recorded a continued surplus of RM9.1 billion, equivalent to 2 per cent of the
GDP, mainly supported by goods surplus, followed by lower deficit in the
Services and Secondary income account. The Services account recorded a
lower deficit of RM10.3 billion in the third quarter of 2023, supported by the
continued recovery in inbound tourism and construction.
“On the income front, the Primary income account posted higher deficit of
RM11 billion, mainly due to higher income generated by foreign companies in
Malaysia. Meanwhile, the Secondary income account registered a lower
deficit of RM2.2 billion.
“During this quarter, foreign direct investment (FDI) posted a higher net inflow
of RM7.2 billion as against RM3.1 billion in the preceding quarter. The higher
FDI inflows were supported by larger inflows in debt instruments and
continued equity injections from foreign investors. The largest recipient of FDI
was the services sector, mainly in financial and mining & quarrying sectors.
Hong Kong, China and the United Kingdom were the primary sources of FDI
during this quarter.
“In the meantime, direct investment abroad (DIA) outflows expanded to
RM13.4 billion, particularly in services sector. The top three destinations of
DIA were Indonesia, Angola and Vietnam.”
Further expansion in domestic demand and improvement in external
demand to support growth in 2024
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “As
we can observe from the GDP performance in the third quarter, the impact of
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
weaker external demand on the economy was cushioned by the resilience of
domestic demand.
“Looking ahead, Malaysia’s economy is expected to grow between 4% – 5% in
2024, underpinned by continued expansion in domestic demand, and
improvement in external demand.
“The key factors driving growth are: first, better employment and
income prospects, which will help strengthen domestic demand; second, the
realisation and progress of multi-year projects; third, improvement in the global
tech cycle, which is expected to lead to higher trade activities; and fourth,
continued increase in tourist arrivals, which will spur growth in tourism-
related sectors.”
Household spending to remain as anchor of growth
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Household spending will remain the anchor for growth, and this is driven by
continued employment and improvement in income levels, sound financial
buffers, and support from targeted government measures.”
Favourable labour market conditions going forward
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“The favourable labour market conditions is the key driver for household
spending.
“Unemployment rate declined to 3.4% in the third quarter and is expected to
improve further by the end of 2023. The gradual decline in unemployment was
driven mainly by continued expansion in employment.
“Going forward, strong job creation data suggests that employment will
continue to expand. Furthermore, labour participation rate is also at a historical
high of 70.1%. These factors would support further growth in income and
consumer spending.”
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Investment activity will be supported by realisation of projects, easing
supply conditions and structural policy measures
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Looking ahead, investment activity will be supported by progress of new and
existing projects, for example in E&E manufacturing and data centres.
Investment would also be boosted by factors such as easing labour supply,
stabilisation of input cost, and implementation of structural policy measures
through the NIMP and NETR, which includes projects such as the Kasawari
Carbon Capture and Storage and EV charging stations.
“I must re-emphasise that these investments are not only important in
supporting immediate growth, but also to enhance Malaysia’s future growth
potential and competitiveness.
“In this regard, it is crucial to ensure that the high investment intentions and
plans are facilitated and realised.”
While exports declined, it exhibited relative resilience amidst a
challenging global landscape
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“While exports declined in 3Q 2023, as the slowdown in global trade in goods
and a high base in 3Q 2022, this is offset by the higher travel receipts during
the quarter.
“Notwithstanding this, Malaysia’s diversified exports structure has also partly
contributed to export resilience. This is reflected in our export performance,
which started to decline much later than some regional economies, with
smaller magnitude of contraction.
“There are also some signs of stabilisation in export growth as reflected in the
turnaround in the quarter-on-quarter seasonally adjusted export growth.”
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Exports to gradually recover going forward, supported by pick up in
global tech cycle and tourism activity
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Exports are expected to gradually recover in the near term. The global
semiconductor sales, which have been declining in 1H 2023, is showing some
signs of turn-around recently. The World Semiconductor Trade Statistics
(WSTS) is projecting a positive growth of 11.8% in 2024, as compared to a
contraction of 10.3% in 2023, which will help to lift our exports, especially in
E&E products.
“In addition, tourism-related activities are expected to pick up further. In
3Q 2023, travel receipts have reached 78% of the corresponding period in
2019. This is expected to continue to recover moving forward and return to
pre-pandemic level in 2024.”
Inbound tourism continues to recover towards pre-pandemic level, in
line with regional economies
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “As
of 1H 2023, tourist arrivals in Malaysia have reached about 70% of the pre-
pandemic level, in line with most economies in the region.
“The recovery is driven mainly by regional tourists from Singapore, Indonesia
and Thailand, with Chinese tourists having the largest room for catch up
growth in 2024, providing good prospects for Malaysia to benefit. Given this,
we should intensify our efforts towards ensuring Malaysia continues to be an
attractive global tourist destination.
“By the way, I should mention that although the chart on the RHS here shows
tourist arrival from China being an outlier, as we have explained earlier, this
owes much to factors such as the lack of flights and issues with passport
renewals in China when they reopened. These constraints are easing. The
latest figures which will be released soon will show a much improved figure.”
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth remains subject to risks from both external and domestic factors
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“The overall growth projection of 4% to 5% next year is subject to both upside
and downside risks.”
“On the global front, slower-than-expected recovery in external demand is the
key downside risk factor. On the domestic front, weaker labour market
conditions, more severe shocks on commodity production due to stronger
impact from El Nino, and prolonged plant maintenance could also potentially
weigh on the growth outlook.
“There are also upside risks from stronger-than-expected tourism activity;
faster recovery from tech cycle downturn as well as a larger impact from the
progress of multi-year investment projects and policy measures under national
master plans and blueprints that were announced recently by the
Government.”
Malaysia’s Economic Resilience: A Post-pandemic Analysis
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “As
of 2Q 2023, on a seasonally adjusted basis, Malaysia’s GDP had exceeded
pre-pandemic levels by more than 10%. The recovery was led mainly by the
manufacturing and services sectors.
“Despite the external challenges, Malaysia’s diversified exports and tourism
rebound have contributed to the country’s trade resilience. Furthermore, the
improving labour market provided job and income opportunities, especially for
the vulnerable segments.
“In essence, our economic fundamentals have enabled the country to weather
the current slowdown in external demand, and the outlook is for further
improvement in our growth prospects.”
Disinflation trend continued with lower headline and core inflation
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “In
line with the easing cost environment, headline inflation continued to trend
lower, averaging at 2% for the third quarter (2Q 2023: 2.8%). Much of this
downtrend was driven by lower core inflation, which contributed around half of
the decline during the third quarter. This also partly reflected effects from the
higher base in the third quarter of 2022.
“Core inflation moderated to 2.5% during the quarter (2Q 2023: 3.4%) mainly
due to lower inflation for core services, such as food away from home,
expenditure at restaurants and café, and repair and maintenance of personal
transport. The moderation in core inflation is expected to continue until end of
the year.”
Going forward, the inflation outlook remains highly subject to domestic
policy factors, global commodity prices and financial market
developments
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“For 2024, headline inflation is expected to average between 2.1% and 3.6%
based on the outlook by the Ministry of Finance. The wide range
partly accounts for some upside impact from proposed subsidy rationalisation
measures, where a more precise details of these policies are currently being
finalised. We will continuously evaluate their implications to the inflation
outlook going forward based on the final implementation of these policies.
“In addition to the domestic policy factors, risks to the inflation outlook could
also stem from global developments. Near-term upside risks include higher
global commodity prices from geopolitical conflicts and potential disruptions
from the El Nino weather phenomenon, as well as higher import prices amid
exchange rate pressures. These risks could be offset by more subdued global
commodity prices driven by weaker-than-expected global growth, as well as
more favourable weather conditions leading to lower pressure on food prices.”
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
The OPR was maintained at 3.00% at the November MPC meeting
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Turning to monetary policy, the MPC maintained the OPR at 3.00% at the
November 2023 MPC meeting.
“At the current OPR level, the MPC deemed that the monetary policy stance
remains supportive of the economy and is consistent with the current
assessment of the inflation and growth prospects.
“As I mentioned earlier, growth next year will be mainly driven by resilient
domestic expenditure. Inflation is also expected to remain modest.
“Going forward, the MPC will remain vigilant to ongoing developments to
inform the assessment on the outlook of domestic inflation and growth. The
MPC will ensure that the monetary policy stance remains conducive to
sustainable economic growth amid price stability.”
The ringgit depreciated in a strong USD environment
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“The ringgit depreciated against the US dollar in the third quarter. This trend
was also observed among other regional currencies, due primarily to external
factors including the US monetary policy path.
“Malaysia’s economy today is resilient notably in terms of our economic
fundamentals, robustness of our financial sector, and depth of our financial
markets. The persistently strong US dollar is therefore not expected to derail
Malaysia’s growth prospects.
“Going forward, global financial market uncertainties are expected to ease –
barring any new adverse developments such as heightening geopolitical
tensions – as financial markets expect the US policy rate to be reduced next
year. This should ease US dollar strength and thus reduce depreciation
pressure on the ringgit.”
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Portfolio investment recorded a net outflow amid external uncertainty
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“However, of late, we have experienced outflows from portfolio investment. In
the third quarter, portfolio investment recorded a net outflow of RM14.1 billion
compared to an inflow of RM8.1 billion in the second quarter of the year due
mainly to higher residents’ investments in equity and debt securities abroad.
“This also reflected the liquidation of domestic debt securities by non-resident
investors, which has partially offset non-residents’ acquisition of equity
securities in Malaysia.
“To ensure balanced two-way flows, we encourage domestic investors to seek
investment opportunities domestically, repatriate export and foreign income
and investment proceeds, and sequence foreign investments.
“Ongoing and future investment projects and structural policy measures will
enhance Malaysia’s future potential growth and competitiveness, which will
attract foreign investments. This will provide more sustainable support to the
ringgit in the longer-term.
“That being said, I want to emphasise that the Bank remains committed to
ensure the ringgit adjusts in an orderly manner and in the longer term, it
should reflect our economic fundamentals.”
Malaysian bond yields and equities rose
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “In
the bond market, bond yields on the 10-year MGS rose in line with regional
peers amid the increase in US bond yields. Investors were largely expecting
the US policy rate to remain higher-for-longer.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
“On domestic equity markets, the announcement of structural reforms,
including various national master plans, boosted prospects of corporate
earnings of companies in the KLCI.
“Such structural reforms reflect Malaysia’s ongoing policy imperatives. Greater
investor confidence in Malaysia’s growth prospects will eventually support a
real appreciation in the exchange rate as external uncertainties recede.”
Credit growth improved following expansion in business loans
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Turning to credit conditions, credit to the private non-financial sector
expanded by 4.2% as at end of the third quarter, driven mainly by higher
growth in business loans (1.6%; 2Q 2023: 0.5%), while the growth in
outstanding corporate bonds was sustained at 5.0% (2Q 2023: 4.9%). For
households, outstanding loans grew by 5.4% (2Q 2023: 5.1%), with sustained
growth recorded across key purposes.
“In terms of credit flows, loan disbursements have remained forthcoming
across both the business and household segments.”
Banks continued to meet SME financing needs in 3Q 2023
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Financing by banks and DFIs continued to support SMEs’ business needs in
the third quarter, with outstanding financing growing at 6.7%.
“Approval rates have been higher than the pre-pandemic levels, indicating
banks are meeting the strong financing demand for investment-related and
working capital purposes. Strong financing activity on both fronts reflect the
improved business activity and elevated cash flow needs amid a challenging
operating environment.
“In 3Q 2023, we saw financing disbursements sustained at high levels,
particularly for working capital purposes. Disbursement growth for working
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
capital purposes was primarily driven by the services sectors, notably in the
wholesale and retail trade, real estate and information and communication
sectors.”
Banks remain well-positioned to support financial intermediation needs
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Turning now to the banking system’s resilience. As indicated earlier, the
banking system continued to play an important role in supporting growth
during the quarter.
“Owing to their strong financial position, including high levels of capital and
liquidity buffers, banks remain well-positioned to support the financing needs
of the domestic economy.
“The quality of business and household loans remains sound, with the share of
loans with higher credit risk and borrowers receiving repayment assistance
moderating. Impairment ratios remain low and stable as well. These
improvements have been supported by prudent loan affordability assessments
by banks, which help to ensure that borrowers have buffers against rising
costs.
“Even with these stable levels of impairments, banks remain prudent in their
provisioning for potential loan losses, given an environment of rising costs and
uneven recovery.
“For borrowers who continue to face financial difficulties, I wish to emphasise
that bespoke loan repayment assistance from banks and AKPK remains
available.”
Malaysia’s macroeconomic fundamentals remain supportive of growth
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “Let
me iterate that Malaysia’s economic fundamentals remain strong and
supportive of growth moving forward.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
“GDP has exceeded its pre-pandemic levels, with continued improvement in
labour market conditions.
“Malaysia’s diversified exports destination and products will cushion the impact
from moderating global demand.
“Our external position remains strong despite the external headwinds, with
sustained net creditor position and continued surplus in the current account
balance.
“In addition, our deep financial markets and strong financial sector will
continue to ensure efficient financial intermediation and contribute towards
economic growth.”
Summary
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “In
summary, the Malaysian economy expanded by 3.3% in the third quarter of
2023, driven mainly by private sector expenditure. The 2.6% growth in
seasonally adjusted quarter-on-quarter number also indicates a positive
momentum in economic activity.”
“For 2024, growth is projected to improve to between 4% and 5%, anchored by
domestic demand.”
There are downside as well as upside risks to growth, stemming from both
external and domestic factors. Headline inflation is expected to average
between 2.1% and 3.6% for 2024.”
Bank Negara Malaysia
17 November 2023
| Press Release |
31 Oct 2023 | Detailed Disclosure of International Reserves as at end-September 2023 | https://www.bnm.gov.my/-/detailed-disclosure-of-international-reserves-as-at-end-september-2023-1 | null | null |
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Detailed Disclosure of International Reserves as at end-September 2023
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1200 on
Tuesday, 31 October 2023
31 Oct 2023
In accordance with the International Monetary Fund (IMF) Special Data Dissemination Standard (SDDS) format, the detailed breakdown of international reserves provides forward-looking information on the size, composition and usability of reserves and other foreign currency assets, and the expected and potential future inflows and outflows of foreign exchange of the Federal Government and Bank Negara Malaysia over the next 12-month period.
The detailed breakdown of international reserves based on the SDDS format is shown in Tables I, II, III and IV.
As shown in Table I, official reserve assets amounted to USD110,146.8 million, while other foreign currency assets amounted to USD1.6 million as at end-September 2023.
As shown in Table II, for the next 12 months, the pre-determined short-term outflows of foreign currency loans, securities and deposits, which include among others, scheduled repayment of external borrowings by the Government and the maturity of foreign currency Bank Negara Interbank Bills, amounted to USD17,285.5 million. The net short forward positions amounted to USD24,097.4 million as at end-September 2023, reflecting the management of ringgit liquidity in the money market. In line with the practice adopted since April 2006, the data excludes projected foreign currency inflows arising from interest income and the drawdown of project loans. Projected foreign currency inflows amount to USD2,214.3 million in the next 12 months.
As shown in Table III, the only contingent short-term net drain on foreign currency assets are Government guarantees of foreign currency debt due within one year, amounting to USD369.4 million. There are no foreign currency loans with embedded options, no undrawn, unconditional credit lines provided by or to other central banks, international organisations, banks and other financial institutions. Bank Negara Malaysia also does not engage in foreign currency options vis-à-vis ringgit.
Overall, the detailed breakdown of international reserves under the IMF SDDS format indicates that as at end-September 2023, Malaysia’s international reserves remain usable. Related Assets
International Reserves and Foreign Currency Liquidity (30 September 2023)
Bank Negara Malaysia
31 October 2023
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |
28 Oct 2023 | Karnival Celik Kewangan Johor: Elevating Digital Financial Capabilities of Malaysians | https://www.bnm.gov.my/-/kckj-pr-en | null | null |
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Karnival Celik Kewangan Johor: Elevating Digital Financial Capabilities of Malaysians
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1425 on
Saturday, 28 October 2023
28 Oct 2023
Bank Negara Malaysia, in collaboration with members and partners of the Financial Education Network (FEN) as well as the financial industry, is organising the Karnival Celik Kewangan (KCK). The KCK Johor is currently taking place from 27 to 29 October 2023 at AEON Mall Kulaijaya, Johor.
The KCK Johor marks the finale of the Financial Literacy Month 2023 (FLM 2023) held throughout the month of October. FEN has covered more than 50 locations nationwide during FLM 2023 to raise awareness on the importance of financial literacy and promote financial inclusion among Malaysians. Throughout the month, FEN has provided the public with access to extensive financial education resources. These resources include personal financial management, digital financial literacy, awareness on financial scams, and free financial advisory services.
The KCK Johor offers a unique opportunity for the public to access information on financial products and services. Attendees will be able to learn about their rights and responsibilities as financial consumers. They will also be able to stay updated on the latest developments in business and financial management, as well as seek financial advisory. In addition, attendees will be able to benefit from information booths by FEN strategic partners, government agencies and financial institutions. This includes the #jangankenascam booth which is a collaboration by financial institutions to enhance awareness on financial scams.
The three-day carnival also features a wide range of fun and exciting activities. Visitors will be able to take part in pocket talks, lucky draws, children activities, including an appearance by the Si Kijang mascot and a mini concert.
The event was officiated by Bank Negara Malaysia Governor Abdul Rasheed Ghaffour. In his speech, Governor Rasheed highlighted that a considerable number of Malaysians currently adopt a short-term mindset when planning their financial management for futures, resulting in difficulties later due to inadequate financial management. Prudent financial management plays a fundamental role in addressing this, ultimately paving the way for a more prosperous and sustainable standard of living.
The event also saw the launch of FEN PROAKTIF[1], a pilot financial education programme developed in collaboration with the Ministry of Higher Education. FEN PROAKTIF aims to equip youths with financial skills relevant to when they start working, including digital financial literacy. Acknowledging the potential of FEN PROAKTIF to positively impact young lives across the nation, Governor Rasheed expressed his aspirations for the swift expansion of the programme to all universities and youth groups, including those in technical and vocational education and training (TVET) institutions and community colleges.
Governor Rasheed also thanked FEN members, partners and new strategic collaborators namely Ministry of Rural and Regional Development, Ministry of Youth and Sports, PERKESO, HRDCorp, and Amanah Ikhtiar Malaysia that have supported FLM 2023 to realise FEN’s aspiration to expand its reach in conveying the message of financial literacy.
Financial Education Network
28 October 2023
See also:
Governor’s Speech at Karnival Celik Kewangan Johor
About Financial Education Network (FEN)
Established in November 2016, FEN serves as an inter-agency platform to increase the impact of financial education initiatives and identify new opportunities to elevate financial literacy among Malaysians through greater alignment, closer collaboration and a strong focus on impact assessments. Its members include the Ministry of Education Malaysia, Ministry of Higher Education, Bank Negara Malaysia, Securities Commission Malaysia, Employees Provident Fund, Agensi Kaunseling dan Pengurusan Kredit, Perbadanan Insurans Deposit Malaysia and Permodalan Nasional Berhad.
[1] FEN PROAKTIF refers to Projek Rintis Pendidikan Kewangan di Institusi Pendidikan Tinggi oleh FEN, involving nine universities nationwide. The programme is supported by the four members of FEN, namely the Ministry of Higher Education, Bank Negara Malaysia, Securities Commission Malaysia, and Agensi Kaunseling dan Pengurusan Kredit, with the assistance of the HRDCorp platform eLATIH.
Bank Negara Malaysia
28 October 2023
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |
27 Oct 2023 | Statement on FinTIP Alert | https://www.bnm.gov.my/-/fintip | null | null |
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Statement on FinTIP Alert
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0821 on
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27 Oct 2023
Bank Negara Malaysia (BNM) would like to address a Financial Sector Cyber Threat Intelligence Platform (FinTIP) alert that was seen circulating on social media.
BNM and the financial industry regularly share information about potential threats in the cyberspace. The FinTIP alert is a routine precautionary notice meant for financial institutions and their connected counterparties. FinTIP constantly scans the cyber landscape and highlights emerging threats including potential escalation in hacking activities. The FinTIP alert allows financial institutions to take appropriate preventive measures to secure their systems and avoid any potential disruption to financial services.
Bank Negara Malaysia
27 October 2023
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |
23 Oct 2023 | JC3 Announces Initiatives to Support an Inclusive Transition to a Greener Economy | https://www.bnm.gov.my/-/jc3j20-pr-en | null | null |
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JC3 Announces Initiatives to Support an Inclusive Transition to a Greener Economy
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JC3 Announces Initiatives to Support an Inclusive Transition to a Greener Economy
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23 Oct 2023
The Joint Committee on Climate Change (JC3) has announced five key initiatives to expedite the transition of businesses and farmers towards low-carbon practices.
The announcements were made at the JC3 Journey to Zero Conference which begins today. It underlines JC3’s commitment to pursue accelerated climate action and emphasises the critical role of the financial industry in enabling a sustainable agenda for the country.
Datuk Abdul Rasheed Ghaffour, Governor of Bank Negara Malaysia, said, “The Bank will continue to provide a facilitative policy environment for the industry to advance financial innovations and explore novel financial structures needed to meet the significant financing needs for climate risk mitigation and adaptation. This will need to include a more prominent role for public-private partnerships and innovative blended finance structures.”
Dato’ Seri Dr. Awang Adek Hussin, Chairman of Securities Commission Malaysia, said, “Considering the huge financing requirement for sustainable development and energy transition, the financial sector, particularly the capital market, must continue to facilitate financing and investments in these key areas to support the Government’s priorities.”
“As such, the capital market should be ready to facilitate fundraising and investments to achieve sustainability and climate goals,” he added.
Y.B. Nik Nazmi Nik Ahmad, Minister of Natural Resources, Environment and Climate Change, who delivered the Keynote Address said, “The very ethos of the governing frameworks of this administration, namely the Malaysia Madani and Ekonomi Madani, have sustainability at their core. Since taking office, we have set into place various measures to both contribute to climate action and transform our economy.
“Indeed, the Budget 2024 continues to build on the Ekonomi Madani with holistic measures to address climate change and complement other policies such as the National Energy Transition Roadmap (NETR), the New Industrial Master Plan (NIMP) 2030 and the Mid-Term Review of the 12th Malaysia Plan (MTR-12MP).”
These public and private sector collaborations encompass the following:
1. Greening Industrial Parks
This pilot project, in partnership with the Ministry of International Trade and Industry, Malaysian Investment Development Authority and SIRIM aims to transition the management of industrial parks and operations of their tenant companies to low-carbon and sustainable practices. These include developing infrastructure such as integrated waste management, use of renewable energy, measurement, monitoring and reporting of greenhouse gas (GHG) emissions as well as verification systems.
Leveraging SIRIM’s cutting-edge S.M.A.R.T solution, designed for sustainable processes and practices, these industrial parks will be able to enhance their efficiency, minimise waste, reduce carbon footprint, and ensure eco-friendly production processes.
2. Greening Value Chain programme with Bursa Malaysia
Following the positive outcomes from the JC3 Greening Value Chain (GVC) pilot programme which was announced in 2022 in conjunction with the Finance Day at COP-27 and has enabled more than 80 participating small and medium enterprises (SMEs) within the supply chain of four corporates to start measuring and reporting their GHG emissions, the Bursa Malaysia’s Centralised Sustainability Intelligence Platform (CSI) is now collaborating with the JC3’s GVC programme.
Through the collaboration, more SMEs within the supply chain of Public Listed Companies (PLCs) can benefit from capacity-building support, GHG emissions reporting tools, and transition finance facilities.
3. RM1 billion portfolio guarantee scheme for ESG financing
Credit Guarantee Corporation Malaysia Berhad (CGC) in partnership with 18 participating banks will offer RM1 billion portfolio guarantee scheme. This is for ESG financing to support wider access to financing for SMEs.
4. ESG jump-start portal
In addition, a one-stop online portal for SMEs to access foundational information to jump-start their sustainability journey is now available on the JC3 website. The portal contains useful and practical information on capacity-building programs, certification schemes, financial and incentive schemes. It also showcases other relevant resources offered by the financial industry, government agencies and other partner organisations.
5. Green AgriTech
JC3 is taking steps to further empower the agriculture sector via collaborative partnership with the Ministry of Agriculture and Food Security (MAFS), Lembaga Pertubuhan Peladang (LPP), and the Malaysia Digital Economy Corporation (MDEC) to pilot the Green AgriTech programme, with a key focus on the ESG agenda for the agriculture sector. The program aims to encourage the adoption of green technology and sustainable agriculture practices among local farmers.
The JC3 has also issued the 2023 Climate Data Catalogue (DC) on its website today, reflecting the latest set of data needs and sources. The 2023 DC is more comprehensive, incorporating additional data items compared to the first version issued in December 2022. The latest release now features a total of 249 granular data items mapped to 399 data sources from 135 data providers. The availability of required data items in terms of sources, time-series and granularity has also improved. The 2023 DC is available in both Excel and web-based versions.
The three-day conference also recognised JC3 members and individuals who have played a critical and active role in leading JC3 initiatives. Further details are available at jc3malaysia.com.
The JC3 Journey to Zero conference is hosting more than 3,000 participants ranging from regulators, climate experts, advocates, practitioners, and policymakers. It aims to encourage dialogue and solutions in financing Malaysia’s transition and progress towards sustainable development.
About the JC3
The JC3 is a platform established in September 2019 to pursue collaborative actions for building climate resilience within the Malaysian financial sector. The JC3 is co-chaired by Datuk Jessica Chew Cheng Lian, Deputy Governor of Bank Negara Malaysia and Datuk Kamarudin Hashim, Managing Director of Securities Commission Malaysia, with members comprising senior officials from Bursa Malaysia and 21 financial industry players. The JC3’s initiatives and priorities are undertaken by its five sub-committees, namely Risk Management; Governance and Disclosure; Product and Innovation; Engagement and Capacity Building; and Bridging Data Gaps. An SME Focus Group has been recently established to develop strategies and solutions that support transition by SMEs.
Members:
Allianz General Insurance Company (Malaysia) Berhad
AmBank (M) Berhad
Bank Islam Malaysia Berhad
Bank Pembangunan Malaysia Berhad
Bank Pertanian Malaysia Berhad (Agrobank)
BIMB Investment Management Berhad
BNP Paribas Asset Management Sdn. Bhd.
Bursa Malaysia Berhad
CIMB Bank
Etiqa Family Takaful Berhad
HSBC Amanah Malaysia Berhad
Kenanga Investors Berhad
Maybank Berhad
MIDF Amanah Investment Bank Berhad
MSIG Insurance (Malaysia) Berhad
RHB Islamic Bank Berhad
RHB Islamic International Asset Management Bhd
Standard Chartered Bank Malaysia Berhad
Swiss Re Asia Pte. Ltd. (Swiss Retakaful)
Syarikat Takaful Malaysia Am Berhad
UOB Asset Management (Malaysia) Berhad and
Zurich General Insurance Malaysia Berhad
Joint Committee on Climate Change
23 October 2023
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |
21 Oct 2023 | Assistance for MSMEs under Belanjawan 2024 | https://www.bnm.gov.my/-/msme-budget24 | null | null |
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Assistance for MSMEs under Belanjawan 2024
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Assistance for MSMEs under Belanjawan 2024
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21 Oct 2023
RM600 million allocated for MSMEs under BNM’s Fund for SMEs
Additional RM25 million in matching grants allocated through iTEKAD to assist microentrepreneurs
Bank Negara Malaysia (BNM) wishes to provide details on the assistance for micro, small and medium enterprises (MSMEs) as announced in the Belanjawan 2024 speech by the Prime Minister and Minister of Finance, YAB Dato’ Seri Anwar bin Ibrahim on 13 October 2023.
Continuous support under BNM’s Fund for SMEs
BNM continues to support priority segments of MSMEs to obtain financing at competitive rates. A total of RM600 million from selected facilities under BNM’s Fund for SMEs has been earmarked for four target segments:
RM200 million increase in allocation for the Micro Enterprises Facility (MEF) to further support the financing needs of microentrepreneurs, of which RM50 million will be allocated for low-income microentrepreneurs under the iTEKAD initiative.
RM200 million under the All Economic Sectors Facility (AES) will be allocated to catalyse the provision of CAKNA 2, a contract financing facility for small contractors (G1-G4) by financial institutions. It aims to support the implementation of small-scale government projects (of contract value less than RM1.5 million).
RM100 million under the Agrofood Facility (AF) will be allocated to support the national food security agenda by increasing domestic food supply and expanding import capacity.
RM100 million under the Low Carbon Transition Facility (LCTF) will be allocated to incentivise MSMEs to obtain sustainability and green certification for their business operations.
Overall, about RM8.4 billion is still available for MSMEs across all financing facilities under the BNM’s Fund for SMEs. These facilities are aligned with efforts to support the involvement of MSMEs in key national initiatives including the New Industrial Master Plan 2030, the National Energy Transition Roadmap and other initiatives under Belanjawan 2024.
For more information on these and other facilities under BNM’s Fund for SMEs, please visit bnm.gov.my/funds4sme
Available Balance for Facilities under BNM’s Fund for SMEs
No
Facility
Available Balance
(RM
million)
Remarks
1
All Economic Sectors Facility (AES)
2,904
RM200 million will be allocated to catalyse the provision of contract financing for small contractors (G1-G4)
2
Business Recapitalisation Facility (BRF)
1,000
3
SME Automation and Digitalisation Facility (ADF)
914
4
Low Carbon Transition Facility (LCTF)
892
RM100 million will be allocated to incentivise MSMEs to obtain sustainability and green certification
5
High Tech and Green Facility (HTG)
808
6
Agrofood Facility (AF)
798
RM100 million will be allocated to support the national food security agenda
7
PENJANA Tourism Financing (PTF)
464
8
Micro Enterprises Facility (MEF)
417
RM200 million increase in allocation for MEF, of which RM50 million will be allocated for low-income microentrepreneurs under iTEKAD initiative
9
Disaster Relief Facility (DRF)
231
Total
8,428
Measures to crowd in social finance funds and support low-income microentrepreneurs through iTEKAD
An additional RM25 million in grants will be allocated to support the expansion of the iTEKAD initiative and assist low-income microentrepreneurs. These funds will be matched with social finance funds such as donations (including corporate social responsibility funds), zakat and cash waqf.
For more information on iTEKAD and other social finance initiatives, please visit bnm.gov.my/social-finance.
Bank Negara Malaysia
21 October 2023
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |
20 Oct 2023 | International Reserves of Bank Negara Malaysia as at 13 October 2023 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-13-october-2023 | https://www.bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf | null |
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International Reserves of Bank Negara Malaysia as at 13 October 2023
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International Reserves of Bank Negara Malaysia as at 13 October 2023
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20 Oct 2023
The international reserves of Bank Negara Malaysia amounted to USD108.9 billion as at 13 October 2023. The reserves position is sufficient to finance 5.1 months of imports of goods and services[1], and is 1.0 time the total short-term external debt.
[1] Under the previous import coverage measure, reserves is sufficient to finance 7.0 months of retained imports of goods. For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27, which can be accessed at Quarterly Bulletin 4Q2021. Related Assets
BNM Statement of Assets & Liabilities - 13 October 2023
Bank Negara Malaysia
20 October 2023
© Bank Negara Malaysia, 2023. All rights reserved.
|
Monthly Highlights
Headline inflation declined to 3.4% in March
March 2023
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t-
2
2
N
o
v
-2
2
D
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c
-2
2
J
a
n
-2
3
F
e
b
-2
3
M
a
r-
2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation declined to 3.4% in March
(February: 3.7%) due mainly to lower inflation for
fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation moderated slightly to 3.8% during
the month (February: 3.9%), driven largely by
lower inflation for food away from home.
1
Robust growth in volume index driven by retail and motor vehicles
Index of Wholesale and Retail Trade
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded by 10.6% in February 2023
(January: 8.5%).
• The higher growth was driven mainly by retail
sales in non-specialised stores (e.g., department
stores) followed by continued strength in
purchases of motor vehicles amid the ongoing
fulfilment of backlog orders.
• On a month-on-month seasonally adjusted basis,
the index accelerated by 5.5% (January: 0.2%).
9.5 8.510.6
0
10
20
30
40
Feb-
22
Mar-
22
Apr-
22
May-
22
Jun-
22
Jul-
22
Aug-
22
Sep-
22
Oct-
22
Nov-
22
Dec-
22
Jan-
23
Feb-
23
ppt, %yoy
Motor vehicles Retail Wholesale
2.4
5.2
4.4
0
1
2
3
4
5
6
7
Mar-22 Jul-22 Nov-22 Mar-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Growth in credit to the private non-financial sector moderated
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
2.7 2.6 2.7 2.6
1.0 0.6 0.7 0.7
1.0
1.1 1.1 0.9
4.7 4.3 4.5 4.2
Dec-22 Jan-23 Feb-23 Mar-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Contribution to growth (ppt)
• Credit to the private non-financial sector grew by
4.2% as at end-March (February: 4.5%), attributed
to slower growth in credit to businesses (3.2%;
February: 3.7%).
• While growth in outstanding corporate bonds
moderated (4.4%; February : 5.5%), outstanding
business loan growth was sustained at 2.4%
(February: 2.4%). This was supported by the
continued growth in both working capital (2.2%;
February: 1.9%) and investment-related loans
(4.3%; February: 4.2%).
• Outstanding household loan growth remained
broadly stable (5.2%; February: 5.3%), supported
by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan
growth for the purchase of securities (-6.9%;
February: -3.3%).
Credit to the Private Non-Financial Sector1,2
Monthly Highlights
March 2023
Domestic financial market conditions remained orderly
Financial Market Performance in March 2023
Source: Bank Negara Malaysia, Bursa Malaysia
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
11.0
-2.1
-5.3
0.0
-2.2
1.7
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-10 -5 0 5 10 15
Mar-23
Feb-23
• In March, global financial markets were affected by
the emergence of banking sector stress in some
major economies. As spillovers were contained thus
far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds
improved.
• In line with the performance of regional currencies,
the ringgit appreciated by 1.7% against the US
dollar. Conditions in the domestic bond market
also remained stable.
• The FBM KLCI declined by 2.2% during the month.
2
Banks maintained strong liquidity and funding positions to support intermediation
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.9
157.4
0
40
80
120
160
70
75
80
85
90
95
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
increased slightly to 1.8% (February-23: 1.8%) and
1.2% (February-23: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory
reserves) continue to record a prudent level of
110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
%
1.8
1.2
1.7
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
157.4% (February-23: 152.7%).
• The aggregate loan-to-fund ratio remained stable at
81.9% (February-23: 81.6%).
PRESS RELEASE
Ref. No.: 04/23/05 EMBARGO: Not for publication or
broadcast before 1500 hours on
Friday, 28 April 2023
Monthly Highlights – March 2023
Headline inflation declined to 3.4% in March
• Headline inflation declined to 3.4% in March (February: 3.7%) due mainly
to lower inflation for fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation1 moderated slightly to 3.8% during the month
(February: 3.9%), driven largely by lower inflation for food away from
home.
Robust growth in volume index driven by retail and motor vehicles
• The Index of Wholesale and Retail Trade (IOWRT) expanded by 10.6%
in February 2023 (January: 8.5%).
• The higher growth was driven mainly by retail sales in non-specialised
stores (e.g., department stores) followed by continued strength in
purchases of motor vehicles amid the ongoing fulfilment of backlog
orders.
• On a month-on-month seasonally adjusted basis, the index accelerated
by 5.5% (January: 0.2%).
1 Core inflation is computed by excluding price-volatile and price-administered items.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth in credit to the private non-financial sector2,3 moderated
• Credit to the private non-financial sector grew by 4.2% as at end-March
(February: 4.5%), attributed to slower growth in credit to businesses
(3.2%; February: 3.7%).
• While growth in outstanding corporate bonds moderated (4.4%;
February: 5.5%), outstanding business loan growth was sustained at
2.4% (February: 2.4%). This was supported by the continued growth in
both working capital (2.2%; February: 1.9%) and investment-related
loans (4.3%; February: 4.2%).
• Outstanding household loan growth remained broadly stable (5.2%;
February: 5.3%), supported by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan growth for the purchase of
securities (-6.9%; February: -3.3%).
Domestic financial market conditions remained orderly
• In March, global financial markets were affected by the emergence of
banking sector stress in some major economies. As spillovers were
contained thus far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds improved.
• In line with the performance of regional currencies, the ringgit
appreciated by 1.7% against the US dollar. Conditions in the domestic
bond market also remained stable.
• The FBM KLCI declined by 2.2% during the month.
Banks maintained strong liquidity and funding positions to support
intermediation
• Banks continued to record healthy liquidity buffers with the aggregate
Liquidity Coverage Ratio at 157.4% (February: 152.7%).
2 Comprises loans to households and non-financial corporations from the banking system and development financial
institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
3 Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced
to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
• The aggregate loan-to-fund ratio remained stable at 81.9%
(February: 81.6%).
Asset quality in the banking system remained intact
• Overall gross and net impaired loans ratios increased slightly to 1.8%
(February: 1.8%) and 1.2% (February: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory reserves) continues to
record a prudent level of 110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
Bank Negara Malaysia
28 April 2023
20230428_BNM Monthly Highlights-March_en
Slide 1
Slide 2
20230428_BNM PR_Monthly Highlights-Mar 2023_eng
| Press Release |
12 Oct 2023 | Advancing Financial Literacy at the National Financial Literacy Symposium 2023 | https://www.bnm.gov.my/-/nfls23-en | null | null |
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Advancing Financial Literacy at the National Financial Literacy Symposium 2023
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Advancing Financial Literacy at the National Financial Literacy Symposium 2023
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Not for publication or broadcast before
1635 on
Thursday, 12 October 2023
12 Oct 2023
The National Financial Literacy Symposium 2023 (NFLS 2023) took place from 10 to 11 October 2023 at Sasana Kijang, Kuala Lumpur. Organised by the Financial Education Network (FEN), in collaboration with the Malaysian Economic Association (MEA), NFLS 2023 brought together policymakers, researchers, practitioners and non-government organisations to discuss and translate research findings into practical tools and strategies to elevate financial literacy. Collaboration with MEA provides synergy to promote the involvement of economic community in scientific research on the financial well-being of Malaysians.
In his keynote address, Bank Negara Malaysia Deputy Governor Encik Adnan Zaylani Mohamad Zahid stressed the importance of a strong research culture in advancing financial literacy. He said, “Our collective goal is to harness the power of research to shape the design, implementation and monitoring of financial education initiatives. The Symposium serves as a platform for robust discussions on current financial literacy issues, involving senior policymakers, market practitioners and academicians”.
Meanwhile, Employees Provident Fund Chief Financial Officer Encik Mohamad Hafiz Kassim said, “Advancing financial literacy agenda remains one of our foremost priorities. Through this symposium, we hope to foster a collaborative learning environment, forge meaningful connections, and spark transformative ideas that will have a lasting impact”. In addition to the importance of financial literacy, Agensi Kaunseling dan Pengurusan Kredit Chief Executive Officer Encik Azaddin Ngah Tasir is of the view that climate impact could severely affect our financial well-being in the near future and should be taken seriously.
NFLS 2023 was co-hosted by Bank Negara Malaysia, the Employees Provident Fund and Agensi Kaunseling dan Pengurusan Kredit, in conjunction with FEN’s Financial Literacy Month 2023. The two-day Symposium lined up a mix of panel discussions and research paper presentations by domestic, regional and international experts. The Symposium delved into the fast-evolving digital finance realm – the risks it poses and the opportunities it presents for meaningful financial inclusion among consumers.
Forty-two research papers were submitted earlier covering various aspects of financial literacy such as financial consumer behaviour, retirement planning, dynamics of gig economy and the advancement of digital financial products and services. Ten submissions were shortlisted and presented at the Symposium. Awards were presented to the three best papers, as follows:
Retirement Readiness and Financial Sustainability: Investigating the Behavioural Dynamics among Millennials in Malaysia, by Joyce S.S. Chuah, Santha Vaithilingam, Sharon G.M. Koh, Mahendiran Nair, Monash Universiti Malaysia and Sunway University
Digital Financial Literacy and the Usage of Digital Financial Products and Services, by Helen Lee Siew Heng, Loke Yiing Jia and Chin Phaik Nie, Universiti Sains Malaysia
Motivations and Drivers Behind Savings Behaviour and their Impact on Financial Resilience: Breaking Common Assumptions, by Nadhirah Ibrahim, Aida Jaslina Jalaludin, Azleen Osman Rani, The Institute for Capital Market Research Malaysia
For more information on NFLS 2023, please visit www.fenetwork.my/nfls/
Financial Education Network
12 October 2023
See also: Keynote address by Deputy Governor Adnan Zaylani Mohamad Zahid on the launch of NFLS 2023
About Financial Education Network (FEN)
Established in November 2016, FEN serves as an inter-agency platform to increase the impact of financial education initiatives and identify new opportunities to elevate financial literacy among Malaysians through greater alignment, closer collaboration and a strong focus on impact assessments. Its members include the Ministry of Education Malaysia, Ministry of Higher Education, Bank Negara Malaysia, Securities Commission Malaysia, Employees Provident Fund, Agensi Kaunseling dan Pengurusan Kredit, Perbadanan Insurans Deposit Malaysia and Permodalan Nasional Berhad.
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |
09 Oct 2023 | Financial Stability Review First Half 2023 | https://www.bnm.gov.my/-/fsr23h1-en-pr | null | null |
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Financial Stability Review First Half 2023
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2
Financial Stability Review First Half 2023
1200 on
Monday, 9 October 2023
Overall households’ and businesses’ debt repayment ability remains healthy amid sound lending standards maintained by banks
The healthy buffers of financial institutions continue to preserve their resilience against unexpected losses and enable them to support financial intermediation
Preservation of operational and cyber readiness of financial institutions remains a priority
Bank Negara Malaysia (BNM) released the Financial Stability Review for the First Half of 2023 today.
Domestic financial markets remain orderly
Despite continued heightened volatility in the global financial markets, domestic market conditions remain orderly. This was reflected in the smooth intermediation of two-way flows in the bond and equity markets. Ringgit continued to be primarily influenced by external developments. However, foreign exchange (FX) risk exposures in the corporate and banking sectors remain manageable. This was underpinned by banks’ sizeable foreign currency liquid asset buffers and corporates’ prudent FX risk management practices. Continued onshore FX market liquidity is enabling orderly adjustments to external developments. This will support businesses and market participants in managing their FX exposures and allocation of resources.
Businesses continued to show improvement in financial performance amid ongoing challenges
Domestic business activity has improved considerably. However, recovery remains uneven as certain sectors continue to face challenges arising from elevated input costs and weak external demand. Overall business loan impairments remain low at 1% of total banking system loans. The share of SME loans with higher credit risk (classified as Stage 2[1]) remains small at 2.1% of total banking system loans. The share of SME loans under repayment assistance declined further to 5.5% of total SME loans (or 0.9% of total loans from the banking system and development financial institutions). SMEs that have exited repayment assistance programmes have largely been able to sustain their loan repayments.
Businesses are likely to face continued headwinds such as elevated costs and weak external demand. In addition, climate-related risks and opportunities are more likely to be important considerations for businesses. However, most businesses are expected to be able to withstand potential new shocks amid improvements in business leverage, healthy cash buffers, and more agile business models.
Income and employment growth continues to support household resilience
The household debt-to-GDP ratio remains stable at 81.9%. The median debt- to-income (DTI) ratio for overall households had been broadly stable at 1.4 times amid sound lending standards maintained by banks. Other measures of households’ debt repayment ability also indicate limited new risks. The median debt service ratios (DSRs) for newly approved and outstanding household loans remain prudent at 42% and 36%, respectively. This is helping to preserve healthy loan servicing buffers among households. The share of Stage 2[1] household loans has declined further to 4.6% of total household loans (or 2.7% of banking system loans) from 6.7% as of December 2022. Banks remain vigilant of risks associated with higher borrowing costs and the performance of borrowers that are exiting repayment assistance programmes extended during the pandemic. Any drop in household borrowing quality is expected to be well within the existing provisioning and capital buffers of the banking system.
Preserving operational and cyber resilience of financial institutions remains a high priority
Financial institutions continue to invest significant resources in managing operational and cyber-related risks. The launch of the National Scam Response Centre (NSRC) in October 2022 has allowed for more efficient actions to combat financial scams. Financial institutions are cooperating with law enforcement agencies through the NSRC to clamp down on mule accounts used to facilitate financial scams. Significant resources will continue to be directed towards increasing public cooperation in reporting fraud incidents and raising awareness of safe banking.
Financial institutions are also making progress in aligning business operations with environmental and sustainability goals. Bank Negara Malaysia Deputy Governor Jessica Chew says, “Financial institutions are increasingly adopting sustainable investment and lending practices, as well as expanding green financial solutions. To this end, addressing data needs and capacity building in climate risk management continue to be an ongoing priority for financial institutions, through collaborative efforts supported by the Joint Committee on Climate Change (JC3) with private industry and government agencies.”
Domestic financial system remains resilient
Banks continued to maintain strong liquidity buffers. The aggregate Liquidity Coverage Ratio and Net Stable Funding Ratio remained well above regulatory minima at 154.4% and 117.0%, respectively. The banking system remains well- capitalised. The total capital ratio stood at 18.5% at end-June 2023 with capital buffers of RM138.5 billion in excess of the regulatory minimum. Similarly, the insurance and takaful sector also remained resilient. The aggregate capital adequacy ratio and excess capital buffers stood at 225% and RM38.8 billion, respectively, as of the end of June 2023. The strong buffers of banks, insurers, and takaful operators will continue to ensure the financial system’s resilience against future shocks and unexpected losses. This will enable them to continue to support the financing and protection needs of households and businesses.
[1] Stage 2 loans are loans that have exhibited deterioration in credit risk, for which banks are required to set aside provisions based on lifetime expected credit losses based on the Malaysian Financial Reporting Standard 9.
See also: Financial Stability Review First Half 2023
Bank Negara Malaysia
9 October 2023
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |
06 Oct 2023 | International Reserves of Bank Negara Malaysia as at 29 September 2023 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-29-september-2023 | https://www.bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf | null |
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International Reserves of Bank Negara Malaysia as at 29 September 2023
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International Reserves of Bank Negara Malaysia as at 29 September 2023
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1500 on
Friday, 6 October 2023
6 Oct 2023
The international reserves of Bank Negara Malaysia amounted to USD110.1 billion as at 29 September 2023. The reserves level has taken into account the quarterly foreign exchange revaluation changes. The reserves position is sufficient to finance 5.1 months of imports of goods and services[1], and is 1.0 time of the total short-term external debt.
[1] Under the previous import coverage measure, reserves are sufficient to finance 7.0 months of retained imports of goods. For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27, which can be accessed at bnm.gov.my/-/quarterly-bulletin-4q-2021 Related Assets
BNM Statement of Assets & Liabilities - 29 September 2023
Bank Negara Malaysia
6 October 2023
© Bank Negara Malaysia, 2023. All rights reserved.
|
Monthly Highlights
Headline inflation declined to 3.4% in March
March 2023
1
3.7 3.4
3.9 3.8
0.00
2.00
4.00
0.0
2.0
4.0
J
a
n
-2
2
F
e
b
-2
2
M
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2
2
A
p
r-
2
2
M
a
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-2
2
J
u
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-2
2
J
u
l-
2
2
A
u
g
-2
2
S
e
p
-2
2
O
c
t-
2
2
N
o
v
-2
2
D
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-2
2
J
a
n
-2
3
F
e
b
-2
3
M
a
r-
2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation declined to 3.4% in March
(February: 3.7%) due mainly to lower inflation for
fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation moderated slightly to 3.8% during
the month (February: 3.9%), driven largely by
lower inflation for food away from home.
1
Robust growth in volume index driven by retail and motor vehicles
Index of Wholesale and Retail Trade
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded by 10.6% in February 2023
(January: 8.5%).
• The higher growth was driven mainly by retail
sales in non-specialised stores (e.g., department
stores) followed by continued strength in
purchases of motor vehicles amid the ongoing
fulfilment of backlog orders.
• On a month-on-month seasonally adjusted basis,
the index accelerated by 5.5% (January: 0.2%).
9.5 8.510.6
0
10
20
30
40
Feb-
22
Mar-
22
Apr-
22
May-
22
Jun-
22
Jul-
22
Aug-
22
Sep-
22
Oct-
22
Nov-
22
Dec-
22
Jan-
23
Feb-
23
ppt, %yoy
Motor vehicles Retail Wholesale
2.4
5.2
4.4
0
1
2
3
4
5
6
7
Mar-22 Jul-22 Nov-22 Mar-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Growth in credit to the private non-financial sector moderated
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
2.7 2.6 2.7 2.6
1.0 0.6 0.7 0.7
1.0
1.1 1.1 0.9
4.7 4.3 4.5 4.2
Dec-22 Jan-23 Feb-23 Mar-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Contribution to growth (ppt)
• Credit to the private non-financial sector grew by
4.2% as at end-March (February: 4.5%), attributed
to slower growth in credit to businesses (3.2%;
February: 3.7%).
• While growth in outstanding corporate bonds
moderated (4.4%; February : 5.5%), outstanding
business loan growth was sustained at 2.4%
(February: 2.4%). This was supported by the
continued growth in both working capital (2.2%;
February: 1.9%) and investment-related loans
(4.3%; February: 4.2%).
• Outstanding household loan growth remained
broadly stable (5.2%; February: 5.3%), supported
by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan
growth for the purchase of securities (-6.9%;
February: -3.3%).
Credit to the Private Non-Financial Sector1,2
Monthly Highlights
March 2023
Domestic financial market conditions remained orderly
Financial Market Performance in March 2023
Source: Bank Negara Malaysia, Bursa Malaysia
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
11.0
-2.1
-5.3
0.0
-2.2
1.7
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-10 -5 0 5 10 15
Mar-23
Feb-23
• In March, global financial markets were affected by
the emergence of banking sector stress in some
major economies. As spillovers were contained thus
far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds
improved.
• In line with the performance of regional currencies,
the ringgit appreciated by 1.7% against the US
dollar. Conditions in the domestic bond market
also remained stable.
• The FBM KLCI declined by 2.2% during the month.
2
Banks maintained strong liquidity and funding positions to support intermediation
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.9
157.4
0
40
80
120
160
70
75
80
85
90
95
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
increased slightly to 1.8% (February-23: 1.8%) and
1.2% (February-23: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory
reserves) continue to record a prudent level of
110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
%
1.8
1.2
1.7
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
M
a
r
2
2
A
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2
2
M
a
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2
2
J
u
n
2
2
J
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2
2
A
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2
2
S
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2
2
O
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2
2
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2
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2
2
J
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2
3
F
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2
3
M
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2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
157.4% (February-23: 152.7%).
• The aggregate loan-to-fund ratio remained stable at
81.9% (February-23: 81.6%).
PRESS RELEASE
Ref. No.: 04/23/05 EMBARGO: Not for publication or
broadcast before 1500 hours on
Friday, 28 April 2023
Monthly Highlights – March 2023
Headline inflation declined to 3.4% in March
• Headline inflation declined to 3.4% in March (February: 3.7%) due mainly
to lower inflation for fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation1 moderated slightly to 3.8% during the month
(February: 3.9%), driven largely by lower inflation for food away from
home.
Robust growth in volume index driven by retail and motor vehicles
• The Index of Wholesale and Retail Trade (IOWRT) expanded by 10.6%
in February 2023 (January: 8.5%).
• The higher growth was driven mainly by retail sales in non-specialised
stores (e.g., department stores) followed by continued strength in
purchases of motor vehicles amid the ongoing fulfilment of backlog
orders.
• On a month-on-month seasonally adjusted basis, the index accelerated
by 5.5% (January: 0.2%).
1 Core inflation is computed by excluding price-volatile and price-administered items.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth in credit to the private non-financial sector2,3 moderated
• Credit to the private non-financial sector grew by 4.2% as at end-March
(February: 4.5%), attributed to slower growth in credit to businesses
(3.2%; February: 3.7%).
• While growth in outstanding corporate bonds moderated (4.4%;
February: 5.5%), outstanding business loan growth was sustained at
2.4% (February: 2.4%). This was supported by the continued growth in
both working capital (2.2%; February: 1.9%) and investment-related
loans (4.3%; February: 4.2%).
• Outstanding household loan growth remained broadly stable (5.2%;
February: 5.3%), supported by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan growth for the purchase of
securities (-6.9%; February: -3.3%).
Domestic financial market conditions remained orderly
• In March, global financial markets were affected by the emergence of
banking sector stress in some major economies. As spillovers were
contained thus far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds improved.
• In line with the performance of regional currencies, the ringgit
appreciated by 1.7% against the US dollar. Conditions in the domestic
bond market also remained stable.
• The FBM KLCI declined by 2.2% during the month.
Banks maintained strong liquidity and funding positions to support
intermediation
• Banks continued to record healthy liquidity buffers with the aggregate
Liquidity Coverage Ratio at 157.4% (February: 152.7%).
2 Comprises loans to households and non-financial corporations from the banking system and development financial
institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
3 Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced
to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
• The aggregate loan-to-fund ratio remained stable at 81.9%
(February: 81.6%).
Asset quality in the banking system remained intact
• Overall gross and net impaired loans ratios increased slightly to 1.8%
(February: 1.8%) and 1.2% (February: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory reserves) continues to
record a prudent level of 110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
Bank Negara Malaysia
28 April 2023
20230428_BNM Monthly Highlights-March_en
Slide 1
Slide 2
20230428_BNM PR_Monthly Highlights-Mar 2023_eng
| Press Release |
05 Oct 2023 | BIS and central bank partners to explore protocols for embedding policy and regulatory compliance in cross-border transactions | https://www.bnm.gov.my/-/project-mandala-launch | null | null |
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BIS and central bank partners to explore protocols for embedding policy and regulatory compliance in cross-border transactions
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BIS and central bank partners to explore protocols for embedding policy and regulatory compliance in cross-border transactions
1400 on
Thursday, 5 October 2023
Project Mandala looks to automate compliance procedures, provide real-time transaction monitoring and increase transparency and visibility around country-specific policies.
The project explores the feasibility of encoding policy and regulatory requirements into a common protocol.
It is a joint collaboration between BIS Innovation Hub (BISIH) Singapore Centre, Reserve Bank of Australia (RBA), Bank of Korea (BOK), Bank Negara Malaysia (BNM), and Monetary Authority of Singapore (MAS), with financial institutions.
The Bank for International Settlements (BIS) and central bank partners today launched Project Mandala, which explores the feasibility of encoding jurisdiction-specific policy and regulatory requirements into a common protocol for cross-border use cases such as foreign direct investment, borrowing and payments.
Disparate policy and regulatory frameworks between different jurisdictions are among the chief obstacles to smooth and efficient cross-border payments. They contribute to the regulatory compliance burden across the payment chain, increase the time for cross-border transactions and introduce uncertainties among stakeholders.
Project Mandala – a proof-of-concept run by BISIH Singapore Centre, RBA, BOK, BNM and MAS, with the collaboration of financial institutions – seeks to ease the policy and regulatory compliance burden by automating compliance procedures, providing real-time transaction monitoring and increasing transparency and visibility around country-specific policies.
In doing so, it aims to address key challenges identified during Project Dunbar, which developed an experimental multiple central bank digital currency (mCBDC) platform.
The envisioned compliance-by-design architecture could enable a more efficient cross-border transfer of any digital assets including CBDCs and tokenised deposits. It could also serve as the foundational compliance layer for legacy and nascent wholesale or retail payment systems.
The measures could include quantifiable and configurable foreign exchange rules, as well as anti-money laundering and countering the financing of terrorism (AML/CFT) measures.
Project Mandala aligns with the Financial Stability Board 2023 priority actions for achieving the G20 targets for enhancing cross-border payments in the area of promoting an efficient legal, regulatory and supervisory environment for cross-border payments while maintaining their safety, security and integrity.
Bank Negara Malaysia Assistant Governor Dr. Norhana Endut said, “BNM is committed to making cross-border payments more efficient. Project Mandala could pave the way for more seamless cross-border transactions in the future while ensuring that regulatory compliance and transaction security are maintained. We welcome its potential, not only for Malaysia but also for the global community."
Bank Negara Malaysia
5 October 2023
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |
05 Oct 2023 | Outcome of Public Consultation on Exposure Draft on Licensing and Regulatory Framework for Digital Insurers and Takaful Operators | https://www.bnm.gov.my/-/dito-outcome | null | null |
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Outcome of Public Consultation on Exposure Draft on Licensing and Regulatory Framework for Digital Insurers and Takaful Operators
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Outcome of Public Consultation on Exposure Draft on Licensing and Regulatory Framework for Digital Insurers and Takaful Operators
Embargo :
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Not for publication or broadcast before
1046 on
Thursday, 5 October 2023
5 Oct 2023
Bank Negara Malaysia (BNM) wishes to provide an update on the outcome of the consultation paper on the Exposure Draft on Licensing and Regulatory Framework for Digital Insurers and Takaful Operators (DITO Framework) published in November 2022. The Exposure Draft outlines the proposed framework to facilitate the entry of DITOs in Malaysia that can offer strong value propositions to realise the policy outcomes of inclusion, competition, and efficiency.
Feedback from more than 50 stakeholders were received during this consultation period, which ended on 28 April 2023. In the months that followed, BNM continued to engage various stakeholders extensively to consider the feedback received from the Exposure Draft, particularly in relation to alternative business and operational models, as well as on the approach to the foundational phase. The input and feedback received have been insightful in providing additional perspectives, including market trends, to shape the final version of the policy document.
Having carefully considered the feedback and additional insights gained, BNM is taking the opportunity to refine several aspects of the DITO Framework. This includes enhancements to provide clarity for emerging and innovative business models such as embedded insurance and insurance-as-a-service. This aims to encourage wider participation from players in the insurance and takaful value chain that can deliver the intended policy outcomes of the DITO Framework. BNM plans to finalise the framework by the first half of 2024.
BNM would like to thank all parties that have contributed views, ideas and proposals during the consultation. Interested parties are still welcome to provide further feedback or engage BNM on the DITO Framework at DITF@bnm.gov.my.
Bank Negara Malaysia
5 October 2023
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |
29 Sep 2023 | DuitNow QR payments: Micro and small businesses will continue to enjoy zero-cost transactions; No new costs for individual customers | https://www.bnm.gov.my/-/duitnow-qr-payments | null | null |
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DuitNow QR payments: Micro and small businesses will continue to enjoy zero-cost transactions; No new costs for individual customers
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DuitNow QR payments: Micro and small businesses will continue to enjoy zero-cost transactions; No new costs for individual customers
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Friday, 29 September 2023
Major banks and non-bank financial service providers will waive transaction fees for micro and small businesses accepting DuitNow QR payments
Bank Negara Malaysia (BNM) would like to address concerns over the imposition of a transaction fee[1] by some acquirers[2] on businesses that accept DuitNow QR payments from 1 October 2023, following the end of a temporary fee waiver introduced in 2019.
The transaction fee is intended to cover costs and investments needed by the industry to upkeep their payment systems, including cybersecurity and fraud prevention controls, in order to maintain the high service and security standards for payment services.
DuitNow QR remains an affordable and cost-effective payment method. For individual customers, the usage of DuitNow QR to make payments will not attract any additional charges. For businesses, any transaction fee imposed on QR payments remains as low as, or lower than, fees imposed on payments using debit cards. Businesses using DuitNow QR as a payment method also do not need to incur recurring costs for POS terminal rental for card-based payment channels or additional overhead and administrative costs for handling cash payments.
The industry will take measures to minimise the potential impact of transaction fees on small businesses.
Major banks and selected non-bank financial service providers, who manage 75% of businesses currently accepting DuitNow QR payments, have announced that they will continue to waive the transaction fee for micro and small businesses accepting DuitNow QR payments.
In addition, PayNet[3] will allocate resources to help defray the costs incurred by acquirers that continue to offer full waivers to micro and small businesses accepting DuitNow QR payments.
Together, these measures will enable micro and small businesses to continue to enjoy DuitNow QR payment services at zero cost, while ensuring that QR payment services remain efficient, reliable, and safe for all consumers.
BNM remains fully committed to supporting the widespread adoption of digital payments in Malaysia through a vibrant, secure, and inclusive payment ecosystem that is also sustainable over the long term.
Bank Negara Malaysia
29 September 2023
[1] The transaction fee applicable for business merchants is known as the Merchant Discount Rate (MDR), which is a common fee associated with the provision of electronic payment services. It is charged based on a percentage of the payment transaction value to cover processing costs. A business merchant would receive the payment made by their customers after deducting the MDR. Currently, debit and credit card payments also incur MDRs.
[2] Acquirers are banks or non-bank financial service providers that provide merchant acquiring services that enable businesses, including micro and small businesses, to accept electronic payments for the sale of goods and services to their customers.
[3] Payments Network Malaysia Sdn Bhd (PayNet), the operator of DuitNow QR.
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |
29 Sep 2023 | Monetary and Financial Developments in August 2023 | https://www.bnm.gov.my/-/monetary-and-financial-developments-in-august-2023 | https://www.bnm.gov.my/documents/20124/12049798/i_en.pdf | null |
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Monetary and Financial Developments in August 2023
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Monetary and Financial Developments in August 2023
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29 Sep 2023
Headline inflation remained unchanged at 2.0% in August
Headline inflation remained unchanged at 2.0% (July 2023: 2.0%) as the decline in core inflation was offset by an uptick in inflation for non-core components, including fuel and electricity.
The lower core inflation at 2.5% (July 2023: 2.8%) largely reflected lower inflation for food away from home, rental and discretionary services.
Exports declined further in August
Exports contracted by 18.6% in August 2023 (July 2023: -13.0%), reflecting weaker external demand and a decline in commodity prices amid a high base effect.
Manufactured export growth was weighed mainly by electrical and engineering (E&E) products, petroleum and palm oil-based products. Meanwhile, commodities exports declined due primarily to lower palm oil, liquefied natural gas and crude petroleum shipments.
Export growth is expected to remain in contraction in the near term, albeit at a milder pace. Downside risks remain, stemming from weaker external
Sustained growth in credit to the private non-financial sector in August
Credit to the private non-financial sector grew by 3.8% as at end-August (July 2023: 3.8%), supported by higher growth in outstanding loans.
For businesses, while outstanding corporate bonds grew at a slower pace of 4.4% (July 2023: 5.2%), outstanding loan growth increased to 0.7% (July 2023: 0.2%). This mainly reflected improvement in the non-SME segment, for both working capital and investment loans. Of note, growth in outstanding loans to SMEs remained largely forthcoming at 2% (July 2023: 6.7%).
Growth in outstanding household loans was sustained at 3% (July 2023: 5.2%), supported by higher growth across most loan purposes. Household loan growth continued to be driven by loans for the purchase of houses and cars, which grew by 7.3% and 8.7%, respectively (July 2023: 7.1% and 8.4%, respectively).
Domestic financial markets were driven by external factors
Global financial markets were weighed down by ongoing concerns surrounding the Chinese economic slowdown. The People’s Bank of China announced an unexpected round of monetary policy easing. Meanwhile, the US Federal Reserve’s Chair Jerome Powell reaffirmed at the Jackson Hole Symposium that US monetary conditions would need to remain tight for longer.
As a result, the ringgit depreciated against the US dollar by 2.1% (regional[1] average: -2.4%), while the FBM KLCI declined by 0.5% (regional average: -2.0%). 10-year MGS yields remain unchanged in
Banks remain well-capitalised to support economic growth
Banks’ capital position remained strong to withstand potential shock and support credit intermediation growth in the economy.
The banking system recorded excess capital buffers[2] of RM133.3 billion as of the reporting date.
Banking system resilience continues to be underpinned by sound asset quality
Overall gross and net impaired loans ratios remain largely unchanged at 1.8% and 1.1%, respectively.
Loan loss coverage ratio (including regulatory reserves) remains at a prudent level of 115.0% of impaired loans, with total provisions accounting for 1.6% of total loans.
See also: Monthly Highlights [PDF]
[1] Regional countries comprised of Singapore, Thailand, Philippines, Indonesia and Korea
[2] Refers to total capital above the regulatory minimum, which includes the capital conservation buffer (2.5%) and bank-specific higher minimum requirements Related Assets
Monthly Highlights & Statistics in August 2023
Bank Negara Malaysia
29 September 2023
© Bank Negara Malaysia, 2023. All rights reserved.
|
Monthly Highlights May 2023
Monthly Highlights
Headline inflation declined further to 2.8% in May
May 2023
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation moderated to 2.8% (April 2023:
3.3%). This decline was largely due to non-core
CPI components, particularly lower inflation for
fuel (-0.2 percentage points, ppt) and fresh food
(-0.1ppt).
• Core inflation also declined slightly to 3.5% (April
2023: 3.6%) amid lower inflation for
communication services.
3.3
2.8
3.6 3.5
0.00
2.00
4.00
0.0
2.0
4.0
J
a
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-2
2
F
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-2
2
M
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2
2
A
p
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2
2
M
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-2
2
J
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-2
2
J
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2
2
A
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-2
2
S
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-2
2
O
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t-
2
2
N
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-2
2
D
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-2
2
J
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-2
3
F
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-2
3
M
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2
3
A
p
r-
2
3
M
a
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-2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
1.6
5.1
4.6
0
1
2
3
4
5
6
7
May-22 Sep-22 Jan-23 May-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Credit to the Private Non-Financial Sector1,2
1
Growth in credit to the private non-financial sector improved in May
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
Contribution to growth (ppt)
• Credit to the private non-financial sector expanded
by 4.0% as at end-May (April 2023: 3.7%), driven
mainly by higher growth in credit to businesses
(2.8%; April 2023: 2.5%).
• Outstanding corporate bonds grew by 4.6% (April
2023: 4.4%), while outstanding business loans
expanded by 1.6% (April 2023: 1.0%). The higher
business loan growth reflected improvement in
loans for both working capital and investments to
SMEs and non-SMEs.
• In the household segment, outstanding loan
growth was sustained at 5.1% (April 2023: 5.0%),
supported by higher growth across most loan
purposes. Of note, household loan growth
continued to be driven by loans for the purchase of
houses and cars, which grew by 7.0% and 8.4%,
respectively (April 2023: 6.8% and 8.0%).
2.7 2.6 2.5 2.6
0.7 0.7 0.3 0.5
1.1 0.9
0.9 1.0
4.5 4.2
3.7 4.0
Feb-23 Mar-23 Apr-23 May-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Index of wholesale and retail trade growth moderated in April
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded more moderately by 4.7% in
April 2023 (March 2023: 9.4%). The lower growth
was due mainly to the decline in the motor vehicle
segment.
• However, the retail segment continued to record a
double-digit growth of 10.0% (March 2023:
13.8%), supported by sales in non-specialised and
other specialised stores1.
• On a month-on-month seasonally adjusted basis,
the index increased at a faster pace of 6.5%
(March 2023: -0.9%).
1 Other goods in specialised stores includes clothing, footwear,
pharmaceuticals, cosmetics, watches, jewellery and optical goods.
10.6
9.4
4.7
-2
3
8
13
18
23
28
33
Apr-22 Jun-22 Aug-22 Oct-22 Dec-22 Feb-23 Apr-23
ppt, %yoy
Motor vehicles Retail Wholesale
Index of Wholesale and Retail Trade
Monthly Highlights
2
May 2023
Domestic financial markets were largely affected by external factors
Financial Market Performance in May 2023
-18.0
-0.5
-1.1
-3.0
-2.0
-3.4
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-20 -15 -10 -5 0
May-23 Apr-23
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
1Regional countries comprise Singapore, Thailand, Philippines, Indonesia, and Korea
Source: Bank Negara Malaysia, Bursa Malaysia
• Global investors maintained a risk-off approach
throughout May, as concerns over the impact of the
US debt ceiling crisis and the weaker-than-
expected rebound in China’s economy weighed on
global financial markets.
• As a result, the ringgit depreciated against the US
dollar by 3.4% (regional1 average: -1.2%). Similarly,
the FBM KLCI declined by 2.0% (regional1 average:
-1.3%).
• Nonetheless, the 10-year MGS yields decreased
slightly by 3 basis points, supported by non-resident
inflows into the domestic bond market.
Banks maintained strong liquidity and funding positions to support intermediation
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
151.2% (April 2023: 154.3%).
• The aggregate loan-to-fund ratio remained stable at
81.8% (April 2023: 82.1%).
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.8
151.2
0
40
80
120
160
70
75
80
85
90
95
M
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2
2
J
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3
F
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2
3
M
a
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2
3
A
p
r
2
3
M
a
y
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
remained broadly unchanged at 1.80% (April
2023: 1.78%) and 1.10% (April 2023: 1.10%),
respectively.
• Loan loss coverage ratio (including regulatory
reserves) remained at a prudent level of 114.1%
of impaired loans, with total provisions accounting
for 1.7% of total loans.
%
1.8
1.1
1.7
0.5
1.0
1.5
2.0
M
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A
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3
M
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2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
April 2023 Monthly Highlights
Slide 1
Slide 2
| Press Release |
29 Sep 2023 | Detailed Disclosure of International Reserves as at end-August 2023 | https://www.bnm.gov.my/-/detailed-disclosure-of-international-reserves-as-at-end-august-2023-1 | null | null |
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Detailed Disclosure of International Reserves as at end-August 2023
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Detailed Disclosure of International Reserves as at end-August 2023
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29 Sep 2023
In accordance with the International Monetary Fund (IMF) Special Data Dissemination Standard (SDDS) format, the detailed breakdown of international reserves provides forward-looking information on the size, composition and usability of reserves and other foreign currency assets, and the expected and potential future inflows and outflows of foreign exchange of the Federal Government and Bank Negara Malaysia over the next 12-month period. The detailed breakdown of international reserves based on the SDDS format is shown in Tables I, II, III and IV.
As shown in Table I, official reserve assets amounted to USD112,460.7 million, while other foreign currency assets amounted to USD1.7 million as at end-August 2023.
As shown in Table II, for the next 12 months, the pre-determined short-term outflows of foreign currency loans, securities and deposits, which include among others, scheduled repayment of external borrowings by the Government and the maturity of foreign currency Bank Negara Interbank Bills, amounted to USD17,555.2 million. The net short forward positions amounted to USD22,889.7 million as at end-August 2023, reflecting the management of ringgit liquidity in the money market. In line with the practice adopted since April 2006, the data excludes projected foreign currency inflows arising from interest income and the drawdown of project loans. Projected foreign currency inflows amount to USD2,228.8 million in the next 12 months.
As shown in Table III, the only contingent short-term net drain on foreign currency assets are Government guarantees of foreign currency debt due within one year, amounting to USD369.5 million. There are no foreign currency loans with embedded options, no undrawn, unconditional credit lines provided by or to other central banks, international organisations, banks and other financial institutions. Bank Negara Malaysia also does not engage in foreign currency options vis-à-vis ringgit.
Overall, the detailed breakdown of international reserves under the IMF SDDS format indicates that as at end-August 2023, Malaysia’s international reserves remain usable.
Related Assets
International Reserves and Foreign Currency Liquidity (31 August 2023)
Bank Negara Malaysia
29 September 2023
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |
27 Sep 2023 | Joint Statement by Bank Negara Malaysia and Securities Commission Malaysia: Updates from the 11th Joint Committee on Climate Change (JC3) Meeting | https://www.bnm.gov.my/-/jc3-mtg11-en | null | null |
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Joint Statement by Bank Negara Malaysia and Securities Commission Malaysia: Updates from the 11th Joint Committee on Climate Change (JC3) Meeting
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Joint Statement by Bank Negara Malaysia and Securities Commission Malaysia: Updates from the 11th Joint Committee on Climate Change (JC3) Meeting
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27 Sep 2023
The Joint Committee on Climate Change (JC3) convened its eleventh meeting on 20 September 2023 to review the progress and action plans of JC3. Members also discussed the proposed deliverables and action plans of the newly established SME Focus Group within JC3.
Working Groups on Physical Risk and Transition Risk have been formed under JC3 to support financial institutions’ implementation of the Policy Document on Climate Risk Management and Scenario Analysis (CRMSA) issued by Bank Negara Malaysia. Engagements with industry are also being intensified to build capacity and accelerate preparations for the upcoming industry-wide Climate Risk Stress Test (CRST).
JC3 also noted improvements[1] towards more consistent and credible reporting by financial institutions under the Climate Change and Principle-based Taxonomy (CCPT), although financial institutions continue to face challenges in obtaining information from their customers and counterparties to enable appropriate classifications. In addressing this challenge, JC3 will facilitate the adoption of a standardised minimum due diligence questionnaire by financial institutions and develop tailored guidance for SMEs to provide the information required by financial institutions.
JC3 is reviewing the TCFD[2] Application Guide for Malaysian Financial Institutions[3] published in June 2022 and will make relevant updates to the Guide to take into account the International Sustainability Standards Board (ISSB) general sustainability-related (S1) and climate-related (S2) disclosure standards. Members were also updated on the immediate focus and priorities of the Advisory Committee on Sustainability Reporting. This committee was established with the endorsement of the Ministry of Finance and chaired by the Securities Commission Malaysia to look into the implementation of the ISSB in Malaysia.
The newly formed SME Focus Group under JC3 will initially focus on enhancing awareness, facilitating green certifications of SMEs and supporting better disclosures. This will complement existing initiatives by Government ministries and agencies to jump-start the transition journey for SMEs. The SME Focus Group will work in close collaboration with FIs, relevant Government ministries and agencies, Credit Guarantee Corporation and SME trade associations in this important effort.
Members also noted the positive outcomes from the Greening Value Chain (GVC) pilot programme, an initiative rolled out by JC3 earlier this year. The programme, implemented in partnership with four corporates, has enabled sixty participating SMEs within their supply chain to start measuring and reporting their greenhouse gas emissions.
Jessica Chew, Deputy Governor of Bank Negara Malaysia and Co-Chair of JC3, said, “It is critical to ensure that SMEs are not left behind in the transition to a greener economy. Key to this will be reducing the costs of transition for SMEs and leveraging strategic partners, including FIs and large anchor corporates to support SMEs on this journey.”
At this meeting, members also had a fruitful exchange with the Ministry of Economy to gain better insights on the National Energy Transition Roadmap (NETR) and the role of the financial sector in supporting the flagship projects outlined in the NETR, as well as areas of collaboration between the financial sector and Government.
Datuk Kamarudin Hashim, Managing Director of the Securities Commission Malaysia and Co-Chair of JC3, stated, “Given the nature of climate-related projects, public sector financing alone will not be viable. Blended financing can bridge the gap to make financing for sustainable projects more feasible. In this regard, blended financing can accelerate the implementation of projects and initiatives, including under the recently launched NETR by the Ministry of Economy, which aims to accelerate the development of a sustainable, affordable and resilient energy system to support Malaysia's low-carbon transition.”
JC3 will soon organise its biennial flagship conference that will take place from 23 to 25 October 2023 at Sasana Kijang, Kuala Lumpur. This hybrid JC3 Journey to Zero Conference will focus on practical and actionable solutions, emphasising the critical role of the financial industry in driving sustainable transformation. For those interested in participating in the JC3 Journey to Zero Conference, registration is now open at https://jc3conference.com/.
Bank Negara Malaysia
Securities Commission Malaysia
27 September 2023
[1] Improvements in interpreting guiding principles in particular Guiding Principle 3 (“no significant harm to the environment”) and Guiding Principle 4 (“remedial measures to transition”) after the issuance of the Due Diligence Questions in assessing BNM CCPT Guiding Principles 3 and 4 by CCPT IG in April 2023
[2] Task Force on Climate-related Financial Disclosures
[3] Released by JC3 in 2022
About the JC3
The JC3 is a platform established in September 2019 to pursue collaborative actions for building climate resilience within the Malaysian financial sector. The JC3 is co-chaired by Datuk Jessica Chew Cheng Lian, Deputy Governor of Bank Negara Malaysia and Datuk Kamarudin Hashim, Managing Director of Securities Commission Malaysia, with members comprising senior officials from Bursa Malaysia and 21 financial industry players. The JC3’s initiatives and priorities are undertaken by its five sub-committees, namely Risk Management; Governance and Disclosure; Product and Innovation; Engagement and Capacity Building; and Bridging Data Gaps. An SME Focus Group has been established to develop strategies and solutions that support transition by SMEs.
Members: Allianz General Insurance Company (Malaysia) Berhad, AmBank (M) Berhad, Bank Islam Malaysia Berhad, Bank Pembangunan Malaysia Berhad, Bank Pertanian Malaysia Berhad (Agrobank), BIMB Investment Management Berhad, BNP Paribas Asset Management Sdn. Bhd., Bursa Malaysia Berhad, CIMB Bank, Etiqa Family Takaful Berhad, HSBC Amanah Malaysia Berhad, Kenanga Investors Berhad, Maybank Berhad, MIDF Amanah Investment Bank Berhad, MSIG Insurance (Malaysia) Berhad, RHB Islamic Bank Berhad, RHB Islamic International Asset Management Bhd., Standard Chartered Bank Malaysia Berhad, Swiss Re Asia Pte. Ltd. (Swiss Retakaful), Syarikat Takaful Malaysia Am Berhad, UOB Asset Management (Malaysia) Berhad and Zurich General Insurance Malaysia Berhad.
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |
22 Sep 2023 | International Reserves of Bank Negara Malaysia as at 15 September 2023 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-15-september-2023 | https://www.bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf | null |
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International Reserves of Bank Negara Malaysia as at 15 September 2023
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4
International Reserves of Bank Negara Malaysia as at 15 September 2023
Embargo :
For immediate release
Not for publication or broadcast before
1500 on
Friday, 22 September 2023
22 Sep 2023
The international reserves of Bank Negara Malaysia amounted to USD111.5 billion as at 15 September 2023. The reserves position is sufficient to finance 5.2 months of imports of goods and services[1], and is 1.0 time of the total short-term external debt.
[1] Under the previous import coverage measure, reserves is sufficient to finance 7.1 months of retained imports of goods. For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27, which can be accessed at bnm.gov.my/-/quarterly-bulletin-4q-2021 Related Assets
BNM Statement of Assets & Liabilities - 15 September 2023
Bank Negara Malaysia
22 September 2023
© Bank Negara Malaysia, 2023. All rights reserved.
|
Monthly Highlights
Headline inflation declined to 3.4% in March
March 2023
1
3.7 3.4
3.9 3.8
0.00
2.00
4.00
0.0
2.0
4.0
J
a
n
-2
2
F
e
b
-2
2
M
a
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2
2
A
p
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2
2
M
a
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-2
2
J
u
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-2
2
J
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l-
2
2
A
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-2
2
S
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p
-2
2
O
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t-
2
2
N
o
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-2
2
D
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-2
2
J
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-2
3
F
e
b
-2
3
M
a
r-
2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation declined to 3.4% in March
(February: 3.7%) due mainly to lower inflation for
fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation moderated slightly to 3.8% during
the month (February: 3.9%), driven largely by
lower inflation for food away from home.
1
Robust growth in volume index driven by retail and motor vehicles
Index of Wholesale and Retail Trade
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded by 10.6% in February 2023
(January: 8.5%).
• The higher growth was driven mainly by retail
sales in non-specialised stores (e.g., department
stores) followed by continued strength in
purchases of motor vehicles amid the ongoing
fulfilment of backlog orders.
• On a month-on-month seasonally adjusted basis,
the index accelerated by 5.5% (January: 0.2%).
9.5 8.510.6
0
10
20
30
40
Feb-
22
Mar-
22
Apr-
22
May-
22
Jun-
22
Jul-
22
Aug-
22
Sep-
22
Oct-
22
Nov-
22
Dec-
22
Jan-
23
Feb-
23
ppt, %yoy
Motor vehicles Retail Wholesale
2.4
5.2
4.4
0
1
2
3
4
5
6
7
Mar-22 Jul-22 Nov-22 Mar-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Growth in credit to the private non-financial sector moderated
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
2.7 2.6 2.7 2.6
1.0 0.6 0.7 0.7
1.0
1.1 1.1 0.9
4.7 4.3 4.5 4.2
Dec-22 Jan-23 Feb-23 Mar-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Contribution to growth (ppt)
• Credit to the private non-financial sector grew by
4.2% as at end-March (February: 4.5%), attributed
to slower growth in credit to businesses (3.2%;
February: 3.7%).
• While growth in outstanding corporate bonds
moderated (4.4%; February : 5.5%), outstanding
business loan growth was sustained at 2.4%
(February: 2.4%). This was supported by the
continued growth in both working capital (2.2%;
February: 1.9%) and investment-related loans
(4.3%; February: 4.2%).
• Outstanding household loan growth remained
broadly stable (5.2%; February: 5.3%), supported
by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan
growth for the purchase of securities (-6.9%;
February: -3.3%).
Credit to the Private Non-Financial Sector1,2
Monthly Highlights
March 2023
Domestic financial market conditions remained orderly
Financial Market Performance in March 2023
Source: Bank Negara Malaysia, Bursa Malaysia
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
11.0
-2.1
-5.3
0.0
-2.2
1.7
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-10 -5 0 5 10 15
Mar-23
Feb-23
• In March, global financial markets were affected by
the emergence of banking sector stress in some
major economies. As spillovers were contained thus
far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds
improved.
• In line with the performance of regional currencies,
the ringgit appreciated by 1.7% against the US
dollar. Conditions in the domestic bond market
also remained stable.
• The FBM KLCI declined by 2.2% during the month.
2
Banks maintained strong liquidity and funding positions to support intermediation
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.9
157.4
0
40
80
120
160
70
75
80
85
90
95
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
increased slightly to 1.8% (February-23: 1.8%) and
1.2% (February-23: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory
reserves) continue to record a prudent level of
110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
%
1.8
1.2
1.7
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
157.4% (February-23: 152.7%).
• The aggregate loan-to-fund ratio remained stable at
81.9% (February-23: 81.6%).
PRESS RELEASE
Ref. No.: 04/23/05 EMBARGO: Not for publication or
broadcast before 1500 hours on
Friday, 28 April 2023
Monthly Highlights – March 2023
Headline inflation declined to 3.4% in March
• Headline inflation declined to 3.4% in March (February: 3.7%) due mainly
to lower inflation for fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation1 moderated slightly to 3.8% during the month
(February: 3.9%), driven largely by lower inflation for food away from
home.
Robust growth in volume index driven by retail and motor vehicles
• The Index of Wholesale and Retail Trade (IOWRT) expanded by 10.6%
in February 2023 (January: 8.5%).
• The higher growth was driven mainly by retail sales in non-specialised
stores (e.g., department stores) followed by continued strength in
purchases of motor vehicles amid the ongoing fulfilment of backlog
orders.
• On a month-on-month seasonally adjusted basis, the index accelerated
by 5.5% (January: 0.2%).
1 Core inflation is computed by excluding price-volatile and price-administered items.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth in credit to the private non-financial sector2,3 moderated
• Credit to the private non-financial sector grew by 4.2% as at end-March
(February: 4.5%), attributed to slower growth in credit to businesses
(3.2%; February: 3.7%).
• While growth in outstanding corporate bonds moderated (4.4%;
February: 5.5%), outstanding business loan growth was sustained at
2.4% (February: 2.4%). This was supported by the continued growth in
both working capital (2.2%; February: 1.9%) and investment-related
loans (4.3%; February: 4.2%).
• Outstanding household loan growth remained broadly stable (5.2%;
February: 5.3%), supported by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan growth for the purchase of
securities (-6.9%; February: -3.3%).
Domestic financial market conditions remained orderly
• In March, global financial markets were affected by the emergence of
banking sector stress in some major economies. As spillovers were
contained thus far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds improved.
• In line with the performance of regional currencies, the ringgit
appreciated by 1.7% against the US dollar. Conditions in the domestic
bond market also remained stable.
• The FBM KLCI declined by 2.2% during the month.
Banks maintained strong liquidity and funding positions to support
intermediation
• Banks continued to record healthy liquidity buffers with the aggregate
Liquidity Coverage Ratio at 157.4% (February: 152.7%).
2 Comprises loans to households and non-financial corporations from the banking system and development financial
institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
3 Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced
to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
• The aggregate loan-to-fund ratio remained stable at 81.9%
(February: 81.6%).
Asset quality in the banking system remained intact
• Overall gross and net impaired loans ratios increased slightly to 1.8%
(February: 1.8%) and 1.2% (February: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory reserves) continues to
record a prudent level of 110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
Bank Negara Malaysia
28 April 2023
20230428_BNM Monthly Highlights-March_en
Slide 1
Slide 2
20230428_BNM PR_Monthly Highlights-Mar 2023_eng
| Press Release |
19 Sep 2023 | Renewal of Bilateral Swap Arrangement between Japan and Malaysia | https://www.bnm.gov.my/-/bsa-bnm-boj-en | null | null |
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Renewal of Bilateral Swap Arrangement between Japan and Malaysia
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Renewal of Bilateral Swap Arrangement between Japan and Malaysia
Embargo :
For immediate release
Not for publication or broadcast before
1400 on
Tuesday, 19 September 2023
19 Sep 2023
Japan and Malaysia renewed the Bilateral Swap Arrangement1 (BSA) effective on 18 September 2023.
The Bank of Japan (BOJ), acting as agent for the Minister of Finance of Japan, and Bank Negara Malaysia (BNM) renewed the BSA of up to USD3 billion. The signed Amendment and Restatement Agreement follows the BSA signed in 2020.
The renewed BSA incorporates the recent amendments to the Chiang Mai Initiative Multilateralisation (CMIM) Agreement.
Japan and Malaysia agree that the BSA will further deepen financial cooperation between the two countries and enhance regional financial stability.
1 The BSA is a bilateral agreement that allows both parties to exchange their local currencies for U.S. Dollars, with Malaysia also having the option to exchange Malaysian ringgit for Japanese yen.
Bank of Japan
Bank Negara Malaysia
19 September 2023
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |
07 Sep 2023 | International Reserves of Bank Negara Malaysia as at 30 August 2023 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-30-august-2023 | https://www.bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf | null |
Reading:
International Reserves of Bank Negara Malaysia as at 30 August 2023
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3
International Reserves of Bank Negara Malaysia as at 30 August 2023
Embargo :
For immediate release
Not for publication or broadcast before
1500 on
Thursday, 7 September 2023
7 Sep 2023
The international reserves of Bank Negara Malaysia amounted to USD112.5 billion as at 30 August 2023. The reserves position is sufficient to finance 5.2 months of imports of goods and services[1], and is 1.0 time of the total short-term external debt.
[1] Under the previous import coverage measure, reserves is sufficient to finance 7.1 months of retained imports of goods. For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27, which can be accessed at bnm.gov.my/-/quarterly-bulletin-4q-2021 Related Assets
BNM Statement of Assets & Liabilities - 30 August 2023
Bank Negara Malaysia
7 September 2023
© Bank Negara Malaysia, 2023. All rights reserved.
|
Monthly Highlights
Headline inflation declined to 3.4% in March
March 2023
1
3.7 3.4
3.9 3.8
0.00
2.00
4.00
0.0
2.0
4.0
J
a
n
-2
2
F
e
b
-2
2
M
a
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2
2
A
p
r-
2
2
M
a
y
-2
2
J
u
n
-2
2
J
u
l-
2
2
A
u
g
-2
2
S
e
p
-2
2
O
c
t-
2
2
N
o
v
-2
2
D
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c
-2
2
J
a
n
-2
3
F
e
b
-2
3
M
a
r-
2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation declined to 3.4% in March
(February: 3.7%) due mainly to lower inflation for
fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation moderated slightly to 3.8% during
the month (February: 3.9%), driven largely by
lower inflation for food away from home.
1
Robust growth in volume index driven by retail and motor vehicles
Index of Wholesale and Retail Trade
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded by 10.6% in February 2023
(January: 8.5%).
• The higher growth was driven mainly by retail
sales in non-specialised stores (e.g., department
stores) followed by continued strength in
purchases of motor vehicles amid the ongoing
fulfilment of backlog orders.
• On a month-on-month seasonally adjusted basis,
the index accelerated by 5.5% (January: 0.2%).
9.5 8.510.6
0
10
20
30
40
Feb-
22
Mar-
22
Apr-
22
May-
22
Jun-
22
Jul-
22
Aug-
22
Sep-
22
Oct-
22
Nov-
22
Dec-
22
Jan-
23
Feb-
23
ppt, %yoy
Motor vehicles Retail Wholesale
2.4
5.2
4.4
0
1
2
3
4
5
6
7
Mar-22 Jul-22 Nov-22 Mar-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Growth in credit to the private non-financial sector moderated
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
2.7 2.6 2.7 2.6
1.0 0.6 0.7 0.7
1.0
1.1 1.1 0.9
4.7 4.3 4.5 4.2
Dec-22 Jan-23 Feb-23 Mar-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Contribution to growth (ppt)
• Credit to the private non-financial sector grew by
4.2% as at end-March (February: 4.5%), attributed
to slower growth in credit to businesses (3.2%;
February: 3.7%).
• While growth in outstanding corporate bonds
moderated (4.4%; February : 5.5%), outstanding
business loan growth was sustained at 2.4%
(February: 2.4%). This was supported by the
continued growth in both working capital (2.2%;
February: 1.9%) and investment-related loans
(4.3%; February: 4.2%).
• Outstanding household loan growth remained
broadly stable (5.2%; February: 5.3%), supported
by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan
growth for the purchase of securities (-6.9%;
February: -3.3%).
Credit to the Private Non-Financial Sector1,2
Monthly Highlights
March 2023
Domestic financial market conditions remained orderly
Financial Market Performance in March 2023
Source: Bank Negara Malaysia, Bursa Malaysia
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
11.0
-2.1
-5.3
0.0
-2.2
1.7
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-10 -5 0 5 10 15
Mar-23
Feb-23
• In March, global financial markets were affected by
the emergence of banking sector stress in some
major economies. As spillovers were contained thus
far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds
improved.
• In line with the performance of regional currencies,
the ringgit appreciated by 1.7% against the US
dollar. Conditions in the domestic bond market
also remained stable.
• The FBM KLCI declined by 2.2% during the month.
2
Banks maintained strong liquidity and funding positions to support intermediation
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.9
157.4
0
40
80
120
160
70
75
80
85
90
95
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
increased slightly to 1.8% (February-23: 1.8%) and
1.2% (February-23: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory
reserves) continue to record a prudent level of
110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
%
1.8
1.2
1.7
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
157.4% (February-23: 152.7%).
• The aggregate loan-to-fund ratio remained stable at
81.9% (February-23: 81.6%).
PRESS RELEASE
Ref. No.: 04/23/05 EMBARGO: Not for publication or
broadcast before 1500 hours on
Friday, 28 April 2023
Monthly Highlights – March 2023
Headline inflation declined to 3.4% in March
• Headline inflation declined to 3.4% in March (February: 3.7%) due mainly
to lower inflation for fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation1 moderated slightly to 3.8% during the month
(February: 3.9%), driven largely by lower inflation for food away from
home.
Robust growth in volume index driven by retail and motor vehicles
• The Index of Wholesale and Retail Trade (IOWRT) expanded by 10.6%
in February 2023 (January: 8.5%).
• The higher growth was driven mainly by retail sales in non-specialised
stores (e.g., department stores) followed by continued strength in
purchases of motor vehicles amid the ongoing fulfilment of backlog
orders.
• On a month-on-month seasonally adjusted basis, the index accelerated
by 5.5% (January: 0.2%).
1 Core inflation is computed by excluding price-volatile and price-administered items.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth in credit to the private non-financial sector2,3 moderated
• Credit to the private non-financial sector grew by 4.2% as at end-March
(February: 4.5%), attributed to slower growth in credit to businesses
(3.2%; February: 3.7%).
• While growth in outstanding corporate bonds moderated (4.4%;
February: 5.5%), outstanding business loan growth was sustained at
2.4% (February: 2.4%). This was supported by the continued growth in
both working capital (2.2%; February: 1.9%) and investment-related
loans (4.3%; February: 4.2%).
• Outstanding household loan growth remained broadly stable (5.2%;
February: 5.3%), supported by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan growth for the purchase of
securities (-6.9%; February: -3.3%).
Domestic financial market conditions remained orderly
• In March, global financial markets were affected by the emergence of
banking sector stress in some major economies. As spillovers were
contained thus far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds improved.
• In line with the performance of regional currencies, the ringgit
appreciated by 1.7% against the US dollar. Conditions in the domestic
bond market also remained stable.
• The FBM KLCI declined by 2.2% during the month.
Banks maintained strong liquidity and funding positions to support
intermediation
• Banks continued to record healthy liquidity buffers with the aggregate
Liquidity Coverage Ratio at 157.4% (February: 152.7%).
2 Comprises loans to households and non-financial corporations from the banking system and development financial
institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
3 Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced
to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
• The aggregate loan-to-fund ratio remained stable at 81.9%
(February: 81.6%).
Asset quality in the banking system remained intact
• Overall gross and net impaired loans ratios increased slightly to 1.8%
(February: 1.8%) and 1.2% (February: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory reserves) continues to
record a prudent level of 110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
Bank Negara Malaysia
28 April 2023
20230428_BNM Monthly Highlights-March_en
Slide 1
Slide 2
20230428_BNM PR_Monthly Highlights-Mar 2023_eng
| Press Release |
07 Sep 2023 | Monetary Policy Statement | https://www.bnm.gov.my/-/monetary-policy-statement-07092023 | https://www.bnm.gov.my/documents/20124/11842159/MPS_Snapshot_2023_09_en.pdf | null |
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Monetary Policy Statement
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17
Monetary Policy Statement
Embargo :
For immediate release
Not for publication or broadcast before
1500 on
Thursday, 7 September 2023
7 Sep 2023
At its meeting today, the Monetary Policy Committee (MPC) of Bank Negara Malaysia decided to maintain the Overnight Policy Rate (OPR) at 3.00 percent.
The global economy continues to expand, driven by resilient domestic demand supported by strong labour market conditions. Global growth, however, remains weighed down by persistently elevated core inflation and higher interest rates. Global trade is also affected by rotation of spending from goods to services, and the ongoing electrical and electronics (E&E) downcycle. The slower-than-expected growth in China also weighed on the global economy. Globally, headline inflation continued to moderate. While core inflation in advanced economies is slowing down, it remains above historical averages. For most central banks, the monetary policy stance is likely to remain tight. The growth outlook remains subject to downside risks, mainly from a slower momentum in major economies, higher-than-anticipated inflation outturns, an escalation of geopolitical tensions, and a sharp tightening in financial market conditions.
In the second quarter of the year, growth of the Malaysian economy was affected by slower external demand and a decline in commodity production. Moving forward, growth will continue to be driven by resilient domestic expenditure amid the challenging external environment. Continued employment and wage growth, particularly in the domestic-oriented sectors, remain supportive of household spending. Tourist arrivals and spending are expected to improve further. Investment activity would be supported by continued progress of multi-year infrastructure projects, and implementation of catalytic initiatives under the recently announced national master plans. Domestic financial conditions also remain conducive to financial intermediation amid sustained credit growth. These factors will continue to underpin the growth momentum going into 2024. While the growth outlook is subject to downside risks stemming from weaker-than-expected external demand and larger and protracted declines in commodity production, upside risks mainly emanate from stronger-than-expected tourism activity, a stronger recovery from the E&E downcycle, and faster implementation of existing and new projects.
In line with expectations, headline and core inflation have continued to ease amid the more moderate cost conditions. This moderating trend would likely continue in the second half of 2023, partly reflecting the higher base from the second half of 2022 and continued easing momentum of price increases. Risks to the inflation outlook remain highly subject to changes to domestic policy on subsidies and price controls, global commodity prices and financial market developments, as well as the degree of persistence in core inflation.
At the current OPR level, the monetary policy stance remains supportive of the economy and is consistent with the current assessment of the inflation and growth prospects. The MPC remains vigilant to ongoing developments to inform the assessment on the outlook of domestic inflation and growth. The MPC will ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability.
See also:
Monetary Policy Statement (MPS) Snapshot: September 2023
Frequently Asked QuestionsBank Negara Malaysia
7 September 2023
© Bank Negara Malaysia, 2023. All rights reserved.
|
Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services
27Quarterly Bulletin | 4Q 2021
Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to
Imports of Goods and Services
One of the indicators used by the Bank to measure international reserve adequacy is the reserve coverage
of retained imports,1 which is communicated on a fortnightly basis. As the economy grew and evolved with
higher share of the services sector, this has raised the prominence of services imports in the measure of
reserve adequacy. Given this consideration and in line with the international best practice, future fortnightly
reporting of Malaysia’s international reserves will include the indicator on reserve coverage of imports of
goods and services, effective from 22 February 2022.2
1 Defined as gross imports subtracted with re-exports. The 12-month average retained imports can be derived from the Monthly Highlight and Statistics Table
3.6.8 (Imports by End-Use; see Appendix 1).
2 For the international reserves position as at 15 February 2022.
3 Defined as imports plus exports.
4 From RM101.3 billion to RM351.3 billion, or a compound annual growth rate (CAGR) of 6.4%.
5 Based on JP Morgan’s Government Bond Index for Emerging Markets.
Services tradeC1
0
100
200
300
400
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
RM billion
Travel1
Computer and information
Transport
Manufacturing
Other business3
Other2
Perdagangan perkhidmatanR1
0
100
200
300
400
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
RM bilion
Perjalanan1
Komputer dan informasi
Pengangkutan
Pembuatan
Perniagaan Lain3
Lain-lain2
Nota: Data sebelum tahun 2005 adalah berdasarkan garis panduan dalam Edisi Kelima Manual Imbangan Pembayaran dan Kedudukan
............Pelaburan Antarabangsa (BPM5) IMF. Data bagi tahun 2005 dan selanjutnya adalah berdasarkan BPM6.
1 Termasuk perbelanjaan perjalanan bagi aktiviti pelancongan.
2 Termasuk pembinaan, caj penggunaan harta intelek, perkhidmatan persendirian, kebudayaan dan rekreasi.
3 Perkhidmatan perniagaan lain termasuk perkhidmatan penyelidikan dan pembangunan, profesional, teknikal, berkaitan perdagangan dan
...perkhidmatan perniagaan lain.
Sumber: Jabatan Perangkaan Malaysia dan Bank Negara Malaysia
Note: Data prior to 2005 are based on the guideline in the Fifth Edition of the Balance of Payments and International Investment Position
............Manual (BPM5) of the IMF. Data for 2005 and beyond are based on BPM6.
1 Includes travel spending for tourism activity.
2 Includes construction, charges for intellectual property use, personal, culture & recreational services.
3 Other business services comprise research and development, professional, technical, trade-related and other business services.
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
The Bank’s reporting of the reserve coverage of retained imports was published as early as in the 1990s. Data
on retained imports are available on monthly basis and thereby closely match the fortnightly release of the
international reserves data. However, retained imports do not include payment for services, which has grown
over the past two decades. From 1999 to 2019, services trade3 has increased by 246.9%4 (Chart 1). This was
mainly due to higher tourism activity as well as payments for foreign transport services for goods trade. In
addition, there was also an expansion in goods import, largely in support of domestic investment activities
and production of manufactured goods.
Malaysia’s performance on this indicator is in line with regional and peer5 economies. On historical basis,
reserve coverage of imports of goods and services indicator has been in the range of between 5 and 8
months since 2008 – well above the generally-accepted ‘rule of thumb’ adequacy threshold of 3-months, and
demonstrates the ability of the Malaysian economy to withstand against external shocks.
28 Quarterly Bulletin | 4Q 2021
It is also important to emphasize that the assessment of reserve adequacy should not be solely based
on the face value of these indicators. This needs to be complemented with deeper understanding about
the country’s external position, financial system and broad economic policies. In particular, international
reserves is not the only means to meet external obligations.6 Prevailing assessment indicates that the
country’s external position7 is underpinned by its strong economic fundamentals including healthy current
account surplus, large foreign currency external assets held by domestic entities8 and the flexible ringgit
exchange rate.
References
Department of Statistics, Malaysia. ‘External Sector’, Jabatan Perangkaan Malaysia, Putrajaya.
Greenspan, A., ‘Currency reserves and debt’. Remarks before the World Bank Conference on Recent Trends in
Reserves Management, Washington, DC, 29 April 1999.
International Monetary Fund, (2016). ‘Guidance Note on the Assessment of Reserve Adequacy and Related
Considerations’.
Appendix 1: Calculation of international reserves coverage of retained imports
aFor example, to calculate monthly retained imports for December 2019, the retained imports for the months of
January to December 2019 is summed up (i.e. rolling 12-months of retained imports). This number is then divided
by 12, to obtain a monthly average. The figures can be obtained from BNM’s MHS Table 3.6.8, column S.
6 Further information can be found in the box article “Malaysia’s Resilience in Managing External Debt Obligations and the Adequacy of International Reserves”
in BNM’s Annual Report 2018.
7 In addition, it has also been emphasized that Malaysia’s external debt position, including short-term external debt, remains manageable. This is supported by
the favourable currency and maturity profile on its external debt as well as domestic entities’ resilient repayment capacity. Foreign-currency external debt of
corporates are also mainly subject to prudential and hedging requirements (refer to the latest assessment on external debt developments on page 25)
8 Amounting to RM1.1 trillion as at end-2021.
| Press Release |
30 Aug 2023 | Appointment of New Deputy Governor of Bank Negara Malaysia | https://www.bnm.gov.my/-/appt-dgazmz | null | null |
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Appointment of New Deputy Governor of Bank Negara Malaysia
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10
Appointment of New Deputy Governor of Bank Negara Malaysia
Embargo :
For immediate release
Not for publication or broadcast before
1600 on
Wednesday, 30 August 2023
30 Aug 2023
Bank Negara Malaysia (the Bank) today announces that the Minister of Finance has approved the appointment of Encik Adnan Zaylani bin Mohamad Zahid as Deputy Governor for a three-year term effective 1 September 2023.
As Deputy Governor, Encik Adnan Zaylani will oversee the Financial Markets and Development sectors. He will be a member of the Bank’s Board of Directors and continue to serve on various committees of the Bank, including the Management Committee, Monetary Policy Committee, Reserve Management Committee, Financial Risk Management Committee, Financial Stability Committee, and Joint Policy Committee.
Encik Adnan Zaylani joined the Bank in 1994 and holds a Master of Public Policy from the Blavatnik School of Government, University of Oxford. He also holds a Master of Science in Global Market Economics and a Bachelor of Science in Economics from the London School of Economics and Political Science. Throughout his 29-year career with the Bank, he has been involved in diverse areas of central banking ranging from investments and financial markets, foreign exchange policy, Islamic finance and financial sector development. He is currently the Chairman of the Financial Markets Committee, and a member of the Board Executive Committee of the International Islamic Liquidity Management Corporation, the Board of Directors of Kumpulan Wang Persaraan (Diperbadankan) [KWAP], and the Board of Directors of International Centre for Education in Islamic Finance.
Bank Negara Malaysia
30 August 2023
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |
30 Aug 2023 | Monetary and Financial Developments in July 2023 | https://www.bnm.gov.my/-/monetary-and-financial-developments-in-july-2023 | https://www.bnm.gov.my/documents/20124/11761547/i_en.pdf | null |
Reading:
Monetary and Financial Developments in July 2023
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Monetary and Financial Developments in July 2023
Embargo :
For immediate release
Not for publication or broadcast before
1500 on
Wednesday, 30 August 2023
30 Aug 2023
Headline inflation continued to moderate to 2.0% in July
Headline inflation declined to 2.0% (June 2023: 2.4%) in line with easing monthly price increases.
The decline was driven by lower core inflation[1] at 2.8% (June 2023: 3.1%) attributed mainly to lower inflation for food away from home and selected discretionary services.
Manufacturing production contracted by 1.6% in June
Manufacturing IPI contracted by 1.6% in June 2023 compared to a year ago, weighed down by weaker production of electrical and electronic products (E&E) and refined petroleum products amid the global tech cycle downturn and decline in mining output, respectively.
However, production in the domestic-oriented clusters remained resilient, reflecting mainly the continued growth in food, beverages and tobacco, metals and non-metallic products as well as transport equipment.
Growth in credit to the private non-financial sector[2],[3] was sustained in July
Credit to the private non-financial sector grew by 3.8% as at end-July (June 2023: 3.8%), underpinned by sustained loan growth in the household segment.
Outstanding business loans expanded at a slower pace of 0.2% (June 2023: 0.7%), due mainly to a more moderate growth in working capital loans among non-SMEs. Growth in outstanding loans to SMEs, however, remained forthcoming (6.7%; June 2023: 6.4%). In addition, outstanding corporate bond growth continued to increase (5.2%; June 2023: 4.9%), as bond issuances growth outpaced that of redemptions.
Growth in outstanding household loans was sustained at 5.2% (June 2023: 5.1%), with steady growth registered across most loan purposes. This was reflective of the higher growth in household loan applications, particularly for the purchase of houses, cars and personal use.
Domestic financial markets were mostly affected by investors’ expectations of the US policy rate cycle
Domestic financial market developments were driven mainly by financial market expectations that the US Federal Reserve’s monetary policy tightening cycle was nearing its end after the policy rate increase at the July Federal Open Market Committee (FOMC) meeting.
The ringgit appreciated against the US dollar by 3.1%, higher than the regional[4] average of 1.9%. 10-year MGS yields declined marginally by 1 bps. The FBM KLCI also increased by 6.0% (regional[4] average: 3.5%).
Banks remained well-capitalised to support economic growth
Banks' capital position remained strong to withstand potential stress and provide credit to support economic activities.
The banking system excess capital buffer[5] was healthy at RM142.0 billion.
Banks maintained strong liquidity and funding positions
Banking system continued to record healthy liquidity buffers with the aggregate Liquidity Coverage Ratio at 154.8% (June 2023: 154.3%).
The aggregate loan-to-fund ratio remained largely stable at 82.0% (June 2023: 81.6%).
See also: Monthly Highlights [PDF]
[1] Core inflation is computed by excluding price-volatile and price-administered items.
[2] Comprises loans to households and non-financial corporations from the banking system and development financial institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
[3] Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
[4] Regional countries comprise Singapore, Thailand, Philippines, Indonesia, and Korea.
[5] Refers to total capital above the regulatory minimum, which includes the capital conservation buffer (2.5%) and bank-specific higher minimum requirements. Related Assets
Monthly Highlights & Statistics in July 2023
Bank Negara Malaysia
30 August 2023
© Bank Negara Malaysia, 2023. All rights reserved.
|
Monthly Highlights May 2023
Monthly Highlights
Headline inflation declined further to 2.8% in May
May 2023
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation moderated to 2.8% (April 2023:
3.3%). This decline was largely due to non-core
CPI components, particularly lower inflation for
fuel (-0.2 percentage points, ppt) and fresh food
(-0.1ppt).
• Core inflation also declined slightly to 3.5% (April
2023: 3.6%) amid lower inflation for
communication services.
3.3
2.8
3.6 3.5
0.00
2.00
4.00
0.0
2.0
4.0
J
a
n
-2
2
F
e
b
-2
2
M
a
r-
2
2
A
p
r-
2
2
M
a
y
-2
2
J
u
n
-2
2
J
u
l-
2
2
A
u
g
-2
2
S
e
p
-2
2
O
c
t-
2
2
N
o
v
-2
2
D
e
c
-2
2
J
a
n
-2
3
F
e
b
-2
3
M
a
r-
2
3
A
p
r-
2
3
M
a
y
-2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
1.6
5.1
4.6
0
1
2
3
4
5
6
7
May-22 Sep-22 Jan-23 May-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Credit to the Private Non-Financial Sector1,2
1
Growth in credit to the private non-financial sector improved in May
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
Contribution to growth (ppt)
• Credit to the private non-financial sector expanded
by 4.0% as at end-May (April 2023: 3.7%), driven
mainly by higher growth in credit to businesses
(2.8%; April 2023: 2.5%).
• Outstanding corporate bonds grew by 4.6% (April
2023: 4.4%), while outstanding business loans
expanded by 1.6% (April 2023: 1.0%). The higher
business loan growth reflected improvement in
loans for both working capital and investments to
SMEs and non-SMEs.
• In the household segment, outstanding loan
growth was sustained at 5.1% (April 2023: 5.0%),
supported by higher growth across most loan
purposes. Of note, household loan growth
continued to be driven by loans for the purchase of
houses and cars, which grew by 7.0% and 8.4%,
respectively (April 2023: 6.8% and 8.0%).
2.7 2.6 2.5 2.6
0.7 0.7 0.3 0.5
1.1 0.9
0.9 1.0
4.5 4.2
3.7 4.0
Feb-23 Mar-23 Apr-23 May-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Index of wholesale and retail trade growth moderated in April
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded more moderately by 4.7% in
April 2023 (March 2023: 9.4%). The lower growth
was due mainly to the decline in the motor vehicle
segment.
• However, the retail segment continued to record a
double-digit growth of 10.0% (March 2023:
13.8%), supported by sales in non-specialised and
other specialised stores1.
• On a month-on-month seasonally adjusted basis,
the index increased at a faster pace of 6.5%
(March 2023: -0.9%).
1 Other goods in specialised stores includes clothing, footwear,
pharmaceuticals, cosmetics, watches, jewellery and optical goods.
10.6
9.4
4.7
-2
3
8
13
18
23
28
33
Apr-22 Jun-22 Aug-22 Oct-22 Dec-22 Feb-23 Apr-23
ppt, %yoy
Motor vehicles Retail Wholesale
Index of Wholesale and Retail Trade
Monthly Highlights
2
May 2023
Domestic financial markets were largely affected by external factors
Financial Market Performance in May 2023
-18.0
-0.5
-1.1
-3.0
-2.0
-3.4
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-20 -15 -10 -5 0
May-23 Apr-23
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
1Regional countries comprise Singapore, Thailand, Philippines, Indonesia, and Korea
Source: Bank Negara Malaysia, Bursa Malaysia
• Global investors maintained a risk-off approach
throughout May, as concerns over the impact of the
US debt ceiling crisis and the weaker-than-
expected rebound in China’s economy weighed on
global financial markets.
• As a result, the ringgit depreciated against the US
dollar by 3.4% (regional1 average: -1.2%). Similarly,
the FBM KLCI declined by 2.0% (regional1 average:
-1.3%).
• Nonetheless, the 10-year MGS yields decreased
slightly by 3 basis points, supported by non-resident
inflows into the domestic bond market.
Banks maintained strong liquidity and funding positions to support intermediation
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
151.2% (April 2023: 154.3%).
• The aggregate loan-to-fund ratio remained stable at
81.8% (April 2023: 82.1%).
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.8
151.2
0
40
80
120
160
70
75
80
85
90
95
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
A
p
r
2
3
M
a
y
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
remained broadly unchanged at 1.80% (April
2023: 1.78%) and 1.10% (April 2023: 1.10%),
respectively.
• Loan loss coverage ratio (including regulatory
reserves) remained at a prudent level of 114.1%
of impaired loans, with total provisions accounting
for 1.7% of total loans.
%
1.8
1.1
1.7
0.5
1.0
1.5
2.0
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
A
p
r
2
3
M
a
y
2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
April 2023 Monthly Highlights
Slide 1
Slide 2
| Press Release |
30 Aug 2023 | Detailed Disclosure of International Reserves as at end-July 2023 | https://www.bnm.gov.my/-/detailed-disclosure-of-international-reserves-as-at-end-july-2023-1 | null | null |
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Detailed Disclosure of International Reserves as at end-July 2023
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Detailed Disclosure of International Reserves as at end-July 2023
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30 Aug 2023
In accordance with the International Monetary Fund (IMF) Special Data Dissemination Standard (SDDS) format, the detailed breakdown of international reserves provides forward-looking information on the size, composition, and usability of reserves and other foreign currency assets, and the expected and potential future inflows and outflows of foreign exchange of the Federal Government and Bank Negara Malaysia over the next 12-month period.
The detailed breakdown of international reserves based on the SDDS format is shown in Tables I, II, III, and IV.
As shown in Table I, official reserve assets amounted to USD112,944.9 million, while other foreign currency assets amounted to 1.7 million as at end-July 2023.
As shown in Table II, for the next 12 months, the pre-determined short-term outflows of foreign currency loans, securities, and deposits, which include among others, scheduled repayment of external borrowings by the Government and the maturity of foreign currency Bank Negara Interbank Bills, amounted to USD15,639.5 The net short forward positions amounted to USD24,297.0 million as at end-July 2023, reflecting the management of ringgit liquidity in the money market. In line with the practice adopted since April 2006, the data excludes projected foreign currency inflows arising from interest income and the drawdown of project loans. Projected foreign currency inflows amount to USD2,367.5 million in the next 12 months.
As shown in Table III, the only contingent short-term net drain on foreign currency assets is Government guarantees of foreign currency debt due within one year, amounting to USD369.5 million. There are no foreign currency loans with embedded options, no undrawn, unconditional credit lines provided by or to other central banks, international organisations, banks, and other financial institutions. Bank Negara Malaysia also does not engage in foreign currency options vis-à-vis ringgit.
Overall, the detailed breakdown of international reserves under the IMF SDDS format indicates that as at end-July 2023, Malaysia’s international reserves remain usable.
Related Assets
International Reserves and Foreign Currency Liquidity (31 July 2023)
Bank Negara Malaysia
30 August 2023
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |
22 Aug 2023 | International Reserves of Bank Negara Malaysia as at 15 August 2023 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-15-august-2023 | https://www.bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf | null |
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International Reserves of Bank Negara Malaysia as at 15 August 2023
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International Reserves of Bank Negara Malaysia as at 15 August 2023
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22 Aug 2023
The international reserves of Bank Negara Malaysia amounted to USD112.2 billion as at 15 August 2023. The reserves position is sufficient to finance 5.2 months of imports of goods and services[1], and is 1.0 time of the total short-term external debt.
[1] Under the previous import coverage measure, reserves is sufficient to finance 7.1 months of retained imports of goods. For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27, which can be accessed at Quarterly Bulletin 4Q2021 Related Assets
BNM Statement of Assets & Liabilities - 15 August 2023
Bank Negara Malaysia
22 August 2023
© Bank Negara Malaysia, 2023. All rights reserved.
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Monthly Highlights
Headline inflation declined to 3.4% in March
March 2023
1
3.7 3.4
3.9 3.8
0.00
2.00
4.00
0.0
2.0
4.0
J
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Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation declined to 3.4% in March
(February: 3.7%) due mainly to lower inflation for
fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation moderated slightly to 3.8% during
the month (February: 3.9%), driven largely by
lower inflation for food away from home.
1
Robust growth in volume index driven by retail and motor vehicles
Index of Wholesale and Retail Trade
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded by 10.6% in February 2023
(January: 8.5%).
• The higher growth was driven mainly by retail
sales in non-specialised stores (e.g., department
stores) followed by continued strength in
purchases of motor vehicles amid the ongoing
fulfilment of backlog orders.
• On a month-on-month seasonally adjusted basis,
the index accelerated by 5.5% (January: 0.2%).
9.5 8.510.6
0
10
20
30
40
Feb-
22
Mar-
22
Apr-
22
May-
22
Jun-
22
Jul-
22
Aug-
22
Sep-
22
Oct-
22
Nov-
22
Dec-
22
Jan-
23
Feb-
23
ppt, %yoy
Motor vehicles Retail Wholesale
2.4
5.2
4.4
0
1
2
3
4
5
6
7
Mar-22 Jul-22 Nov-22 Mar-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Growth in credit to the private non-financial sector moderated
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
2.7 2.6 2.7 2.6
1.0 0.6 0.7 0.7
1.0
1.1 1.1 0.9
4.7 4.3 4.5 4.2
Dec-22 Jan-23 Feb-23 Mar-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Contribution to growth (ppt)
• Credit to the private non-financial sector grew by
4.2% as at end-March (February: 4.5%), attributed
to slower growth in credit to businesses (3.2%;
February: 3.7%).
• While growth in outstanding corporate bonds
moderated (4.4%; February : 5.5%), outstanding
business loan growth was sustained at 2.4%
(February: 2.4%). This was supported by the
continued growth in both working capital (2.2%;
February: 1.9%) and investment-related loans
(4.3%; February: 4.2%).
• Outstanding household loan growth remained
broadly stable (5.2%; February: 5.3%), supported
by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan
growth for the purchase of securities (-6.9%;
February: -3.3%).
Credit to the Private Non-Financial Sector1,2
Monthly Highlights
March 2023
Domestic financial market conditions remained orderly
Financial Market Performance in March 2023
Source: Bank Negara Malaysia, Bursa Malaysia
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
11.0
-2.1
-5.3
0.0
-2.2
1.7
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-10 -5 0 5 10 15
Mar-23
Feb-23
• In March, global financial markets were affected by
the emergence of banking sector stress in some
major economies. As spillovers were contained thus
far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds
improved.
• In line with the performance of regional currencies,
the ringgit appreciated by 1.7% against the US
dollar. Conditions in the domestic bond market
also remained stable.
• The FBM KLCI declined by 2.2% during the month.
2
Banks maintained strong liquidity and funding positions to support intermediation
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.9
157.4
0
40
80
120
160
70
75
80
85
90
95
M
a
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2
2
A
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2
2
M
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2
2
J
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2
J
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2
A
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2
S
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2
D
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2
2
J
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2
3
F
e
b
2
3
M
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2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
increased slightly to 1.8% (February-23: 1.8%) and
1.2% (February-23: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory
reserves) continue to record a prudent level of
110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
%
1.8
1.2
1.7
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
M
a
r
2
2
A
p
r
2
2
M
a
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2
2
J
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2
2
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2
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2
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O
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2
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2
D
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2
2
J
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2
3
F
e
b
2
3
M
a
r
2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
157.4% (February-23: 152.7%).
• The aggregate loan-to-fund ratio remained stable at
81.9% (February-23: 81.6%).
PRESS RELEASE
Ref. No.: 04/23/05 EMBARGO: Not for publication or
broadcast before 1500 hours on
Friday, 28 April 2023
Monthly Highlights – March 2023
Headline inflation declined to 3.4% in March
• Headline inflation declined to 3.4% in March (February: 3.7%) due mainly
to lower inflation for fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation1 moderated slightly to 3.8% during the month
(February: 3.9%), driven largely by lower inflation for food away from
home.
Robust growth in volume index driven by retail and motor vehicles
• The Index of Wholesale and Retail Trade (IOWRT) expanded by 10.6%
in February 2023 (January: 8.5%).
• The higher growth was driven mainly by retail sales in non-specialised
stores (e.g., department stores) followed by continued strength in
purchases of motor vehicles amid the ongoing fulfilment of backlog
orders.
• On a month-on-month seasonally adjusted basis, the index accelerated
by 5.5% (January: 0.2%).
1 Core inflation is computed by excluding price-volatile and price-administered items.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth in credit to the private non-financial sector2,3 moderated
• Credit to the private non-financial sector grew by 4.2% as at end-March
(February: 4.5%), attributed to slower growth in credit to businesses
(3.2%; February: 3.7%).
• While growth in outstanding corporate bonds moderated (4.4%;
February: 5.5%), outstanding business loan growth was sustained at
2.4% (February: 2.4%). This was supported by the continued growth in
both working capital (2.2%; February: 1.9%) and investment-related
loans (4.3%; February: 4.2%).
• Outstanding household loan growth remained broadly stable (5.2%;
February: 5.3%), supported by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan growth for the purchase of
securities (-6.9%; February: -3.3%).
Domestic financial market conditions remained orderly
• In March, global financial markets were affected by the emergence of
banking sector stress in some major economies. As spillovers were
contained thus far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds improved.
• In line with the performance of regional currencies, the ringgit
appreciated by 1.7% against the US dollar. Conditions in the domestic
bond market also remained stable.
• The FBM KLCI declined by 2.2% during the month.
Banks maintained strong liquidity and funding positions to support
intermediation
• Banks continued to record healthy liquidity buffers with the aggregate
Liquidity Coverage Ratio at 157.4% (February: 152.7%).
2 Comprises loans to households and non-financial corporations from the banking system and development financial
institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
3 Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced
to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
• The aggregate loan-to-fund ratio remained stable at 81.9%
(February: 81.6%).
Asset quality in the banking system remained intact
• Overall gross and net impaired loans ratios increased slightly to 1.8%
(February: 1.8%) and 1.2% (February: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory reserves) continues to
record a prudent level of 110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
Bank Negara Malaysia
28 April 2023
20230428_BNM Monthly Highlights-March_en
Slide 1
Slide 2
20230428_BNM PR_Monthly Highlights-Mar 2023_eng
| Press Release |
22 Aug 2023 | Scaling Up iTEKAD Program for Greater Socioeconomic Empowerment of Micro Enterprise | https://www.bnm.gov.my/-/itekad-pr | https://www.bnm.gov.my/documents/20124/5915429/fsb3_en_box4.pdf | null |
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Scaling Up iTEKAD Program for Greater Socioeconomic Empowerment of Micro Enterprise
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Scaling Up iTEKAD Program for Greater Socioeconomic Empowerment of Micro Enterprise
Embargo :
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1420 on
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22 Aug 2023
Bank Negara Malaysia (BNM) today hosted the first Majlis Jalinan Kerjasama iTEKAD. The event aims to provide a platform to dialogue and strengthen the commitment for sustainable socioeconomic development through social finance. Prime Minister YAB Dato’ Seri Anwar bin Ibrahim delivered his keynote address at the event. More than 300 current and future collaborators and implementation partners attended the event comprising iTEKAD participants, financial institutions (FIs), State Islamic Religious Councils (SIRCs), corporates, government agencies and government-linked companies (GLCs).
The iTEKAD initiative was introduced by BNM during the pandemic to assist low-income microentrepreneurs strengthen their financial management and business acumen towards generating sustainable income. This is also aligned to the strategic thrust of Financial Sector Blueprint 2022 – 2026 in elevating the financial well-being of households and businesses.
This initiative combines philanthropic and commercial funds in a form of blended finance to provide structured training, seed capital and microfinancing to the target segments. As of May 2023, over 3,000 microentrepreneurs have benefited from the program with improved financial resilience. At the same time, many participants have created jobs and provided economic opportunity within their respective communities.
To date, iTEKAD has 11 participating FIs nationwide and over 50 implementation partners. The participating FIs are Bank Islam Malaysia Berhad, CIMB Islamic Bank Berhad, Bank Muamalat Malaysia Berhad, Bank Kerjasama Rakyat Malaysia Berhad, Agrobank, Bank Simpanan Nasional, RHB Islamic Bank Berhad, AmBank Islamic Berhad, SME Bank, Public Islamic Bank and Maybank Islamic Berhad. New implementation partners include Koperasi Usahawan Serikandi Johor (KUSERI), Sekretariat Usahawan Negeri Perak (STEP), Lembaga Kemajuan Tanah Persekutuan (FELDA), Majlis Agama Islam Melaka (MAIM), Majlis Ugama Islam dan Adat Resam Melayu Pahang (MUIP), Majlis Ugama Islam Sabah (MUIS), Tabung Baitulmal Sarawak (TBS) and MADCash Sdn. Bhd. A broader stakeholder network will enhance funding, market access and impact monitoring towards uplifting microentrepreneurs in Malaysia. By end of the year, participating FIs together with their respective implementation partners have committed to onboard over 4,000 iTEKAD participants.
Stakeholders including corporates from the public and private sectors are encouraged to contact any of the participating FIs to be part of the iTEKAD initiative.
For more information on iTEKAD, please visit bnm.gov.my/social-finance.
BNM Governor Datuk Abdul Rasheed Ghaffour delivering his Welcoming Address at the Majlis Jalinan Kerjasama iTEKAD
Prime Minister YAB Dato’ Seri Anwar bin Ibrahim delivering his Keynote Address at the Majlis Jalinan Kerjasama iTEKAD
Prime Minister YAB Dato’ Seri Anwar bin Ibrahim (centre) and BNM Governor Datuk Abdul Rasheed Ghaffour (sixth from left) together with collaborators and implementation partners of ITEKAD
BNM Governor Datuk Abdul Rasheed Ghaffour (second left), Prime Minister YAB Dato’ Seri Anwar bin Ibrahim (centre), Deputy Minister of Finance I Datuk Seri Ahmad bin Maslan (second right) and Deputy Minister of Entrepreneur and Cooperatives Development YB Senator Saraswathy a/p Kandasami (far right) engaging one of the beneficiaries of iTEKAD.
Bank Negara Malaysia
22 August 2023
© Bank Negara Malaysia, 2023. All rights reserved.
|
Monthly Highlights
142.8
-1.6
-5
0
5
10
15
20
115
120
125
130
135
140
145
150
Ja
n-
22
Fe
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22
M
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-2
2
Ap
r-2
2
M
ay
-2
2
Ju
n-
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Ju
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2
Au
g-
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Se
p-
22
O
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-2
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N
ov
-2
2
D
ec
-2
2
Ja
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23
Fe
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M
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-2
3
Ap
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3
M
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-2
3
Ju
n-
23
Manufacturing Industrial Production Index
Mfg. IPI Index (2015=100) - LHS
Mfg. IPI Index YoY Growth (%) - RHS
Manufacturing production contracted by 1.6% in June
July 2023
• Manufacturing IPI contracted by 1.6% in June
2023 compared to a year ago, weighed down
by weaker production of electrical and
electronic products (E&E) and refined
petroleum products amid the global tech cycle
downturn and decline in mining output,
respectively.
• However, production in the domestic-oriented
clusters remained resilient, reflecting mainly the
continued growth in food, beverages and
tobacco, metals and non-metallic products as
well as transport equipment.
Source: Department of Statistics, Malaysia
1
Headline inflation continued to moderate to 2.0% in July
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
2.42.0
3.12.8
0.00
2.00
4.00
0.0
2.0
4.0
Ap
r-2
2
M
ay
-2
2
Ju
n-
22
Ju
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2
Au
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22
Se
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O
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N
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-2
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D
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-2
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Fe
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M
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-2
3
Ap
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3
M
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-2
3
Ju
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23
Ju
l-2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
• Headline inflation declined to 2.0% (June 2023:
2.4%) in line with easing monthly price
increases.
• The decline was driven by lower core inflation
at 2.8% (June 2023: 3.1%) attributed mainly to
lower inflation for food away from home and
selected discretionary services.
0.2
5.2
5.2
0
1
2
3
4
5
6
7
Jul-22 Nov-22 Mar-23 Jul-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Credit to the Private Non-Financial Sector1,2
Growth in credit to the private non-financial sector was sustained in July
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of financing
data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
Contribution to growth (ppt)
• Credit to the private non-financial sector grew by
3.8% as at end-July (June 2023: 3.8%), underpinned
by sustained loan growth in the household segment.
• Outstanding business loans expanded at a slower
pace of 0.2% (June 2023: 0.7%), due mainly to a
more moderate growth in working capital loans
among non-SMEs. Growth in outstanding loans to
SMEs, however, remained forthcoming (6.7%;
June 2023: 6.4%). In addition, outstanding
corporate bonds growth continued to increase
(5.2%; June 2023: 4.9%), as bond issuances
growth outpaced that of redemptions.
• Growth in outstanding household loans was
sustained at 5.2% (June 2023: 5.1%), with steady
growth registered across most loan purposes.
This was reflective of the higher growth in
household loan applications, particularly for the
purchase of houses, cars and personal use.
2.5 2.6 2.6 2.6
0.3 0.4 0.2 0.1
0.9 1.0 1.0 1.1
3.7 3.9 3.8 3.8
Apr-23 May-23 Jun-23 Jul-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Monthly Highlights
July 2023
Domestic financial markets were mostly affected by investors’ expectations of
the US policy rate cycle
2
Financial Market Performance in July 2023
15.0
-0.8
-1.3
-1.0
6.0
3.1
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-6 -3 0 3 6 9 12 15 18
Jul-23 Jun-23
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank
Foreign Exchange Market
*Regional countries comprise: Singapore, Thailand, Philippines, Indonesia,
and Korea
Source: Bank Negara Malaysia, Bursa Malaysia
• Domestic financial markets developments
were driven mainly by financial market
expectations that the US Federal Reserve’s
monetary policy tightening cycle was
nearing its end after the policy rate increase
at the July FOMC meeting.
• The ringgit appreciated against the US
dollar by 3.1%, higher than the regional*
average of 1.9%. 10-year MGS yields
declined marginally by 1 bps. The FBM
KLCI also increased by 6.0% (regional*
average: 3.5%).
Banks remained well-capitalised to support economic growth
• Banks' capital position remained strong to
withstand potential stress and provide
credit to support economic activities.
• The banking system excess capital buffer1
was healthy at RM142.0 billion.
Banking System Capital Adequacy
15.1
15.6
18.8
8
10
12
14
16
18
20
Ju
l-2
2
Au
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22
Se
p-
22
O
ct
-2
2
N
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-2
2
D
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-2
2
Ja
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23
Fe
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M
ar
-2
3
Ap
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3
M
ay
-2
3
Ju
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23
Ju
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3
Common Equity Tier 1 (CET1) Capital Ratio
Tier 1 Capital Ratio
Total Capital Ratio
%
Source: Bank Negara Malaysia
1 Refers to total capital above the regulatory minimum, which includes the capital
conservation buffer (2.5%) and bank-specific higher minimum requirements
Banks maintained strong liquidity and funding positions
Banking System Liquidity and Funding Ratios
Source: Bank Negara Malaysia
%
82.0
154.8
0
40
80
120
160
70
75
80
85
90
95
Ju
l 2
2
Au
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22
Se
p
22
O
ct
2
2
N
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2
2
D
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2
2
Ja
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23
Fe
b
23
M
ar
2
3
Ap
r 2
3
M
ay
2
3
Ju
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23
Ju
l 2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
• Banking system continued to record
healthy liquidity buffers with the aggregate
Liquidity Coverage Ratio at 154.8% (June
2023: 154.3%).
• The aggregate loan-to-fund ratio remained
largely stable at 82.0% (June 2023:
81.6%).
PRESS RELEASE
Ref. No.: 08/23/09 EMBARGO: Not for publication or
broadcast before 1500 hours on
Wednesday, 30 August 2023
Monthly Highlights – July 2023
Headline inflation continued to moderate to 2.0% in July
• Headline inflation declined to 2.0% (June 2023: 2.4%) in line with easing
monthly price increases.
• The decline was driven by lower core inflation1 at 2.8% (June 2023: 3.1%)
attributed mainly to lower inflation for food away from home and selected
discretionary services.
Manufacturing production contracted by 1.6% in June
• Manufacturing IPI contracted by 1.6% in June 2023 compared to a year
ago, weighed down by weaker production of electrical and electronic
products (E&E) and refined petroleum products amid the global tech
cycle downturn and decline in mining output, respectively.
• However, production in the domestic-oriented clusters remained resilient,
reflecting mainly the continued growth in food, beverages and tobacco,
metals and non-metallic products as well as transport equipment.
1 Core inflation is computed by excluding price-volatile and price-administered items.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth in credit to the private non-financial sector2,3 was sustained in July
• Credit to the private non-financial sector grew by 3.8% as at end-July
(June 2023: 3.8%), underpinned by sustained loan growth in the
household segment.
• Outstanding business loans expanded at a slower pace of 0.2% (June
2023: 0.7%), due mainly to a more moderate growth in working capital
loans among non-SMEs. Growth in outstanding loans to SMEs, however,
remained forthcoming (6.7%; June 2023: 6.4%). In addition, outstanding
corporate bond growth continued to increase (5.2%; June 2023: 4.9%),
as bond issuances growth outpaced that of redemptions.
• Growth in outstanding household loans was sustained at 5.2% (June
2023: 5.1%), with steady growth registered across most loan purposes.
This was reflective of the higher growth in household loan applications,
particularly for the purchase of houses, cars and personal use.
Domestic financial markets were mostly affected by investors’
expectations of the US policy rate cycle
• Domestic financial market developments were driven mainly by financial
market expectations that the US Federal Reserve’s monetary policy
tightening cycle was nearing its end after the policy rate increase at the
July Federal Open Market Committee (FOMC) meeting.
• The ringgit appreciated against the US dollar by 3.1%, higher than the
regional4 average of 1.9%. 10-year MGS yields declined marginally by
1 bps. The FBM KLCI also increased by 6.0% (regional4 average: 3.5%).
2 Comprises loans to households and non-financial corporations from the banking system and development financial
institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
3 Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced
to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
4 Regional countries comprise Singapore, Thailand, Philippines, Indonesia, and Korea.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Banks remained well-capitalised to support economic growth
• Banks' capital position remained strong to withstand potential stress and
provide credit to support economic activities.
• The banking system excess capital buffer5 was healthy at
RM142.0 billion.
Banks maintained strong liquidity and funding positions
• Banking system continued to record healthy liquidity buffers with the
aggregate Liquidity Coverage Ratio at 154.8% (June 2023: 154.3%).
• The aggregate loan-to-fund ratio remained largely stable at 82.0% (June
2023: 81.6%).
Bank Negara Malaysia
30 August 2023
5 Refers to total capital above the regulatory minimum, which includes the capital conservation buffer (2.5%) and
bank-specific higher minimum requirements.
20230830_BNM Monthly Highlights_July 2023_en
Slide Number 1
Slide Number 2
20230830_BNM PR_Monthly Highlights-July 2023_eng
| Press Release |
18 Aug 2023 | Economic and Financial Developments in Malaysia in the Second Quarter of 2023 | https://www.bnm.gov.my/-/qb23q2_en_pr | https://www.bnm.gov.my/documents/20124/11625493//qb23q2_slides.pdf, https://www.bnm.gov.my/documents/20124/11625493/qb23q2_transcript.pdf, https://www.bnm.gov.my/documents/20124/11625493/qb23q2_en_table1.pdf | null |
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Economic and Financial Developments in Malaysia in the Second Quarter of 2023
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Economic and Financial Developments in Malaysia in the Second Quarter of 2023
Embargo :
For immediate release
Not for publication or broadcast before
1200 on
Friday, 18 August 2023
18 Aug 2023
The economy grew by 2.9% in the second quarter
The Malaysian economy expanded moderately in the second quarter of 2023 (2.9%; 1Q 2023: 5.6%), weighed mainly by slower external demand. Domestic demand remained the key driver of growth, supported by private consumption and investment. Household spending was supported by further growth in employment and wages. Meanwhile, investment activity was underpinned by capacity expansion, progress of multi-year projects and higher fixed asset spending by the government. Continued recovery in inbound tourism partially offset the slower goods export growth. Growth during the quarter was also affected by the high base effect in the second quarter of 2022 when the economy experienced strong growth from reopening effects and policy measures. On the supply side, the services and construction sectors continued to support growth. Meanwhile, production in the agriculture and mining sectors were affected by hot weather and plant maintenance. On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 1.5% (1Q 2023: 0.9%).
Headline inflation during the quarter continued to moderate to 2.8% (1Q 2023: 3.6%). The moderation was recorded in both non-core inflation and core inflation. For non-core inflation, fresh food and fuel contributed to the decline. Core inflation, while declining, remained elevated relative to its long-term average (2011-2019 average: 2.0%). The moderation in core inflation (2Q 2023: 3.4%; 1Q 2023: 3.9%) was largely contributed by selected services. These included food away from home, telephone and telefax services, and personal transport repair and maintenance. Inflation pervasiveness declined as the share of Consumer Price Index (CPI) items recording monthly price increases moderated to 42.7% during the quarter (1Q 2023: 56.0%), below the second quarter long-term average (2011-2019) of 43.9%. Notably, inflation pervasiveness dropped in June after a transitory uptick in May following the festive season.
Exchange rate developments
Global developments continued to be the dominant factor in driving domestic financial conditions during the quarter. Global financial market sentiments were dampened by concerns over a slower global economic outlook, and weaker-than-expected rebound in China’s economy. This was further compounded by concerns over the US debt ceiling crisis during the first two months of the quarter, alongside ongoing financial market expectations of continued monetary policy tightening in advanced economies. Lower commodity prices and global semiconductor demand also weighed on domestic financial markets.
Reflecting these developments, the ringgit depreciated by 5.8% in the second quarter of 2023. However, the ringgit has appreciated by 1.1% so far over the third quarter (as at 15 August 2023), amid growing expectations that monetary policy tightening in the US is nearing its end. Bank Negara Malaysia (BNM) will continue to closely monitor global and domestic financial conditions and ensure market adjustments remain orderly. BNM’s presence in the foreign exchange market is to stem currency movements that are deemed excessive.
Financing conditions
The growth in credit to the private non-financial sector moderated to 3.8% (1Q 2023: 4.1%) on account of slower growth in outstanding business loans. Outstanding corporate bonds growth, however, improved to 4.9% (1Q 2023: 4.4%). Outstanding business loans grew by 0.7%, due mainly to lower growth in working capital loans to non-SMEs. Notwithstanding this, investment-related loan growth remained sustained, with steady growth recorded for the purchase of fixed assets and non-residential properties. For households, outstanding loans expanded by 5.1%, mainly driven by loans for the purchase of residential properties and cars.
For the remainder of 2023, growth to remain moderate amid external headwinds but continues to be supported by resilient domestic demand
With the challenging global environment, the Malaysian economy is projected to expand close to the lower end of the 4.0% to 5.0% range in 2023. Growth will continue to be supported by domestic demand amid improving employment and income as well as implementation of multi-year projects. Tourist arrivals are expected to continue rising, which would support tourism-related activities. Governor Datuk Abdul Rasheed Ghaffour explained, “Risks to Malaysia’s growth outlook is subject to downside risk stemming primarily from weaker-than-expected global growth. There are, however, upside risk factors such as stronger-than-expected tourism activity and faster implementation of projects.”
Headline and core inflation are projected to moderate further in 2H 2023
For the second half of 2023, both headline and core inflation are projected to trend lower within expectations, partly due to the higher base in the corresponding period last year. Nonetheless, risks to the inflation outlook are subject to the changes to domestic policy on subsidies and price controls, as well as global commodity prices and financial market developments.
See also:
Press Conference Slides (PDF)
Press Conference Presentation Transcript
Press Conference Video
Publication: Quarterly Bulletin Second Quarter 2023
Table 1: GDP by Expenditure Components and Economic ActivityBank Negara Malaysia
18 August 2023
© Bank Negara Malaysia, 2023. All rights reserved.
|
GDP Q2 2023 Presentation Slides
1
Sidang Akhbar
Prestasi Ekonomi Suku
18 Ogos 2023
Kedua Tahun 2023
1
2
Global Growth Developments
The global economy registered modest growth in 2Q 2023
Note:
1 GDP for the second quarter of 2023 are advanced or preliminary estimates except for China, Indonesia, Philippines, Hong Kong and Singapore.
2 Inflation figures are aggregated across major countries based on their share of global growth. AEs stands for Advanced Economies while EMEs stands for Emerging Market Economies.
Source: Macrobond, national authorities, International Monetary Fund, Bank Negara Malaysia estimates
4.5
6.7
3.73.6
4.8
3.1
8.1
4.0
5.5
2.1
Jan-22 May-22 Sep-22 Jan-23 May-23
World Headline
World Core
AEs Headline
EMEs Headline
Inflation2
6.3
5.2
4.3
2.6
1.5
0.9
0.6
0.5
4.5
5.0
6.4
1.8
2.9
0.9 1.1
0.4
CN ID PH US HK KR EA SG
2Q23 1Q23
Real GDP Growth1
Annual change (%)
Moderating headline
inflation, but core
inflation remained high
Modest growth as
growth is weighed by
higher interest rate and
elevated inflation
Regional exports declined
due to shift from goods to
services and global
technology downcycle
2
China’s economy grew
post-reopening, albeit at
a slower pace
Annual change (%)
Jun-23
3
Malaysia’s GDP grew by 2.9% in 2Q 2023
Source: Department of Statistics, Malaysia
Factors Supporting Growth in 2Q 2023
-0.2
16.2
-4.2
3.6
4.8
8.8
14.1
7.1
5.6
2.9
2.2
-1.7
0.9
1.5
1Q-21 2Q-21 3Q-21 4Q-21 1Q-22 2Q-22 3Q-22 4Q-22 1Q-23 2Q-23
Annual change (%)
q-o-q SA
Real GDP Growth (Quarterly)
Higher tourism activities
Monthly Real GDP Growth (Annual change, %)
Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23
4.6 6.6 5.7 0.7 5.6 2.4
Moderation from 1Q 2023 partly due to ...
Continued increase in
domestic demand
Lower commodity production
Weaker external demand amid
global technology downcycle
Improving labour market
3
High base effect from 2Q 2022
4
Growth underpinned by domestic demand and tourism activities
Source: Department of Statistics, Malaysia
Private Consumption
Moderate expansion in both necessities and
discretionary spending
Driven mainly by services and construction sectors
-3.7
54.4
2Q23
1Q23
3.8
-2.2
2Q23
1Q23
7.9
5.7
2Q23
1Q23
5.1
4.7
2Q23
1Q23
4.3
5.9
2Q23
1Q23
Private Investment
Supported by investment in structures and M&E
Public Investment
Improved Government’s fixed assets spending
Public Consumption
Higher emoluments spending
Net Exports
Weaker exports amid global technology downcycle
Driven mainly by private sector expenditure
6.2
7.4
2Q23
1Q23
-2.3
2.4
2Q23
1Q23
-1.1
1.0
2Q23
1Q23
0.1
3.2
2Q23
1Q23
4.7
7.3
2Q23
1Q23
Services
Moderation in consumer- and business-
related services, while tourism spending
remained supportive
Manufacturing
Weaker E&E production and lower refined
petroleum production amid a decline in mining
output
Agriculture
Lower oil palm and fisheries output amid hot
weather condition
Mining
Decreased oil and gas output due to plant
maintenance
Construction
Continued progress of large infrastructure
projects and support from higher special
trade activities
Annual Change (%) Annual Change (%)
4
5
12.0
5.8
-1.4
7.7
3.1
7.7
3.7
-8.3
Total Equity Injections Debt Instruments Reinvestment
of Earnings
1Q23 2Q23
4.3
39.9
-12.8
-16.9
-5.9
9.1
29.5
-11.3
-6.3 -2.8
Current Account
Balance
Goods Services Primary
Income
Secondary
Income
1Q23
2Q23
Larger current account surplus and continued FDI inflows
Source: Department of Statistics, Malaysia
RM bil
Narrower services deficit reflecting continued recovery
in inbound tourism
Smaller primary income deficit driven mainly by higher
investment income from investments abroad
Current Account Foreign Direct Investment
RM bil
Continued FDI inflows supported by higher equity injections
and inflows in debt instruments.
However, FDI flows were weighed by dividend payments and
losses in the manufacturing and mining sectors.
Current Account (% of GDP)
2Q 2023: 2.1%
1Q 2023: 1.0%
5
6
Looking ahead, domestic demand to remain the key driver of growth amid
challenging global environment
Continued recovery in labour market
Further improvement in employment and income prospects
Implementation of new and existing investment projects
Continued progress of multi-year projects
Higher tourism activity
Further recovery in tourist arrivals and travel receipts towards pre-pandemic levels
Slower global growth
Tight monetary policy, slower trade activity and prolonged global technology downcycle
Growth in 2023 to remain between 4% and 5%
Key
growth
drivers
6
Lower commodity production
Hot weather and plant maintenance affecting output in the commodity sector
7
Mixed indicators, but generally pointing to continued growth for the
Malaysian economy
7
Overall IPI
Baltic Dry Index
Index of Retail Trade
Global Composite PMI Malaysia’s PMI New Export Orders
RAM-CTOS Business Confidence Index
Jul-22 Oct-22 Jan-23 Apr-23 Jul-23
Expansionary: >50
51.7
Index
170
2Q22 3Q22 4Q22 1Q23 2Q23
2019: 139.5
Index (2015=100)Seasonally Adjusted Index (2015 = 100)
54.8
2Q22 3Q22 4Q22 1Q23 2Q23
’17-’19 avg: 55.3
-48.1
1Q22 2Q22 3Q22 4Q22 1Q23 2Q23
45.0
Jul-22 Oct-22 Jan-23 Apr-23 Jul-23
’11-’19 avg: 2.2%
Index (Neutral=50)
Expansionary: >50Annual Change (%) Index
127.9
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
2019: 114.9
8
Slowdown in goods exports partially cushioned by increased
tourism activities
Broad weakness in exports across
regional countries
*refers to non-oil domestic exports
** compiled by World Semiconductor Trade Statistics (WSTS)
Source: Department of Statistics Malaysia, World Semiconductor Trade Statistics (WSTS), national authorities and newsflows
Gross Export Growth (USD)
-10.9
-12.0
-14.6
-16.8
-17.8
-25.0
-15.0
-5.0
5.0
15.0
25.0
35.0
45.0
-20
-10
0
SG* KR MY TW ID
2Q23 2Q22 (RHS)
Annual change (%)
WSTS Forecast of Global Semiconductor Sales
Tentative signs of bottoming out of
global tech downcycle…
Actual Global Semiconductor Sales**
26.2
3.3
-10.3
11.8
2021 2022 2023f 2024f
Annual change (%)
11.9
-21.4
-21.1
-17.3
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
Annual change (%), 3-month moving average
8
…and expected recovery in 2024
0.3
5.7
10.1
12.2 12.3
16.3
1Q-22 2Q-22 3Q-22 4Q-22 1Q-23 2Q-23 3Q-23
RM billion
Travel Receipts
Tourism sector continues to pick-up
towards pre-pandemic level
2019 quarterly avg: RM20.5 billion
9
Labour market continued to improve
Employment growth remains above pre-pandemic average
Source: Department of Statistics Malaysia, Employment Insurance System, Social Security Organisation, Bank Negara Malaysia estimates
70.0
82.8
56.2
46.1
69.1
81.1
56.1
45.9
Overall Men Women Youth
2Q 23
4Q 19
Further decline in unemployment rate
Vulnerable segments have recovered to pre-pandemic levels
3.6
3.5 3.5 3.5 3.5
3.4
Jan Feb Mar Apr May Jun
Unemployment rate,
% of labour force
Labour force participation rate,
% of population
2.2
3.2
3.6
3.2 3.1
2.8
1Q 22 2Q 22 3Q 22 4Q 22 1Q 23 2Q 23
Pre-pandemic (2019): 3.3%
2015-2019 avg.: 1.7%
Employment,
% yoy
9
4.0
3.1
3.9 3.5 3.5 3.3
4.3
2020 - 2022 avg jobless claims: 5.6
Jan Feb Mar Apr May Jun Jul
Jobless claims,
thousand persons
Jobless claims remains below levels during pandemic years
10
Spending continues to grow….
Household spending to remain as anchor of growth
Source: Department of Statistics, Malaysia and Bank Negara
Malaysia
Going forward, consumption growth would
be underpinned by:
Passenger car sales
Thousand units
152.2
2Q22 3Q22 4Q22 1Q23 2Q23
Continued employment growth
and lower unemployment rate
Government measures
including special appreciation
assistance for civil servants and
RM100 e-Tunai credit for B40 &
M40 households
Easing price pressures9
Real wages
2Q23: 1.0% (1Q23: 0.9%)
Nominal wages
2Q23: 3.8% (1Q23: 4.5%)
Private sector wages
Annual change, %
Financial assets1-to-debt ratio:
2.1 times
Liquid financial assets2-to-
debt ratio: 1.3 times
Household financial buffers
Ratio as of June 2023
4Q19: 3.8%
4Q19: 4.8%
… supported by increment in wages
and financial buffers
10
2015-2019 avg.:135.2
Note:
1 Financial assets comprise EPF savings, deposits, unit trust funds,
domestic equity holdings, and insurance policies (surrender value).
2 Liquid financial assets exclude EPF savings.
17.9
2Q22 3Q22 4Q22 1Q23 2Q23
Annual change (%)
Credit Card Spending
2015-2019 avg.:7.6
11
35.1
28.4
36.9
0
5
10
15
20
25
30
35
40
4Q22 1Q23 2Q23
* Loans for investment-related purposes covers purchases
of residential property for business use, non-residential
property, fixed assets other than land / building, and for
construction.
Source: Bank Negara Malaysia
Progress of multi-year infrastructure
projects to provide further lift to growth
Going forward, realisation of approved
projects to support investment activity
Supportive financing conditions and continuation of new and existing projects
to support investment growth in 2023
*Proxied by coverage of populated areas (COPA)
Source: Newsflows
Key Infrastructure Projects Cumulative Progress Rate
ECRL
RM50.0 billion
2018 2026
42%
LRT3
RM16.6 billion
2018 2024
86%
MyDIGITAL 5G
RM16.5 billion
2021 2031
62%*
Pan Borneo
Highway (Sabah)
RM16.0 billion
2016 2024
75%
MIDA Total Investment Approvals
RM Billion
211
167
309
268
71
2019 2020 2021 2022 1Q23
Primary
Manufacturing
Services
Total
11
Financing for investment improved
Source: MIDA
Business Loan Disbursements and Corporate
Bond Issuances
RM Billion
Investment-
Related* Loan
Disbursements
Corporate
Bond
Issuances for
New Activity
12
MADANI Economy Framework to drive comprehensive restructuring of the
Malaysian economy
Source: Prime Minister Office, Malaysia, newsflows
12
Key Initiatives
New Industrial Master Plan
• Advance economic complexity,
digitalisation and sustainability
• Spur investments in technology and innovation
National Energy Transition Roadmap
• Increase renewable energy generation
• Promote new green growth areas
Create quality and higher paying jobs
• Reduce reliance on low-skilled foreign labour
Revitalise the industrial sector to be more competitive
• Generate economic activities with higher value add and economic
complexity
Promote a climate resilient and greener economy
• Accelerate energy transition
Malaysia’s Economic Vision
Position ourselves as a globally competitive
investment destination
• Strengthen investment promotion and incentives
Ensure a sustainable fiscal position
• Strengthen the fiscal position and ensure resilience and long-term
sustainability of public finances
Fiscal Responsibility Act
• Improve the transparency, accountability and
governance of public finance
• Act as an anchor to existing and future reforms
13
Disinflation trend continued with lower headline and core inflation
■ Headline inflation trended lower in line with moderating costs conditions
■ Core inflation declined amid lower inflation for food away from home and communication services
1/ Average of past inflation is calculated based on monthly frequency from Jan-11 to Dec-19
2/ YTD refers to the average from January 2023 to June 2023
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
Malaysia Inflation
3.3
2.8
2.4
3.6
3.5
3.1
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Apr-23
Headline inflation Core inflation
2011-’19 Avg 1/.:
Headline 2.2
Core 2.0
Annual Change (%)
(2Q-23: 2.8;
1Q-23: 3.6)
(2Q-23: 3.4;
1Q-23: 3.9)
1.3
1.8
2.8 3.1 2.9 2.5
0.6
0.7
0.7
0.5 0.6
0.4
0.5
0.4
0.4 0.2
-0.2
1Q-22 2Q-22 3Q-22 4Q-22 1Q-23 2Q-23
Core Fresh food Fuel Other (non-fuel price admin)
Contribution (ppt)
Non-core
Breakdown of inflation by components
Source: Department of Statistics, Malaysia, Bank Negara Malaysia estimates
13
YTD 2/ Headline inflation: 3.3%
YTD Core inflation: 3.6%
14
Inflationary pressures have become more
generalised over the past two years, although
currently on a moderating trend
Drivers of inflation can be disentangled into general
(common) and sector-specific (idiosyncratic) price
changes
Common inflation has risen in recent times due to a
confluence of simultaneous and aggregate shocks:
– Military conflict in Ukraine
– Pent-up demand
– Potential shift in firms’ pricing behaviour amid a
high-inflation environment
Ongoing disinflationary trend is contributed by both
lower common and idiosyncratic factors
Box Article: Lower headline inflation reflected the decline in both common
and idiosyncratic components
1/ Headline inflation is adjusted to exclude the direct impact of consumption tax policies changes (GST and SST) in 2015 and 2018.
2/ Upcycle refers to periods when global food and/or energy commodities exhibited year-on-year movements higher than the
standard deviation. Global food and energy commodities data are from World Bank Commodity Price Data (The Pink Sheet).
Source: Department of Statistics, Malaysia and Bank Negara Malaysia staff estimates.
14
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
Ja
n-
11
Ju
l-1
1
Ja
n-
12
Ju
l-1
2
Ja
n-
13
Ju
l-1
3
Ja
n-
14
Ju
l-1
4
Ja
n-
15
Ju
l-1
5
Ja
n-
16
Ju
l-1
6
Ja
n-
17
Ju
l-1
7
Ja
n-
18
Ju
l-1
8
Ja
n-
19
Ju
l-1
9
Ja
n-
20
Ju
l-2
0
Ja
n-
21
Ju
l-2
1
Ja
n-
22
Ju
l-2
2
Ja
n-
23
Common Idiosyncratic Headline inflation
Contribution (ppt)
2011
Food & Energy
Joint Upcycle2/
2017
Energy Upcycle
2020
COVID-19 and weaker
global oil price
2021-2022
Food & Energy Joint
Upcycle / Reopening of
economy
2015
Lower global energy
and commodity prices
Decomposition of headline inflation1/ by common and idiosyncratic factors
1
2
3
Box article: Understanding Inflation Drivers: Differentiating Common and Idiosyncratic Dynamics in Malaysia
15
▲ Higher global commodity prices due to
worsening geopolitical conflict or
adverse weather events
▲ Higher imported input costs amid
exchange rate depreciation
Going forward, risks to inflation stem mainly from global developments
Key drivers of headline inflation in 2023
2.8% to 3.8%
(2023f)
Elevated core inflation
Firm domestic demand and
improvement in labour market
Moderating global cost environment
Lower key commodity prices
Gradual subsidy rationalisation
Revision in electricity surcharge1/
Prevailing price controls and subsidies
On key necessity items
Upside risks
Downside risks
▼ Weaker global growth leading to more
subdued commodity prices
▼ Faster dissipation of domestic pent-up
demand from 2022
• Headline inflation is expected to average close to the lower bound of forecast range with the risks broadly balanced.
1/ Reflecting revision for high-usage households and selected industry participants in 2H 2023 and 1H 2023, respectively.
15
16
Source: Bank Negara Malaysia
1.0
1.5
2.0
2.5
3.0
3.5
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
July 2023:
3.00%
Overnight Policy Rate, OPR
%
Historical low
OPR level
The OPR was maintained at 3.00% at the July MPC meeting
At the July MPC meeting, the MPC deemed
the monetary policy stance to be slightly
accommodative and supportive of the
economy
The MPC remains vigilant to ongoing
developments and will continue to monitor
incoming data to inform the assessment on
the outlook of domestic inflation and growth
– The MPC continued to see limited risks of
future financial imbalances
16
17
Updated
Domestic bond yields declined slightly amid inflows, despite
ongoing expectations for US monetary policy tightening
*Regional countries include Indonesia, the Philippines, Singapore, South Korea and Thailand.
Source: Bank Negara Malaysia, ETP and Bloomberg
-16.0
-6.0
-32.9
2.6
-40.7
36.9
-50
-40
-30
-20
-10
0
10
20
30
40
50
1Q23 2Q23
Malaysia
Regional Average*
US
Movement of 10-Year Local Currency Sovereign Bond Yields (in bps)
Domestic financial market developments driven mainly by external factors
Performance of Equity Indices (%QoQ Change)
Most regional equities including Malaysia declined, reflecting
investors’ cautious economic outlook
US: United States; PH: the Philippines; MY: Malaysia; TH: Thailand; SG: Singapore; KR: South Korea; CH:
China; JP: Japan; ID: Indonesia.
Source: Bloomberg and Bursa Malaysia
-3.6
-4.9
5.9
-0.7
0.2
-1.0
10.8
7.0
7.5
-6.6
-3.2
-2.2
-2.1
-1.6
-0.5
3.5
8.3
18.4
-10 0 10 20
TH
MY
CH
ID
SG
PH
KR
US
JP
2Q23
1Q23
17
18
-2.6
-2.5
-2.3
-1.8
-1.4
-1.3
-0.5
-0.4
0.0
0.4
0.6
0.8
1.1
1.1
3.1
1.6
0.3
PHP
TWD
IDR
AUD
INR
KRW
JPY
CNY
SGD
EUR
GBP
ZAR
THB
MYR
NOK
NEER**
DXY*
-10.0 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0
Since 1 July 2023*** YTD
Recently, the ringgit has appreciated against the US dollar
Updated
*The US dollar Index (DXY) is an index of the value of the US dollar against a basket of foreign currencies, namely EUR (57.6%), JPY (13.6%), GBP (11.9%), CAD (9.1%), SEK (4.2%), and CHF (3.6%).
** NEER refers to the ringgit nominal effective exchange rate. It is an index measuring ringgit’s performance against currencies of Malaysia’s major trading partners.
*** Change in exchange rate against the US dollar from 1 July to 15 August 2023
Source: Bank Negara Malaysia and Bloomberg
US Dollar Index (DXY) and Selected Currencies against the US Dollar (%)
Negative indicates
currency
depreciation
18
The ringgit has strengthened against the
US dollar since 1 July 2023.
This is due to market expectations that the
aggressive monetary policy tightening in
major economies is nearing its end.
Further clarity on the future monetary
policy actions in major economies will
provide support to the ringgit and other
regional currencies.
19
Banks remain well-positioned to support financial intermediation needs
1 Impairment ratio based on Stage 3 loans under MFRS 9.
2 Business ICR and CASTD ratios as at Mar-23
3 Financial assets comprise EPF savings, deposits, unit trust funds, domestic equity holdings, and insurance policies (surrender value).
Source: Bank Negara Malaysia
Strong buffers allow banks to continue supporting
financial intermediation activities
Total Capital Ratio, %
Liquidity Coverage Ratio, % Loan Loss Coverage Ratio (including regulatory reserve), %
Impaired Loans Ratio, %
Banks have sufficient provisions to absorb
potential credit losses from vulnerable borrowers
148.3
152.5 152.7
157.3 155.3
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
18.3 17.8
19.0 18.6 18.2
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
115.3 114.8
118.6 116.3 116.2
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
2010-2019 average: 106.3%
19
1.3
2.8
1.8
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
Household
Sector
Business
Sector
Overall Gross
Impaired Loans
2010-2019 overall average: 1.9%
20
Financing in 2Q 2023 remained supportive of SMEs’ business needs
Steady growth in outstanding financing
Higher financing approvals across both
working capital and investment purposes
*Investment-related purpose includes financing for the purchase of non-residential properties, residential properties for business use, fixed assets (incl. cars), and construction purposes.
Note: Reflects loan/financing from the banking system and development financial institutions (DFIs). The data series were revised following a data rectification by financial institutions, mainly involving the reclassification of
SME loans as non-SME loans.
Source: Bank Negara Malaysia
…with investment-related financing
approvals driven by the services sectors
5.8 5.9
6.4
4
5
6
7
8
300
310
320
330
340
350
360
370
380
2Q22 3Q22 4Q22 1Q23 2Q23
RM million % yoy (RHS)
Outstanding SME Financing
RM million
5
10
15
20
25
30
1Q22 2Q22 3Q22 4Q22 1Q23 2Q23
Working Capital Investment-related
SME Financing Approvals
10.6 11.9
18.1
13.7
17.5 16.7
-10
-5
0
5
10
15
20
25
4Q22 1Q23 2Q23
Others
Mining
Agriculture
Construction
Manufacturing
Services
RM million Annual change (%) / Contribution to growth (Ppt)
2018-19 quarterly average: RM14 bn
2018-19 quarterly average: RM11 bn
SME Financing Approvals by Sector
for Investment-Related Purposes*
% yoy
20
21
Domestic demand to remain key driver of growth in 2023 amid
challenging global environment
Downside risks to growth emanating primarily from external
developments, while there are upside risks mainly from domestic factors
Summary
In 2Q 2023, the Malaysian economy grew by 2.9%, driven mainly
by private sector expenditure
Headline and core inflation are projected to average between
2.8% and 3.8% in 2023
21
22
End of Presentation
22
23
Q&A
23
Q&A
BANK NEGARA MALAYSIA
CENTRAL BANK or MALAYSIA
24
Selamat Menyambut
Hari Kebangsaan
Ke-66
24
2525
| Muzium dan Galeri Seni
C-erak
Seni Pencerifaan | Tlre Ar?‘ olSforylelling
18.08.2023, 8:15 p.m.
Galeri Seni, Aras 3 / An‘ Gallery, Level 3
Muzium clan Galeri Seni Bank Negara Malaysia ,_~‘2.3‘
26
Feedback Survey
26
27
Additional Information
27
28
Add. Info
1
Breakdown of 2Q 2023 GDP (% yoy)
Annual Change in GDP Growth by Component
1 Numbers do not add up due to rounding and exclusion of import duties component.
Source: Department of Statistics, Malaysia
Real GDP
(% YoY)
Share, %
(2022)
2022 2023
2Q 1Q 2Q
Domestic Demand
(Excluding Stocks) 93.1 13.0 4.6 4.5
Private Sector 75.5 15.4 5.6 4.5
Consumption 60.2 18.3 5.9 4.3
Investment 15.3 6.3 4.7 5.1
Public Sector 17.6 2.5 -0.3 4.6
Consumption 13.2 2.3 -2.2 3.8
Investment 4.4 3.2 5.7 7.9
Net Exports of Goods
and Services 5.5 -29.0 54.4 -3.7
Exports 74.6 15.9 -3.3 -9.4
Imports 69.1 20.1 -6.5 -9.7
Change in stocks, RM bil. 1.4 12.3 2.8 8.0
Real GDP 100.0 8.8 5.6 2.9
Real GDP
(% YoY)
Share1,
% (2022)
2022 2023
2Q 1Q 2Q
Services 58.3 11.9 7.3 4.7
Manufacturing 24.1 9.2 3.2 0.1
Agriculture 6.6 -2.3 1.0 -1.1
Mining and Quarrying 6.4 -1.7 2.4 -2.3
Construction 3.5 2.5 7.4 6.2
Real GDP 100.0 8.8 5.6 2.9
28
29
Financial account recorded a larger net outflow
Portfolio investment net inflows were more than offset by net outflows in other and direct investment account
Continued FDI inflows amid
higher DIA outflows
Net outflows in
other investment
Net inflows in
portfolio investment
Add. Info
2
*As per the IMF’s BPM5 classifications (i.e. directional basis).
Note: Numbers may not add up due to rounding.
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
29
RM billion
2022 2023
4Q Year 1Q 2Q 1H
Direct Investment -9.3 15.9 10.9 -4.9 6.0
Direct Investment Abroad
(DIA)* -28.5 -58.6 -1.1 -8.0 -9.1
Foreign Direct Investment
(FDI)* 19.2 74.6 12.0 3.1 15.1
Portfolio Investment -26.7 -50.6 -33.3 8.1 -25.2
Residents -15.0 -30.5 -16.3 -10.1 -26.5
Non-residents -11.7 -20.1 -17.0 18.3 1.3
Financial Derivatives -1.7 -2.2 -0.9 0.3 -0.6
Other Investment 36.6 49.2 20.9 -15.1 5.8
Financial Account Balance -1.1 12.4 -2.4 -11.6 -13.9
30
Adequate buffers to weather external shocks
Higher net creditor position … … and further supported by
L
External Assets Minus External Liabilities
(1Q 22 – 2Q 23)
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
… with large net foreign-currency
assets …
3.2 3.0
3.9
4.7
4.7
8.9
0
2
4
6
8
10
0
20
40
60
80
100
120
140
160
180
1Q-22 2Q-22 3Q-22 4Q-22 1Q-23 2Q-23
Net IIP Position (LHS)
% of GDP (RHS)
RM bil % of GDP
Sustained foreign income
Continued current account surplus
reduces external financing
requirements
Sufficient international
reserves* to facilitate
international transactions
… to finance 5.3 months of imports of
goods & services and is 1.0 time total
short-term external debt as at 31 July
2023
Add. Info
3
30
* Note: The reserves coverage ratios differ from that published in the
press statement on international reserves as at 31 July 2023 as it
reflects the latest 2Q 2023 data on imports of goods & services and
short-term external debt.
2,302.8
1,015.1
FCY Assets FCY Liabilities
FCY Denominated External Assets & Liabilities
(End-2Q 2023) (RM bil)
31
Effective exchange rates offer a broader perspective of a country’s
currency value
Apart from bilateral exchange rates, the NEER and REER are used to assess a currency’s performance
1. The NEER considers a currency’s performance against a group of currencies, weighted by the importance of each trading partner. The REER then adjusts for price differences.
Source: Bank Negara Malaysia
Box article: Methodological Framework for Computing Malaysia’s Effective Exchange Rate Indices
• Effective exchange rates, namely the NEER
and REER, can provide insights into
macroeconomic conditions and can facilitate
price competitiveness assessments, inflation
analysis and external balance evaluations.
• Since 2018, movements in the ringgit NEER
and REER have been relatively more muted,
when comparing the movements of the NEER
and REER series with the bilateral ringgit
exchange rate against the US dollar.
Ringgit Nominal Effective Exchange Rate (NEER)1 and
Real Effective Exchange Rate (REER)1Series
3.8
3.9
4.0
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.880
84
88
92
96
100
Ja
n-
18
Ju
n-
18
N
ov
-1
8
Ap
r-1
9
Se
p-
19
Fe
b-
20
Ju
l-2
0
D
ec
-2
0
M
ay
-2
1
O
ct
-2
1
M
ar
-2
2
Au
g-
22
Ja
n-
23
Ju
n-
23
MYR / USDIndex (21 July 2005
= 100)
NEER REER MYR / USD
Note: Last date in the chart is 30 June 2023.
The daily REER is calculated by using the monthly CPI for each day of the month.
appreciation
31
Add. Info
4
32
Temporary commodity-related factors weighed on 2Q 2023 GDP
Source: Bank Negara Malaysia, Department of Statistics Malaysia, Malaysian Palm Oil Board
-10.5
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
Annual Change
% yoy
Plant maintenance activities and hot weather affected production in the mining, manufacturing and agriculture sector
32
Crude Oil and Condensates
Production Natural Gas Production Manufacture of refined petroleum
products (IPI) Crude Palm Oil Production
-5.9
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
Annual Change
% yoy
-8.4
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
Annual Change
% yoy
-6.3
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
Annual Change
% yoy
Add. Info
5
Slide Number 1
The global economy registered modest growth in 2Q 2023
Malaysia’s GDP grew by 2.9% in 2Q 2023
Growth underpinned by domestic demand and tourism activities
Larger current account surplus and continued FDI inflows
Looking ahead, domestic demand to remain the key driver of growth amid challenging global environment
Mixed indicators, but generally pointing to continued growth for the Malaysian economy
Slowdown in goods exports partially cushioned by increased �tourism activities
Labour market continued to improve
Household spending to remain as anchor of growth
Slide Number 11
MADANI Economy Framework to drive comprehensive restructuring of the Malaysian economy
Disinflation trend continued with lower headline and core inflation
Box Article: Lower headline inflation reflected the decline in both common and idiosyncratic components
Going forward, risks to inflation stem mainly from global developments
Slide Number 16
Domestic financial market developments driven mainly by external factors
Recently, the ringgit has appreciated against the US dollar
Banks remain well-positioned to support financial intermediation needs
Financing in 2Q 2023 remained supportive of SMEs’ business needs
Summary
Slide Number 22
Slide Number 23
Slide Number 24
Slide Number 25
Slide Number 26
Slide Number 27
Breakdown of 2Q 2023 GDP (% yoy)
Financial account recorded a larger net outflow
Adequate buffers to weather external shocks
Effective exchange rates offer a broader perspective of a country’s �currency value
Temporary commodity-related factors weighed on 2Q 2023 GDP
[Post-Publish] 2Q23 QB_Slides_20230821.pdf
Default Section
Slide 1
Part A: Developments
Slide 2: The global economy registered modest growth in 2Q 2023
Slide 3: Malaysia’s GDP grew by 2.9% in 2Q 2023
Slide 4: Growth underpinned by domestic demand and tourism activities
Slide 5: Larger current account surplus and continued FDI inflows
Part B: Outlook
Slide 6: Looking ahead, domestic demand to remain the key driver of growth amid challenging global environment
Slide 7: Mixed indicators, but generally pointing to continued growth for the Malaysian economy
Slide 8: Slowdown in goods exports partially cushioned by increased tourism activities
Slide 9: Labour market continued to improve
Slide 10: Household spending to remain as anchor of growth
Slide 11
Slide 12: MADANI Economy Framework to drive comprehensive restructuring of the Malaysian economy
Slide 13: Disinflation trend continued with lower headline and core inflation
Slide 14: Box Article: Lower headline inflation reflected the decline in both common and idiosyncratic components
Slide 15: Going forward, risks to inflation stem mainly from global developments
Slide 16
Part C: Monetary and Financial Developments
Slide 17: Domestic financial market developments driven mainly by external factors
Slide 18: Recently, the ringgit has appreciated against the US dollar
Slide 19: Banks remain well-positioned to support financial intermediation needs
Slide 20: Financing in 2Q 2023 remained supportive of SMEs’ business needs
Part D: Summary
Slide 21: Summary
Slide 22
Slide 23
Slide 24
Slide 25
Slide 26
Additional Information
Slide 27
Slide 28: Breakdown of 2Q 2023 GDP (% yoy)
Slide 29: Financial account recorded a larger net outflow
Slide 30: Adequate buffers to weather external shocks
Slide 31: Effective exchange rates offer a broader perspective of a country’s currency value
Slide 32: Temporary commodity-related factors weighed on 2Q 2023 GDP
PRESS RELEASE
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
EMBARGO: For immediate release
ECONOMIC AND FINANCIAL DEVELOPMENTS IN MALAYSIA
IN THE SECOND QUARTER OF 2023
Press Conference Presentation Transcript
The global economy registered modest growth in 2Q 2023
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “In
the second quarter of 2023, global growth was modest. While the labour market
remained resilient, growth continued to be weighed by higher interest rates and
elevated inflation. China’s growth came in below expectation, despite benefiting
from low base from the lockdown back in 2Q 2022.
“Global headline inflation continued to moderate, in line with lower commodity
prices. Meanwhile, core inflation moderated at a much slower pace given the
resilient labour market.
“Regional exports contracted, reflecting slowing global demand, ongoing shift in
consumption from goods to services and downcycle in E&E sector, particularly
for consumer electronics.”
Malaysia’s GDP grew by 2.9% in 2Q 2023
Ketua Perangkawan Malaysia Dato’ Sri Dr. Mohd Uzir Mahidin berkata,
“Pada suku kedua 2023, ekonomi Malaysia berkembang 2.9%, disokong oleh
pasaran buruh yang bertambah baik, peningkatan permintaan dalam negeri
yang berterusan dan aktiviti pelancongan yang semakin rancak. Namun,
pengurangan permintaan luar negeri dalam keadaan kitaran menurun teknologi
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
global dan pengeluaran komoditi yang lebih rendah menjejaskan pertumbuhan
ekonomi.
“Pertumbuhan tahunan yang lebih perlahan pada suku ini turut mencerminkan
kesan asas yang tinggi dari suku kedua 2022 selepas pembukaan semula
ekonomi negara dan kesan daripada pelaksanaan beberapa langkah dasar.
Dari segi pertumbuhan suku tahun ke suku tahun pelarasan musim, KDNK
menunjukkan peningkatan momentum pertumbuhan yang lebih kukuh
sebanyak 1.5%, iaitu peningkatan berterusan sejak suku keempat 2022.
“Pada suku kedua ini, tiga sektor yang terus mencatatkan pertumbuhan iaitu
sektor perkhidmatan meningkat sebanyak 4.7%, sektor pembuatan meningkat
sebanyak 0.1% dan sektor pembinaan meningkat sebanyak 6.2%. Manakala
dua sektor mencatatkan penyusutan iaitu sektor pertanian merosot sebanyak
1.1% dan sektor perlombongan merosot 2.3%.”
Growth underpinned by domestic demand and tourism activities
Ketua Perangkawan Malaysia Dato’ Sri Dr. Mohd Uzir Mahidin said, “On the
demand side, growth was supported by both private and public sector
expenditures.
“Private consumption growth was underpinned by firm labour market conditions.
Spending expanded moderately across both necessities and discretionary
items.
“Growth in overall investment improved, driven by capital expenditure on
structures, and machinery & equipment (M&E), as well as improved
Government’s fixed assets spending.
“However, during this quarter, net exports registered a contraction due to the
more challenging global environment.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
“Turning to the supply side, growth is driven mainly by the services and
construction sectors.
“The services sector growth moderated across both consumer- and business-
related subsectors. Nevertheless, the sector continued to benefit from improving
tourism-related spending. In fact, this is one of the bright spots during the
quarter.
“For the construction sector, growth remained supported by the continued
progress of large infrastructure projects and higher special trade activities.
“Hot weather and plant maintenance had affected commodity production and
led to contractions in the agriculture and mining sectors.”
Larger current account surplus and continued FDI inflows
Ketua Perangkawan Malaysia Dato’ Sri Dr. Mohd Uzir Mahidin said, “On the
balance of payments, for the second quarter of 2023, the Malaysian current
account recorded a higher surplus of RM9.1 billion, or 2.1% of GDP.
The Services account deficit narrowed by 12.0 per cent quarter-on-quarter to
RM11.3 billion, reflecting mainly further recovery in inbound tourism. In addition,
the primary income account registered a lower deficit, mainly due to higher
income generated by Malaysians investing abroad. Meanwhile, Secondary
income account deficit contracted from RM5.9 billion in the preceding quarter to
RM2.8 billion.
On the financial account, Foreign Direct Investment (FDI) inflows moderated to
RM3.1 billion during the quarter. The FDI inflows were supported by higher
equity injections, reflecting foreign investors’ continued confidence on business
prospects in the country. These investments were channelled mainly into
the Services sector, predominantly in Professional, scientific & technical and
Financial sub-sector. The FDI were primarily from Singapore, Taiwan and
Germany.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
In the meantime, Direct Investment Abroad (DIA) outflows expanded to
RM8.0 billion as compared to RM1.1 billion in the previous quarter. The outflow
was mainly due to higher equity injection and profit retained abroad.The major
sectors contributed to the DIA were Services particularly in Financial and
Information & telecommunication sub-sector. The DIA major destinations were
to Singapore, Indonesia and Norway.
Looking ahead, domestic demand to remain the key driver of growth amid
challenging global environment
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “For
2023, we expect Malaysia’s growth to be close to the lower end of our growth
forecast range, underpinned by domestic demand.
“Let me reiterate that the moderate growth in second quarter of 2023 was partly
driven by several temporary factors, including plant maintenance in the mining
sector, hot weather affecting agricultural output, as well as high base effects
from the economic reopening and policy measures in second quarter last year.
“Based on our estimation, had it not been for the synchronised commodity-
related factors, growth could have been 40 basis points higher at 3.3%.
“Going forward, growth will be supported by four factors. First, continued
recovery in the labour market; second, implementation of new and existing
investment projects; third, higher tourism activity; and fourth, dissipation of plant
maintenance activities in the mining sector.
“Nevertheless, in our baseline forecast, the weak external demand is expected
to weigh on near-term growth.The economy is facing downside risks stemming
from weaker-than-expected global growth and a deeper or longer-than-
expected technology downcycle. Beyond that, there could be lower-than-
expected commodity production domestically due to stronger impact from
El Niño and prolonged plant maintenance.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
“On the upside, tourism activity could pick up even more, while progress of
investment projects could be faster-than-expected.”
Mixed indicators, but generally pointing to continued growth for the
Malaysian economy
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “In
the near term, the external environment is expected to remain challenging.
Nevertheless, indicators of domestic demand in the bottom row of the slide,
continue to point towards a positive expansion in growth.”
Slowdown in goods exports partially cushioned by increased
tourism activities
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “As
a small open economy, Malaysia is affected by the slowdown in global demand.
Like other regional economies, Malaysia’s exports also declined in the second
quarter of 2023. This was driven mainly by weaker manufactured goods amid a
downturn in global tech cycle and lower commodity prices.
“The global semiconductor sales, which have been declining thus far, are
showing tentative signs of bottoming out. Furthermore, the World
Semiconductor Trade Statistics (WSTS) is projecting a positive growth in 2024
on the back of improving demand and easing of inventory correction.
“In addition, tourism-related activities are expected to pick up further and provide
support to growth.” As mentioned by our Chief Statistician, tourism was one of
the bright spots in the second quarter. We are already seeing strong increase
in tourist arrivals and tourist spending.”
Labour market continued to improve
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “The
labour market continued to improve in 2Q 2023. The unemployment rate
declined further to 3.4% in June, driven by steady employment growth.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
“Vulnerable segments such as women and youth have also recovered to pre-
pandemic levels. However, there is still room for improvement as labour
participation amongst women remains way below that of men, which is one of
the focus areas of the MADANI economic framework recently announced by the
Government.”
Household spending to remain as anchor of growth
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Household spending continues to expand, supported by wage growth and
ample financial buffers. High-frequency data such as credit card spending and
passenger car sales continue to record above pre-pandemic figures.
“Going forward, household spending will remain as the anchor of growth
underpinned by continued employment growth, healthy household financial
buffers, government policy measures and easing price pressures.”
In second half of 2023, households remain supported by recent measures
announced by the government, namely the RM100 e-Tunai for B40s and M40s
as well as RM300 and RM200 special assistance for civil servants and
pensioners respectively.
Supportive financing conditions and continuation of new and existing
projects to support investment growth in 2023
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Growth continue to be supported by investment activity. Financing for capital
expenditure remains forthcoming, as also investment intentions. New approved
investments totalled RM71.4 billion in the first quarter of 2023.
“Going forward, the economy would benefit from the realisation of new
investment and existing projects, particularly large infrastructure projects such
as the ECRL and digitalisation projects.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
“I should mention, progress of these investment is critical not just to support
immediate growth, but also to lift Malaysia’s future growth potential. In this
regard, the implementation of catalytic projects, such as those announced under
the recently unveiled National Energy Transition Roadmap (NETR) Phase 1,
would also provide support to growth in the medium term. In fact, some of these
projects are already in progress, with more commencing next year.”
MADANI Economy Framework to drive comprehensive restructuring of the
Malaysian economy
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “It is
important to not just focus on the headline GDP growth, but also quality growth
that is inclusive and sustainable over the long-term. To this end, the MADANI
framework will anchor the restructuring of the Malaysian economy to achieve
this vision.
“Within this framework, the Malaysian economy will see several important
transformation, such as having a revitalised industrial sector, supported by
quality investments which will create quality and high-paying jobs; becoming a
climate resilient and greener economy and improvement in fiscal governance
and transparency which will enhance confidence from investors and credit rating
agencies.
“Among the key initiatives which will be important in driving this, includes the
New Industrial Master Plan, the National Energy Transition Roadmap and the
tabling of the Fiscal Responsibility Act.
“In the short-term, we can expect to see positive support to growth from the
implementation of several important catalytic projects under the National Energy
Transition Roadmap.”
Disinflation trend continued with lower headline and core inflation
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “Now
let me turn to inflation. In line with the easing cost environment, headline inflation
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
continued to trend lower in the second quarter, averaging 2.8% for the quarter
(1Q 2023: 3.6%). Much of this downtrend was driven by lower core inflation,
which contributed around half of the decline during the second quarter.
“While core inflation moderated to 3.4% during the quarter (1Q 2022: 3.9%), it
remains elevated relative to the historical average of around 2.0%, therefore the
need to remain vigilant. The lower core inflation was mainly due to lower inflation
for food away from home and communication services.”
Lower headline inflation reflected the decline in both common and
idiosyncratic components
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Looking deeper into the dynamics of inflation, price changes can be driven by
sector-specific (idiosyncratic) factors or economy-wide – “common” – factors.
While the former leads to price changes of specific goods and services relative
to others; the latter exert widespread, general price pressures.
“Over the past two years, the common component has risen significantly, given
the confluence of multiple supply and demand shocks. During the high inflation
environment, firms also reported1 to have found it easier to raise prices, a shift
in price-setting behaviour that could further contribute to the rise in common
inflation.
“At present, the ongoing disinflationary trend has been contributed by both
common and idiosyncratic components. Of note, the disinflationary process
would have been more gradual in the absence of idiosyncratic component.
“I would invite you to read our box article on this entitled “Understanding Inflation
Drivers: Differentiating Common and Idiosyncratic Dynamics in Malaysia” in this
Quarterly Bulletin.”
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Going forward, risks to inflation stem mainly from global developments
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “Let
me take a minute to speak on the risks to inflation. We see that the risks to
inflation stem mainly from global developments. Both headline and core inflation
are expected to moderate over the course of 2023. Headline inflation is
expected to average close to the lower bound of the earlier communicated
forecast range of 2.8-3.8%.
“While cost pressures have eased, core inflation will remain at elevated levels
as demand conditions remain rather firm.
“The balance of risk to inflation is mostly tied to global developments. Near-term
upside risks include higher global commodity prices from geopolitical conflicts
and adverse weather events like El , and higher imported input amid exchange
rate depreciation. These risks could be offset by subdued global commodity
prices due to a weaker global growth outlook, and a faster dissipation of
domestic pent-up demand.”
The OPR was maintained at 3.00% at the July MPC meeting
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Turning to monetary policy, the MPC maintained the OPR at 3.00% at the July
2023 meeting. At the current OPR level, the MPC deemed the monetary policy
stance to be slightly accommodative and supportive of the economy.
“Going forward, the MPC will continue to closely monitor the ongoing domestic
and global developments, and their impact on domestic inflation and growth
prospects. The MPC will ensure that the monetary policy stance remains
conducive to sustainable economic growth amid price stability.”
Domestic financial market developments driven mainly by external factors
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “On
financial markets, adjustments in the domestic financial markets were mostly
driven by global developments, including investors’ expectations of further
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
monetary policy tightening in the US and other advanced economies, the
weaker-than-expected economic rebound from China and the US debt ceiling
crisis earlier in the second quarter of this year.
“The domestic equity market was also affected this year by lower global demand
for semiconductors and lower commodity prices, as well as weakening
corporate earnings and political uncertainties.
“However, domestic government bond yields declined during the second
quarter, supported by non-resident inflows.”
Recently, the ringgit has appreciated against the US dollar
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Reflecting investors’ expectations of further aggressive monetary policy
tightening in the US and other advanced economies throughout the first half of
the year, the ringgit depreciated by 4.7% against the US dollar year-to-date.
“Recently however, the ringgit has appreciated by 1.1% against the US dollar
since the second quarter of 2023. The NEER, which measures the ringgit’s
performance against our major trading partners, has also appreciated by 1.6%.
This is amid overall market expectations that the aggressive monetary policy
tightening campaign in the US is nearing its end.
“Bank Negara Malaysia will continue to closely monitor global and domestic
financial conditions and ensure market adjustments remain orderly. Towards
this end, BNM’s presence in the foreign exchange market is to stem currency
movements that are deemed excessive. Thus, BNM will continue to manage
risks arising from any heightened financial market volatility.”
Banks remain well-positioned to support financial intermediation needs
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “The
banking system will continue to play an important role in supporting growth in
2023.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
“Owing to their strong financial position, including high levels of capital and
liquidity buffers, banks remain well-positioned to support the financing needs of
the domestic economy.
“Banks have also set aside adequate reserves to cover potential credit losses.
This is important because some households and businesses, including SME
borrowers, still face vulnerabilities in the current environment of elevated costs.
“Overall household and business impairments remained low and stable,
indicating that most borrowers are able to repay their loans in a timely
manner. Households’ median debt service ratio of 36% for outstanding loans
and businesses’ median interest coverage ratio of 5.8 times.
“Bespoke repayment assistance also remains available for borrowers who
continue to face financial difficulties.”
Financing in 2Q 2023 remained supportive of SMEs’ business needs
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said,
“Financing activity by banks and DFIs to SMEs remained supportive of
economic activity, with steady growth in outstanding financing at 6.4%.
“Financing approvals continued to support both working capital and investment
purposes, surpassing historical quarterly trends. More positively, we saw
sustained double-digit growth in financing approvals for investment-
related purposes. In the second quarter of 2023, the growth in approvals was
primarily driven by the services sectors, particularly in the finance, real estate,
and transport, storage, and communications sectors.”
Summary
Bank Negara Malaysia Governor Datuk Abdul Rasheed Ghaffour said, “Let
me now conclude.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
“The Malaysian economy expanded by 2.9% in the second quarter of 2023,
driven mainly by private sector expenditure. Growth is projected to be close to
the lower-end of the forecast range of between 4% to 5% for 2023 as a whole,
anchored by domestic demand.
“There are downside risks to growth, stemming primarily from external factors.
Meanwhile, upside risks are mainly from domestic factors, such as stronger-
than-expected tourism activity and implementation of projects.
“On inflation, both headline and core are expected to average between 2.8%
and 3.8% for the year.”
Bank Negara Malaysia
18 August 2023
GDP Q2 2023 Presentation Slides
1
Sidang Akhbar
Prestasi Ekonomi Suku
18 Ogos 2023
Kedua Tahun 2023
1
2
Global Growth Developments
The global economy registered modest growth in 2Q 2023
Note:
1 GDP for the second quarter of 2023 are advanced or preliminary estimates except for China, Indonesia, Philippines, Hong Kong and Singapore.
2 Inflation figures are aggregated across major countries based on their share of global growth. AEs stands for Advanced Economies while EMEs stands for Emerging Market Economies.
Source: Macrobond, national authorities, International Monetary Fund, Bank Negara Malaysia estimates
4.5
6.7
3.73.6
4.8
3.1
8.1
4.0
5.5
2.1
Jan-22 May-22 Sep-22 Jan-23 May-23
World Headline
World Core
AEs Headline
EMEs Headline
Inflation2
6.3
5.2
4.3
2.6
1.5
0.9
0.6
0.5
4.5
5.0
6.4
1.8
2.9
0.9 1.1
0.4
CN ID PH US HK KR EA SG
2Q23 1Q23
Real GDP Growth1
Annual change (%)
Moderating headline
inflation, but core
inflation remained high
Modest growth as
growth is weighed by
higher interest rate and
elevated inflation
Regional exports declined
due to shift from goods to
services and global
technology downcycle
2
China’s economy grew
post-reopening, albeit at
a slower pace
Annual change (%)
Jun-23
3
Malaysia’s GDP grew by 2.9% in 2Q 2023
Source: Department of Statistics, Malaysia
Factors Supporting Growth in 2Q 2023
-0.2
16.2
-4.2
3.6
4.8
8.8
14.1
7.1
5.6
2.9
2.2
-1.7
0.9
1.5
1Q-21 2Q-21 3Q-21 4Q-21 1Q-22 2Q-22 3Q-22 4Q-22 1Q-23 2Q-23
Annual change (%)
q-o-q SA
Real GDP Growth (Quarterly)
Higher tourism activities
Monthly Real GDP Growth (Annual change, %)
Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23
4.6 6.6 5.7 0.7 5.6 2.4
Moderation from 1Q 2023 partly due to ...
Continued increase in
domestic demand
Lower commodity production
Weaker external demand amid
global technology downcycle
Improving labour market
3
High base effect from 2Q 2022
4
Growth underpinned by domestic demand and tourism activities
Source: Department of Statistics, Malaysia
Private Consumption
Moderate expansion in both necessities and
discretionary spending
Driven mainly by services and construction sectors
-3.7
54.4
2Q23
1Q23
3.8
-2.2
2Q23
1Q23
7.9
5.7
2Q23
1Q23
5.1
4.7
2Q23
1Q23
4.3
5.9
2Q23
1Q23
Private Investment
Supported by investment in structures and M&E
Public Investment
Improved Government’s fixed assets spending
Public Consumption
Higher emoluments spending
Net Exports
Weaker exports amid global technology downcycle
Driven mainly by private sector expenditure
6.2
7.4
2Q23
1Q23
-2.3
2.4
2Q23
1Q23
-1.1
1.0
2Q23
1Q23
0.1
3.2
2Q23
1Q23
4.7
7.3
2Q23
1Q23
Services
Moderation in consumer- and business-
related services, while tourism spending
remained supportive
Manufacturing
Weaker E&E production and lower refined
petroleum production amid a decline in mining
output
Agriculture
Lower oil palm and fisheries output amid hot
weather condition
Mining
Decreased oil and gas output due to plant
maintenance
Construction
Continued progress of large infrastructure
projects and support from higher special
trade activities
Annual Change (%) Annual Change (%)
4
5
12.0
5.8
-1.4
7.7
3.1
7.7
3.7
-8.3
Total Equity Injections Debt Instruments Reinvestment
of Earnings
1Q23 2Q23
4.3
39.9
-12.8
-16.9
-5.9
9.1
29.5
-11.3
-6.3 -2.8
Current Account
Balance
Goods Services Primary
Income
Secondary
Income
1Q23
2Q23
Larger current account surplus and continued FDI inflows
Source: Department of Statistics, Malaysia
RM bil
Narrower services deficit reflecting continued recovery
in inbound tourism
Smaller primary income deficit driven mainly by higher
investment income from investments abroad
Current Account Foreign Direct Investment
RM bil
Continued FDI inflows supported by higher equity injections
and inflows in debt instruments.
However, FDI flows were weighed by dividend payments and
losses in the manufacturing and mining sectors.
Current Account (% of GDP)
2Q 2023: 2.1%
1Q 2023: 1.0%
5
6
Looking ahead, domestic demand to remain the key driver of growth amid
challenging global environment
Continued recovery in labour market
Further improvement in employment and income prospects
Implementation of new and existing investment projects
Continued progress of multi-year projects
Higher tourism activity
Further recovery in tourist arrivals and travel receipts towards pre-pandemic levels
Slower global growth
Tight monetary policy, slower trade activity and prolonged global technology downcycle
Growth in 2023 to remain between 4% and 5%
Key
growth
drivers
6
Lower commodity production
Hot weather and plant maintenance affecting output in the commodity sector
7
Mixed indicators, but generally pointing to continued growth for the
Malaysian economy
7
Overall IPI
Baltic Dry Index
Index of Retail Trade
Global Composite PMI Malaysia’s PMI New Export Orders
RAM-CTOS Business Confidence Index
Jul-22 Oct-22 Jan-23 Apr-23 Jul-23
Expansionary: >50
51.7
Index
170
2Q22 3Q22 4Q22 1Q23 2Q23
2019: 139.5
Index (2015=100)Seasonally Adjusted Index (2015 = 100)
54.8
2Q22 3Q22 4Q22 1Q23 2Q23
’17-’19 avg: 55.3
-48.1
1Q22 2Q22 3Q22 4Q22 1Q23 2Q23
45.0
Jul-22 Oct-22 Jan-23 Apr-23 Jul-23
’11-’19 avg: 2.2%
Index (Neutral=50)
Expansionary: >50Annual Change (%) Index
127.9
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
2019: 114.9
8
Slowdown in goods exports partially cushioned by increased
tourism activities
Broad weakness in exports across
regional countries
*refers to non-oil domestic exports
** compiled by World Semiconductor Trade Statistics (WSTS)
Source: Department of Statistics Malaysia, World Semiconductor Trade Statistics (WSTS), national authorities and newsflows
Gross Export Growth (USD)
-10.9
-12.0
-14.6
-16.8
-17.8
-25.0
-15.0
-5.0
5.0
15.0
25.0
35.0
45.0
-20
-10
0
SG* KR MY TW ID
2Q23 2Q22 (RHS)
Annual change (%)
WSTS Forecast of Global Semiconductor Sales
Tentative signs of bottoming out of
global tech downcycle…
Actual Global Semiconductor Sales**
26.2
3.3
-10.3
11.8
2021 2022 2023f 2024f
Annual change (%)
11.9
-21.4
-21.1
-17.3
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
Annual change (%), 3-month moving average
8
…and expected recovery in 2024
0.3
5.7
10.1
12.2 12.3
16.3
1Q-22 2Q-22 3Q-22 4Q-22 1Q-23 2Q-23 3Q-23
RM billion
Travel Receipts
Tourism sector continues to pick-up
towards pre-pandemic level
2019 quarterly avg: RM20.5 billion
9
Labour market continued to improve
Employment growth remains above pre-pandemic average
Source: Department of Statistics Malaysia, Employment Insurance System, Social Security Organisation, Bank Negara Malaysia estimates
70.0
82.8
56.2
46.1
69.1
81.1
56.1
45.9
Overall Men Women Youth
2Q 23
4Q 19
Further decline in unemployment rate
Vulnerable segments have recovered to pre-pandemic levels
3.6
3.5 3.5 3.5 3.5
3.4
Jan Feb Mar Apr May Jun
Unemployment rate,
% of labour force
Labour force participation rate,
% of population
2.2
3.2
3.6
3.2 3.1
2.8
1Q 22 2Q 22 3Q 22 4Q 22 1Q 23 2Q 23
Pre-pandemic (2019): 3.3%
2015-2019 avg.: 1.7%
Employment,
% yoy
9
4.0
3.1
3.9 3.5 3.5 3.3
4.3
2020 - 2022 avg jobless claims: 5.6
Jan Feb Mar Apr May Jun Jul
Jobless claims,
thousand persons
Jobless claims remains below levels during pandemic years
10
Spending continues to grow….
Household spending to remain as anchor of growth
Source: Department of Statistics, Malaysia and Bank Negara
Malaysia
Going forward, consumption growth would
be underpinned by:
Passenger car sales
Thousand units
152.2
2Q22 3Q22 4Q22 1Q23 2Q23
Continued employment growth
and lower unemployment rate
Government measures
including special appreciation
assistance for civil servants and
RM100 e-Tunai credit for B40 &
M40 households
Easing price pressures9
Real wages
2Q23: 1.0% (1Q23: 0.9%)
Nominal wages
2Q23: 3.8% (1Q23: 4.5%)
Private sector wages
Annual change, %
Financial assets1-to-debt ratio:
2.1 times
Liquid financial assets2-to-
debt ratio: 1.3 times
Household financial buffers
Ratio as of June 2023
4Q19: 3.8%
4Q19: 4.8%
… supported by increment in wages
and financial buffers
10
2015-2019 avg.:135.2
Note:
1 Financial assets comprise EPF savings, deposits, unit trust funds,
domestic equity holdings, and insurance policies (surrender value).
2 Liquid financial assets exclude EPF savings.
17.9
2Q22 3Q22 4Q22 1Q23 2Q23
Annual change (%)
Credit Card Spending
2015-2019 avg.:7.6
11
35.1
28.4
36.9
0
5
10
15
20
25
30
35
40
4Q22 1Q23 2Q23
* Loans for investment-related purposes covers purchases
of residential property for business use, non-residential
property, fixed assets other than land / building, and for
construction.
Source: Bank Negara Malaysia
Progress of multi-year infrastructure
projects to provide further lift to growth
Going forward, realisation of approved
projects to support investment activity
Supportive financing conditions and continuation of new and existing projects
to support investment growth in 2023
*Proxied by coverage of populated areas (COPA)
Source: Newsflows
Key Infrastructure Projects Cumulative Progress Rate
ECRL
RM50.0 billion
2018 2026
42%
LRT3
RM16.6 billion
2018 2024
86%
MyDIGITAL 5G
RM16.5 billion
2021 2031
62%*
Pan Borneo
Highway (Sabah)
RM16.0 billion
2016 2024
75%
MIDA Total Investment Approvals
RM Billion
211
167
309
268
71
2019 2020 2021 2022 1Q23
Primary
Manufacturing
Services
Total
11
Financing for investment improved
Source: MIDA
Business Loan Disbursements and Corporate
Bond Issuances
RM Billion
Investment-
Related* Loan
Disbursements
Corporate
Bond
Issuances for
New Activity
12
MADANI Economy Framework to drive comprehensive restructuring of the
Malaysian economy
Source: Prime Minister Office, Malaysia, newsflows
12
Key Initiatives
New Industrial Master Plan
• Advance economic complexity,
digitalisation and sustainability
• Spur investments in technology and innovation
National Energy Transition Roadmap
• Increase renewable energy generation
• Promote new green growth areas
Create quality and higher paying jobs
• Reduce reliance on low-skilled foreign labour
Revitalise the industrial sector to be more competitive
• Generate economic activities with higher value add and economic
complexity
Promote a climate resilient and greener economy
• Accelerate energy transition
Malaysia’s Economic Vision
Position ourselves as a globally competitive
investment destination
• Strengthen investment promotion and incentives
Ensure a sustainable fiscal position
• Strengthen the fiscal position and ensure resilience and long-term
sustainability of public finances
Fiscal Responsibility Act
• Improve the transparency, accountability and
governance of public finance
• Act as an anchor to existing and future reforms
13
Disinflation trend continued with lower headline and core inflation
■ Headline inflation trended lower in line with moderating costs conditions
■ Core inflation declined amid lower inflation for food away from home and communication services
1/ Average of past inflation is calculated based on monthly frequency from Jan-11 to Dec-19
2/ YTD refers to the average from January 2023 to June 2023
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
Malaysia Inflation
3.3
2.8
2.4
3.6
3.5
3.1
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Apr-23
Headline inflation Core inflation
2011-’19 Avg 1/.:
Headline 2.2
Core 2.0
Annual Change (%)
(2Q-23: 2.8;
1Q-23: 3.6)
(2Q-23: 3.4;
1Q-23: 3.9)
1.3
1.8
2.8 3.1 2.9 2.5
0.6
0.7
0.7
0.5 0.6
0.4
0.5
0.4
0.4 0.2
-0.2
1Q-22 2Q-22 3Q-22 4Q-22 1Q-23 2Q-23
Core Fresh food Fuel Other (non-fuel price admin)
Contribution (ppt)
Non-core
Breakdown of inflation by components
Source: Department of Statistics, Malaysia, Bank Negara Malaysia estimates
13
YTD 2/ Headline inflation: 3.3%
YTD Core inflation: 3.6%
14
Inflationary pressures have become more
generalised over the past two years, although
currently on a moderating trend
Drivers of inflation can be disentangled into general
(common) and sector-specific (idiosyncratic) price
changes
Common inflation has risen in recent times due to a
confluence of simultaneous and aggregate shocks:
– Military conflict in Ukraine
– Pent-up demand
– Potential shift in firms’ pricing behaviour amid a
high-inflation environment
Ongoing disinflationary trend is contributed by both
lower common and idiosyncratic factors
Box Article: Lower headline inflation reflected the decline in both common
and idiosyncratic components
1/ Headline inflation is adjusted to exclude the direct impact of consumption tax policies changes (GST and SST) in 2015 and 2018.
2/ Upcycle refers to periods when global food and/or energy commodities exhibited year-on-year movements higher than the
standard deviation. Global food and energy commodities data are from World Bank Commodity Price Data (The Pink Sheet).
Source: Department of Statistics, Malaysia and Bank Negara Malaysia staff estimates.
14
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
Ja
n-
11
Ju
l-1
1
Ja
n-
12
Ju
l-1
2
Ja
n-
13
Ju
l-1
3
Ja
n-
14
Ju
l-1
4
Ja
n-
15
Ju
l-1
5
Ja
n-
16
Ju
l-1
6
Ja
n-
17
Ju
l-1
7
Ja
n-
18
Ju
l-1
8
Ja
n-
19
Ju
l-1
9
Ja
n-
20
Ju
l-2
0
Ja
n-
21
Ju
l-2
1
Ja
n-
22
Ju
l-2
2
Ja
n-
23
Common Idiosyncratic Headline inflation
Contribution (ppt)
2011
Food & Energy
Joint Upcycle2/
2017
Energy Upcycle
2020
COVID-19 and weaker
global oil price
2021-2022
Food & Energy Joint
Upcycle / Reopening of
economy
2015
Lower global energy
and commodity prices
Decomposition of headline inflation1/ by common and idiosyncratic factors
1
2
3
Box article: Understanding Inflation Drivers: Differentiating Common and Idiosyncratic Dynamics in Malaysia
15
▲ Higher global commodity prices due to
worsening geopolitical conflict or
adverse weather events
▲ Higher imported input costs amid
exchange rate depreciation
Going forward, risks to inflation stem mainly from global developments
Key drivers of headline inflation in 2023
2.8% to 3.8%
(2023f)
Elevated core inflation
Firm domestic demand and
improvement in labour market
Moderating global cost environment
Lower key commodity prices
Gradual subsidy rationalisation
Revision in electricity surcharge1/
Prevailing price controls and subsidies
On key necessity items
Upside risks
Downside risks
▼ Weaker global growth leading to more
subdued commodity prices
▼ Faster dissipation of domestic pent-up
demand from 2022
• Headline inflation is expected to average close to the lower bound of forecast range with the risks broadly balanced.
1/ Reflecting revision for high-usage households and selected industry participants in 2H 2023 and 1H 2023, respectively.
15
16
Source: Bank Negara Malaysia
1.0
1.5
2.0
2.5
3.0
3.5
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
July 2023:
3.00%
Overnight Policy Rate, OPR
%
Historical low
OPR level
The OPR was maintained at 3.00% at the July MPC meeting
At the July MPC meeting, the MPC deemed
the monetary policy stance to be slightly
accommodative and supportive of the
economy
The MPC remains vigilant to ongoing
developments and will continue to monitor
incoming data to inform the assessment on
the outlook of domestic inflation and growth
– The MPC continued to see limited risks of
future financial imbalances
16
17
Updated
Domestic bond yields declined slightly amid inflows, despite
ongoing expectations for US monetary policy tightening
*Regional countries include Indonesia, the Philippines, Singapore, South Korea and Thailand.
Source: Bank Negara Malaysia, ETP and Bloomberg
-16.0
-6.0
-32.9
2.6
-40.7
36.9
-50
-40
-30
-20
-10
0
10
20
30
40
50
1Q23 2Q23
Malaysia
Regional Average*
US
Movement of 10-Year Local Currency Sovereign Bond Yields (in bps)
Domestic financial market developments driven mainly by external factors
Performance of Equity Indices (%QoQ Change)
Most regional equities including Malaysia declined, reflecting
investors’ cautious economic outlook
US: United States; PH: the Philippines; MY: Malaysia; TH: Thailand; SG: Singapore; KR: South Korea; CH:
China; JP: Japan; ID: Indonesia.
Source: Bloomberg and Bursa Malaysia
-3.6
-4.9
5.9
-0.7
0.2
-1.0
10.8
7.0
7.5
-6.6
-3.2
-2.2
-2.1
-1.6
-0.5
3.5
8.3
18.4
-10 0 10 20
TH
MY
CH
ID
SG
PH
KR
US
JP
2Q23
1Q23
17
18
-2.6
-2.5
-2.3
-1.8
-1.4
-1.3
-0.5
-0.4
0.0
0.4
0.6
0.8
1.1
1.1
3.1
1.6
0.3
PHP
TWD
IDR
AUD
INR
KRW
JPY
CNY
SGD
EUR
GBP
ZAR
THB
MYR
NOK
NEER**
DXY*
-10.0 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0
Since 1 July 2023*** YTD
Recently, the ringgit has appreciated against the US dollar
Updated
*The US dollar Index (DXY) is an index of the value of the US dollar against a basket of foreign currencies, namely EUR (57.6%), JPY (13.6%), GBP (11.9%), CAD (9.1%), SEK (4.2%), and CHF (3.6%).
** NEER refers to the ringgit nominal effective exchange rate. It is an index measuring ringgit’s performance against currencies of Malaysia’s major trading partners.
*** Change in exchange rate against the US dollar from 1 July to 15 August 2023
Source: Bank Negara Malaysia and Bloomberg
US Dollar Index (DXY) and Selected Currencies against the US Dollar (%)
Negative indicates
currency
depreciation
18
The ringgit has strengthened against the
US dollar since 1 July 2023.
This is due to market expectations that the
aggressive monetary policy tightening in
major economies is nearing its end.
Further clarity on the future monetary
policy actions in major economies will
provide support to the ringgit and other
regional currencies.
19
Banks remain well-positioned to support financial intermediation needs
1 Impairment ratio based on Stage 3 loans under MFRS 9.
2 Business ICR and CASTD ratios as at Mar-23
3 Financial assets comprise EPF savings, deposits, unit trust funds, domestic equity holdings, and insurance policies (surrender value).
Source: Bank Negara Malaysia
Strong buffers allow banks to continue supporting
financial intermediation activities
Total Capital Ratio, %
Liquidity Coverage Ratio, % Loan Loss Coverage Ratio (including regulatory reserve), %
Impaired Loans Ratio, %
Banks have sufficient provisions to absorb
potential credit losses from vulnerable borrowers
148.3
152.5 152.7
157.3 155.3
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
18.3 17.8
19.0 18.6 18.2
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
115.3 114.8
118.6 116.3 116.2
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
2010-2019 average: 106.3%
19
1.3
2.8
1.8
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
Household
Sector
Business
Sector
Overall Gross
Impaired Loans
2010-2019 overall average: 1.9%
20
Financing in 2Q 2023 remained supportive of SMEs’ business needs
Steady growth in outstanding financing
Higher financing approvals across both
working capital and investment purposes
*Investment-related purpose includes financing for the purchase of non-residential properties, residential properties for business use, fixed assets (incl. cars), and construction purposes.
Note: Reflects loan/financing from the banking system and development financial institutions (DFIs). The data series were revised following a data rectification by financial institutions, mainly involving the reclassification of
SME loans as non-SME loans.
Source: Bank Negara Malaysia
…with investment-related financing
approvals driven by the services sectors
5.8 5.9
6.4
4
5
6
7
8
300
310
320
330
340
350
360
370
380
2Q22 3Q22 4Q22 1Q23 2Q23
RM million % yoy (RHS)
Outstanding SME Financing
RM million
5
10
15
20
25
30
1Q22 2Q22 3Q22 4Q22 1Q23 2Q23
Working Capital Investment-related
SME Financing Approvals
10.6 11.9
18.1
13.7
17.5 16.7
-10
-5
0
5
10
15
20
25
4Q22 1Q23 2Q23
Others
Mining
Agriculture
Construction
Manufacturing
Services
RM million Annual change (%) / Contribution to growth (Ppt)
2018-19 quarterly average: RM14 bn
2018-19 quarterly average: RM11 bn
SME Financing Approvals by Sector
for Investment-Related Purposes*
% yoy
20
21
Domestic demand to remain key driver of growth in 2023 amid
challenging global environment
Downside risks to growth emanating primarily from external
developments, while there are upside risks mainly from domestic factors
Summary
In 2Q 2023, the Malaysian economy grew by 2.9%, driven mainly
by private sector expenditure
Headline and core inflation are projected to average between
2.8% and 3.8% in 2023
21
22
End of Presentation
22
23
Q&A
23
Q&A
BANK NEGARA MALAYSIA
CENTRAL BANK or MALAYSIA
24
Selamat Menyambut
Hari Kebangsaan
Ke-66
24
2525
| Muzium dan Galeri Seni
C-erak
Seni Pencerifaan | Tlre Ar?‘ olSforylelling
18.08.2023, 8:15 p.m.
Galeri Seni, Aras 3 / An‘ Gallery, Level 3
Muzium clan Galeri Seni Bank Negara Malaysia ,_~‘2.3‘
26
Feedback Survey
26
27
Additional Information
27
28
Add. Info
1
Breakdown of 2Q 2023 GDP (% yoy)
Annual Change in GDP Growth by Component
1 Numbers do not add up due to rounding and exclusion of import duties component.
Source: Department of Statistics, Malaysia
Real GDP
(% YoY)
Share, %
(2022)
2022 2023
2Q 1Q 2Q
Domestic Demand
(Excluding Stocks) 93.1 13.0 4.6 4.5
Private Sector 75.5 15.4 5.6 4.5
Consumption 60.2 18.3 5.9 4.3
Investment 15.3 6.3 4.7 5.1
Public Sector 17.6 2.5 -0.3 4.6
Consumption 13.2 2.3 -2.2 3.8
Investment 4.4 3.2 5.7 7.9
Net Exports of Goods
and Services 5.5 -29.0 54.4 -3.7
Exports 74.6 15.9 -3.3 -9.4
Imports 69.1 20.1 -6.5 -9.7
Change in stocks, RM bil. 1.4 12.3 2.8 8.0
Real GDP 100.0 8.8 5.6 2.9
Real GDP
(% YoY)
Share1,
% (2022)
2022 2023
2Q 1Q 2Q
Services 58.3 11.9 7.3 4.7
Manufacturing 24.1 9.2 3.2 0.1
Agriculture 6.6 -2.3 1.0 -1.1
Mining and Quarrying 6.4 -1.7 2.4 -2.3
Construction 3.5 2.5 7.4 6.2
Real GDP 100.0 8.8 5.6 2.9
28
29
Financial account recorded a larger net outflow
Portfolio investment net inflows were more than offset by net outflows in other and direct investment account
Continued FDI inflows amid
higher DIA outflows
Net outflows in
other investment
Net inflows in
portfolio investment
Add. Info
2
*As per the IMF’s BPM5 classifications (i.e. directional basis).
Note: Numbers may not add up due to rounding.
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
29
RM billion
2022 2023
4Q Year 1Q 2Q 1H
Direct Investment -9.3 15.9 10.9 -4.9 6.0
Direct Investment Abroad
(DIA)* -28.5 -58.6 -1.1 -8.0 -9.1
Foreign Direct Investment
(FDI)* 19.2 74.6 12.0 3.1 15.1
Portfolio Investment -26.7 -50.6 -33.3 8.1 -25.2
Residents -15.0 -30.5 -16.3 -10.1 -26.5
Non-residents -11.7 -20.1 -17.0 18.3 1.3
Financial Derivatives -1.7 -2.2 -0.9 0.3 -0.6
Other Investment 36.6 49.2 20.9 -15.1 5.8
Financial Account Balance -1.1 12.4 -2.4 -11.6 -13.9
30
Adequate buffers to weather external shocks
Higher net creditor position … … and further supported by
L
External Assets Minus External Liabilities
(1Q 22 – 2Q 23)
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
… with large net foreign-currency
assets …
3.2 3.0
3.9
4.7
4.7
8.9
0
2
4
6
8
10
0
20
40
60
80
100
120
140
160
180
1Q-22 2Q-22 3Q-22 4Q-22 1Q-23 2Q-23
Net IIP Position (LHS)
% of GDP (RHS)
RM bil % of GDP
Sustained foreign income
Continued current account surplus
reduces external financing
requirements
Sufficient international
reserves* to facilitate
international transactions
… to finance 5.3 months of imports of
goods & services and is 1.0 time total
short-term external debt as at 31 July
2023
Add. Info
3
30
* Note: The reserves coverage ratios differ from that published in the
press statement on international reserves as at 31 July 2023 as it
reflects the latest 2Q 2023 data on imports of goods & services and
short-term external debt.
2,302.8
1,015.1
FCY Assets FCY Liabilities
FCY Denominated External Assets & Liabilities
(End-2Q 2023) (RM bil)
31
Effective exchange rates offer a broader perspective of a country’s
currency value
Apart from bilateral exchange rates, the NEER and REER are used to assess a currency’s performance
1. The NEER considers a currency’s performance against a group of currencies, weighted by the importance of each trading partner. The REER then adjusts for price differences.
Source: Bank Negara Malaysia
Box article: Methodological Framework for Computing Malaysia’s Effective Exchange Rate Indices
• Effective exchange rates, namely the NEER
and REER, can provide insights into
macroeconomic conditions and can facilitate
price competitiveness assessments, inflation
analysis and external balance evaluations.
• Since 2018, movements in the ringgit NEER
and REER have been relatively more muted,
when comparing the movements of the NEER
and REER series with the bilateral ringgit
exchange rate against the US dollar.
Ringgit Nominal Effective Exchange Rate (NEER)1 and
Real Effective Exchange Rate (REER)1Series
3.8
3.9
4.0
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.880
84
88
92
96
100
Ja
n-
18
Ju
n-
18
N
ov
-1
8
Ap
r-1
9
Se
p-
19
Fe
b-
20
Ju
l-2
0
D
ec
-2
0
M
ay
-2
1
O
ct
-2
1
M
ar
-2
2
Au
g-
22
Ja
n-
23
Ju
n-
23
MYR / USDIndex (21 July 2005
= 100)
NEER REER MYR / USD
Note: Last date in the chart is 30 June 2023.
The daily REER is calculated by using the monthly CPI for each day of the month.
appreciation
31
Add. Info
4
32
Temporary commodity-related factors weighed on 2Q 2023 GDP
Source: Bank Negara Malaysia, Department of Statistics Malaysia, Malaysian Palm Oil Board
-10.5
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
Annual Change
% yoy
Plant maintenance activities and hot weather affected production in the mining, manufacturing and agriculture sector
32
Crude Oil and Condensates
Production Natural Gas Production Manufacture of refined petroleum
products (IPI) Crude Palm Oil Production
-5.9
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
Annual Change
% yoy
-8.4
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
Annual Change
% yoy
-6.3
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
Annual Change
% yoy
Add. Info
5
Slide Number 1
The global economy registered modest growth in 2Q 2023
Malaysia’s GDP grew by 2.9% in 2Q 2023
Growth underpinned by domestic demand and tourism activities
Larger current account surplus and continued FDI inflows
Looking ahead, domestic demand to remain the key driver of growth amid challenging global environment
Mixed indicators, but generally pointing to continued growth for the Malaysian economy
Slowdown in goods exports partially cushioned by increased �tourism activities
Labour market continued to improve
Household spending to remain as anchor of growth
Slide Number 11
MADANI Economy Framework to drive comprehensive restructuring of the Malaysian economy
Disinflation trend continued with lower headline and core inflation
Box Article: Lower headline inflation reflected the decline in both common and idiosyncratic components
Going forward, risks to inflation stem mainly from global developments
Slide Number 16
Domestic financial market developments driven mainly by external factors
Recently, the ringgit has appreciated against the US dollar
Banks remain well-positioned to support financial intermediation needs
Financing in 2Q 2023 remained supportive of SMEs’ business needs
Summary
Slide Number 22
Slide Number 23
Slide Number 24
Slide Number 25
Slide Number 26
Slide Number 27
Breakdown of 2Q 2023 GDP (% yoy)
Financial account recorded a larger net outflow
Adequate buffers to weather external shocks
Effective exchange rates offer a broader perspective of a country’s �currency value
Temporary commodity-related factors weighed on 2Q 2023 GDP
[Post-Publish] 2Q23 QB_Slides_20230821.pdf
Default Section
Slide 1
Part A: Developments
Slide 2: The global economy registered modest growth in 2Q 2023
Slide 3: Malaysia’s GDP grew by 2.9% in 2Q 2023
Slide 4: Growth underpinned by domestic demand and tourism activities
Slide 5: Larger current account surplus and continued FDI inflows
Part B: Outlook
Slide 6: Looking ahead, domestic demand to remain the key driver of growth amid challenging global environment
Slide 7: Mixed indicators, but generally pointing to continued growth for the Malaysian economy
Slide 8: Slowdown in goods exports partially cushioned by increased tourism activities
Slide 9: Labour market continued to improve
Slide 10: Household spending to remain as anchor of growth
Slide 11
Slide 12: MADANI Economy Framework to drive comprehensive restructuring of the Malaysian economy
Slide 13: Disinflation trend continued with lower headline and core inflation
Slide 14: Box Article: Lower headline inflation reflected the decline in both common and idiosyncratic components
Slide 15: Going forward, risks to inflation stem mainly from global developments
Slide 16
Part C: Monetary and Financial Developments
Slide 17: Domestic financial market developments driven mainly by external factors
Slide 18: Recently, the ringgit has appreciated against the US dollar
Slide 19: Banks remain well-positioned to support financial intermediation needs
Slide 20: Financing in 2Q 2023 remained supportive of SMEs’ business needs
Part D: Summary
Slide 21: Summary
Slide 22
Slide 23
Slide 24
Slide 25
Slide 26
Additional Information
Slide 27
Slide 28: Breakdown of 2Q 2023 GDP (% yoy)
Slide 29: Financial account recorded a larger net outflow
Slide 30: Adequate buffers to weather external shocks
Slide 31: Effective exchange rates offer a broader perspective of a country’s currency value
Slide 32: Temporary commodity-related factors weighed on 2Q 2023 GDP
| Press Release |
07 Aug 2023 | International Reserves of Bank Negara Malaysia as at 31 July 2023 | https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-31-july-2023 | https://www.bnm.gov.my/documents/20124/6118085/qb2021q4_en_box_imports.pdf | null |
Reading:
International Reserves of Bank Negara Malaysia as at 31 July 2023
Share:
International Reserves of Bank Negara Malaysia as at 31 July 2023
Embargo :
For immediate release
Not for publication or broadcast before
1500 on
Monday, 7 August 2023
7 Aug 2023
The international reserves of Bank Negara Malaysia amounted to USD112.9 billion as at 31 July 2023. The reserves position is sufficient to finance 5.1 months of imports of goods and services[1], and is 1.1 times the total short-term external debt.
[1] Under the previous import coverage measure, reserves are sufficient to finance 7.0 months of retained imports of goods. For more information on the new indicator, please refer to the article on “Expansion of the Measure on Reserve Coverage of Imports – from Retained Imports to Imports of Goods and Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of 2021 publication, page 27, which can be accessed at Quarterly Bulletin 4Q2021 Related Assets
BNM Statement of Assets & Liabilities - 31 July 2023
Bank Negara Malaysia
7 August 2023
© Bank Negara Malaysia, 2023. All rights reserved.
|
Monthly Highlights
Headline inflation declined to 3.4% in March
March 2023
1
3.7 3.4
3.9 3.8
0.00
2.00
4.00
0.0
2.0
4.0
J
a
n
-2
2
F
e
b
-2
2
M
a
r-
2
2
A
p
r-
2
2
M
a
y
-2
2
J
u
n
-2
2
J
u
l-
2
2
A
u
g
-2
2
S
e
p
-2
2
O
c
t-
2
2
N
o
v
-2
2
D
e
c
-2
2
J
a
n
-2
3
F
e
b
-2
3
M
a
r-
2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation declined to 3.4% in March
(February: 3.7%) due mainly to lower inflation for
fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation moderated slightly to 3.8% during
the month (February: 3.9%), driven largely by
lower inflation for food away from home.
1
Robust growth in volume index driven by retail and motor vehicles
Index of Wholesale and Retail Trade
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded by 10.6% in February 2023
(January: 8.5%).
• The higher growth was driven mainly by retail
sales in non-specialised stores (e.g., department
stores) followed by continued strength in
purchases of motor vehicles amid the ongoing
fulfilment of backlog orders.
• On a month-on-month seasonally adjusted basis,
the index accelerated by 5.5% (January: 0.2%).
9.5 8.510.6
0
10
20
30
40
Feb-
22
Mar-
22
Apr-
22
May-
22
Jun-
22
Jul-
22
Aug-
22
Sep-
22
Oct-
22
Nov-
22
Dec-
22
Jan-
23
Feb-
23
ppt, %yoy
Motor vehicles Retail Wholesale
2.4
5.2
4.4
0
1
2
3
4
5
6
7
Mar-22 Jul-22 Nov-22 Mar-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Growth in credit to the private non-financial sector moderated
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
2.7 2.6 2.7 2.6
1.0 0.6 0.7 0.7
1.0
1.1 1.1 0.9
4.7 4.3 4.5 4.2
Dec-22 Jan-23 Feb-23 Mar-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Contribution to growth (ppt)
• Credit to the private non-financial sector grew by
4.2% as at end-March (February: 4.5%), attributed
to slower growth in credit to businesses (3.2%;
February: 3.7%).
• While growth in outstanding corporate bonds
moderated (4.4%; February : 5.5%), outstanding
business loan growth was sustained at 2.4%
(February: 2.4%). This was supported by the
continued growth in both working capital (2.2%;
February: 1.9%) and investment-related loans
(4.3%; February: 4.2%).
• Outstanding household loan growth remained
broadly stable (5.2%; February: 5.3%), supported
by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan
growth for the purchase of securities (-6.9%;
February: -3.3%).
Credit to the Private Non-Financial Sector1,2
Monthly Highlights
March 2023
Domestic financial market conditions remained orderly
Financial Market Performance in March 2023
Source: Bank Negara Malaysia, Bursa Malaysia
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
11.0
-2.1
-5.3
0.0
-2.2
1.7
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-10 -5 0 5 10 15
Mar-23
Feb-23
• In March, global financial markets were affected by
the emergence of banking sector stress in some
major economies. As spillovers were contained thus
far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds
improved.
• In line with the performance of regional currencies,
the ringgit appreciated by 1.7% against the US
dollar. Conditions in the domestic bond market
also remained stable.
• The FBM KLCI declined by 2.2% during the month.
2
Banks maintained strong liquidity and funding positions to support intermediation
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.9
157.4
0
40
80
120
160
70
75
80
85
90
95
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
increased slightly to 1.8% (February-23: 1.8%) and
1.2% (February-23: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory
reserves) continue to record a prudent level of
110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
%
1.8
1.2
1.7
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
M
a
r
2
2
A
p
r
2
2
M
a
y
2
2
J
u
n
2
2
J
u
l
2
2
A
u
g
2
2
S
e
p
2
2
O
c
t
2
2
N
o
v
2
2
D
e
c
2
2
J
a
n
2
3
F
e
b
2
3
M
a
r
2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
157.4% (February-23: 152.7%).
• The aggregate loan-to-fund ratio remained stable at
81.9% (February-23: 81.6%).
PRESS RELEASE
Ref. No.: 04/23/05 EMBARGO: Not for publication or
broadcast before 1500 hours on
Friday, 28 April 2023
Monthly Highlights – March 2023
Headline inflation declined to 3.4% in March
• Headline inflation declined to 3.4% in March (February: 3.7%) due mainly
to lower inflation for fuel, air fares and selected food items, in line with
the easing global commodity prices.
• Core inflation1 moderated slightly to 3.8% during the month
(February: 3.9%), driven largely by lower inflation for food away from
home.
Robust growth in volume index driven by retail and motor vehicles
• The Index of Wholesale and Retail Trade (IOWRT) expanded by 10.6%
in February 2023 (January: 8.5%).
• The higher growth was driven mainly by retail sales in non-specialised
stores (e.g., department stores) followed by continued strength in
purchases of motor vehicles amid the ongoing fulfilment of backlog
orders.
• On a month-on-month seasonally adjusted basis, the index accelerated
by 5.5% (January: 0.2%).
1 Core inflation is computed by excluding price-volatile and price-administered items.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
Growth in credit to the private non-financial sector2,3 moderated
• Credit to the private non-financial sector grew by 4.2% as at end-March
(February: 4.5%), attributed to slower growth in credit to businesses
(3.2%; February: 3.7%).
• While growth in outstanding corporate bonds moderated (4.4%;
February: 5.5%), outstanding business loan growth was sustained at
2.4% (February: 2.4%). This was supported by the continued growth in
both working capital (2.2%; February: 1.9%) and investment-related
loans (4.3%; February: 4.2%).
• Outstanding household loan growth remained broadly stable (5.2%;
February: 5.3%), supported by growth in loans for car purchases (8.7%;
February: 7.6%). This was amid weaker loan growth for the purchase of
securities (-6.9%; February: -3.3%).
Domestic financial market conditions remained orderly
• In March, global financial markets were affected by the emergence of
banking sector stress in some major economies. As spillovers were
contained thus far due to early action by authorities, investors’ risk
appetite for emerging market currencies and bonds improved.
• In line with the performance of regional currencies, the ringgit
appreciated by 1.7% against the US dollar. Conditions in the domestic
bond market also remained stable.
• The FBM KLCI declined by 2.2% during the month.
Banks maintained strong liquidity and funding positions to support
intermediation
• Banks continued to record healthy liquidity buffers with the aggregate
Liquidity Coverage Ratio at 157.4% (February: 152.7%).
2 Comprises loans to households and non-financial corporations from the banking system and development financial
institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
3 Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced
to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
P u b l i s h e d b y :
S t r a t e g i c C o m m u n i c a t i o n s D e p a r t m e n t , L e v e l 1 4 , B l o c k B , B a n k N e g a r a M a l a y s i a ,
J a l a n D a t o ’ O n n , 5 0 4 8 0 K u a l a L u m p u r , M a l a y s i a .
E - m a i l : c o m m u n i c a t i o n s @ b n m . g o v . m y
W e b : w w w . b n m . g o v . m y
• The aggregate loan-to-fund ratio remained stable at 81.9%
(February: 81.6%).
Asset quality in the banking system remained intact
• Overall gross and net impaired loans ratios increased slightly to 1.8%
(February: 1.8%) and 1.2% (February: 1.1%), respectively.
• Loan loss coverage ratio (including regulatory reserves) continues to
record a prudent level of 110.5% of impaired loans, with total provisions
accounting for 1.7% of total loans.
Bank Negara Malaysia
28 April 2023
20230428_BNM Monthly Highlights-March_en
Slide 1
Slide 2
20230428_BNM PR_Monthly Highlights-Mar 2023_eng
| Press Release |
31 Jul 2023 | Monetary and Financial Developments in June 2023 | https://www.bnm.gov.my/-/monetary-and-financial-developments-in-june-2023 | https://www.bnm.gov.my/documents/20124/11457190/i_en.pdf | null |
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Monetary and Financial Developments in June 2023
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7
Monetary and Financial Developments in June 2023
Embargo :
For immediate release
Not for publication or broadcast before
1500 on
Monday, 31 July 2023
31 Jul 2023
Headline inflation continued to decline to 2.4% in June
Headline inflation declined to 2.4% (May 2023: 2.8%). This moderation was largely due to lower inflation for core CPI components (-0.3 percentage points, ppt) and fuel (-0.1ppt).
The moderation in core inflation[1] (June 2023: 3.1%; May 2023 3.5%) was mainly due to lower inflation for some discretionary services, particularly food away from home.
Exports declined in June
Exports contracted by 14.1% (May 2023: -0.9%) in June 2023 reflecting weaker external demand, a decline in commodity prices and a high base effect from 2022.
Manufactured export growth was weighed down mainly by petroleum products and palm oil-based products. Commodities exports declined due to lower shipments of palm oil, LNG, and crude petroleum.
Sustained credit growth in June, despite slower growth in business loans
Credit to the private non-financial sector[2],[3] was broadly sustained (3.9%; May 2023: 4.0%) despite slower expansion in credit to businesses (2.6%; May 2023: 2.8%).
Growth in outstanding business loans moderated to 1.0% (May 2023: 1.6%), following slower growth in working capital loans among non-SMEs. Growth in outstanding corporate bonds, however, improved slightly to 4.9% (May 2023: 4.6%).
For households, outstanding loan growth was unchanged at 5.1%, with sustained growth across most loan purposes. Notwithstanding this, loan applications recorded slower growth, particularly for the purchase of houses and personal use, partly due to the high base effect from a strong increase in June 2022.
Domestic financial markets remained mostly driven by external factors
Global financial sentiments were weighed down by concerns over the global growth outlook due to weaker-than-expected economic recovery in China. This was further compounded by slower economic activity in Europe and weak corporate earnings.
The ringgit depreciated against the US dollar by 1.3% (regional[4] average: -0.1%) while the FBM KLCI declined by 0.8% (regional4 average: -0.1%) in June.
Meanwhile, in tandem with global bond yields, the 10-year MGS yields rose by 15 bps, following indication of tighter monetary policy stance going forward by the US Federal Reserve.
Banks maintained strong liquidity and funding positions to support intermediation
Banks continue to record healthy liquidity buffers with the aggregate Liquidity Coverage Ratio at 155.3% (May 2023: 151.0%).
The aggregate loan-to-fund ratio remained broadly stable at 81.6% (May 2023: 81.8%).
Asset quality in the banking system remained intact
Overall gross and net impaired loans ratios remained broadly unchanged at 1.75% (May 2023: 1.80%) and 1.09% (May 2023: 1.10%), respectively.
Loan loss coverage ratio (including regulatory reserves) continues to be at a prudent level of 116.2% of impaired loans, with total provisions accounting for 1.6% of total loans.
See also: Monthly Highlights [PDF]
[1] Core inflation is computed by excluding price-volatile and price-administered items.
[2] Comprises loans to households and non-financial corporations from the banking system and development financial institutions (DFIs), and corporate bonds issued by non-financial corporations (including short-term papers).
[3] Starting with the publication of December 2022 Monthly Highlights and Statistics (MHS), this series was introduced to enhance the quality of financing data. This new data series is available in the MHS Table 2.18.
[4] Regional countries comprise Singapore, Thailand, Philippines, Indonesia, and Korea. Related Assets
Monthly Highlights & Statistics in June 2023
Bank Negara Malaysia
31 July 2023
© Bank Negara Malaysia, 2023. All rights reserved.
|
Monthly Highlights May 2023
Monthly Highlights
Headline inflation declined further to 2.8% in May
May 2023
Contribution to Inflation
ppt. contribution %, yoy
1 Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia & Bank Negara Malaysia estimates
• Headline inflation moderated to 2.8% (April 2023:
3.3%). This decline was largely due to non-core
CPI components, particularly lower inflation for
fuel (-0.2 percentage points, ppt) and fresh food
(-0.1ppt).
• Core inflation also declined slightly to 3.5% (April
2023: 3.6%) amid lower inflation for
communication services.
3.3
2.8
3.6 3.5
0.00
2.00
4.00
0.0
2.0
4.0
J
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-2
2
F
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-2
2
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2
2
A
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2
M
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-2
2
J
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-2
2
J
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2
2
A
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-2
2
S
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-2
2
O
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2
2
N
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2
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-2
2
J
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-2
3
F
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-2
3
M
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2
3
A
p
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2
3
M
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-2
3
Food & non-alcohol (29.5%) Housing & utilities (23.8%)
Transport (14.6%) Others (32.1%)
Headline inflation (RHS) Core inflation¹ (RHS)
1.6
5.1
4.6
0
1
2
3
4
5
6
7
May-22 Sep-22 Jan-23 May-23
Business loans
Household loans
Corporate bonds
Annual growth (%)
Credit to the Private Non-Financial Sector1,2
1
Growth in credit to the private non-financial sector improved in May
1 Comprises loans to households and non-financial corporations from the
banking system and development financial institutions (DFIs), and corporate
bonds issued by non-financial corporations (including short-term papers).
2 Starting with the publication of December 2022 Monthly Highlights and
Statistics (MHS), this series was introduced to enhance the quality of
financing data. This new data series is available in the MHS Table 2.18.
Source: Bank Negara Malaysia
Contribution to growth (ppt)
• Credit to the private non-financial sector expanded
by 4.0% as at end-May (April 2023: 3.7%), driven
mainly by higher growth in credit to businesses
(2.8%; April 2023: 2.5%).
• Outstanding corporate bonds grew by 4.6% (April
2023: 4.4%), while outstanding business loans
expanded by 1.6% (April 2023: 1.0%). The higher
business loan growth reflected improvement in
loans for both working capital and investments to
SMEs and non-SMEs.
• In the household segment, outstanding loan
growth was sustained at 5.1% (April 2023: 5.0%),
supported by higher growth across most loan
purposes. Of note, household loan growth
continued to be driven by loans for the purchase of
houses and cars, which grew by 7.0% and 8.4%,
respectively (April 2023: 6.8% and 8.0%).
2.7 2.6 2.5 2.6
0.7 0.7 0.3 0.5
1.1 0.9
0.9 1.0
4.5 4.2
3.7 4.0
Feb-23 Mar-23 Apr-23 May-23
Corporate Bonds
Business Loans
Household Loans
Credit to the Private Non-
Financial Sector
Index of wholesale and retail trade growth moderated in April
Source: Department of Statistics, Malaysia
• The Index of Wholesale and Retail Trade
(IOWRT) expanded more moderately by 4.7% in
April 2023 (March 2023: 9.4%). The lower growth
was due mainly to the decline in the motor vehicle
segment.
• However, the retail segment continued to record a
double-digit growth of 10.0% (March 2023:
13.8%), supported by sales in non-specialised and
other specialised stores1.
• On a month-on-month seasonally adjusted basis,
the index increased at a faster pace of 6.5%
(March 2023: -0.9%).
1 Other goods in specialised stores includes clothing, footwear,
pharmaceuticals, cosmetics, watches, jewellery and optical goods.
10.6
9.4
4.7
-2
3
8
13
18
23
28
33
Apr-22 Jun-22 Aug-22 Oct-22 Dec-22 Feb-23 Apr-23
ppt, %yoy
Motor vehicles Retail Wholesale
Index of Wholesale and Retail Trade
Monthly Highlights
2
May 2023
Domestic financial markets were largely affected by external factors
Financial Market Performance in May 2023
-18.0
-0.5
-1.1
-3.0
-2.0
-3.4
10-year MGS
(bps, mom)
Equity
(%, mom)
Ringgit
(%, mom)
-20 -15 -10 -5 0
May-23 Apr-23
Note: The exchange rate data is the noon-rate in the Kuala Lumpur Interbank Foreign Exchange Market
1Regional countries comprise Singapore, Thailand, Philippines, Indonesia, and Korea
Source: Bank Negara Malaysia, Bursa Malaysia
• Global investors maintained a risk-off approach
throughout May, as concerns over the impact of the
US debt ceiling crisis and the weaker-than-
expected rebound in China’s economy weighed on
global financial markets.
• As a result, the ringgit depreciated against the US
dollar by 3.4% (regional1 average: -1.2%). Similarly,
the FBM KLCI declined by 2.0% (regional1 average:
-1.3%).
• Nonetheless, the 10-year MGS yields decreased
slightly by 3 basis points, supported by non-resident
inflows into the domestic bond market.
Banks maintained strong liquidity and funding positions to support intermediation
• Banks continued to record healthy liquidity buffers
with the aggregate Liquidity Coverage Ratio at
151.2% (April 2023: 154.3%).
• The aggregate loan-to-fund ratio remained stable at
81.8% (April 2023: 82.1%).
Source: Bank Negara Malaysia
Banking System Liquidity and Funding Ratios
81.8
151.2
0
40
80
120
160
70
75
80
85
90
95
M
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2
2
J
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2
J
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2
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2
2
O
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2
2
N
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2
D
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2
2
J
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2
3
F
e
b
2
3
M
a
r
2
3
A
p
r
2
3
M
a
y
2
3
% %
Liquidity Coverage Ratio (RHS)
Loan-to-Fund Ratio
Asset quality in the banking system remained intact
Banking System Asset Quality
Source: Bank Negara Malaysia
• Overall gross and net impaired loans ratios
remained broadly unchanged at 1.80% (April
2023: 1.78%) and 1.10% (April 2023: 1.10%),
respectively.
• Loan loss coverage ratio (including regulatory
reserves) remained at a prudent level of 114.1%
of impaired loans, with total provisions accounting
for 1.7% of total loans.
%
1.8
1.1
1.7
0.5
1.0
1.5
2.0
M
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2
3
M
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3
A
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3
M
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2
3
Gross Impaired Loans Ratio
Total Provisions to Total Loans Ratio
Net Impaired Loans Ratio
April 2023 Monthly Highlights
Slide 1
Slide 2
| Press Release |
31 Jul 2023 | Detailed Disclosure of International Reserves as at end-June 2023 | https://www.bnm.gov.my/-/detailed-disclosure-of-international-reserves-as-at-end-june-2023-1 | null | null |
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Detailed Disclosure of International Reserves as at end-June 2023
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Detailed Disclosure of International Reserves as at end-June 2023
Embargo :
For immediate release
Not for publication or broadcast before
1200 on
Monday, 31 July 2023
31 Jul 2023
In accordance with the International Monetary Fund (IMF) Special Data Dissemination Standard (SDDS) format, the detailed breakdown of international reserves provides forward-looking information on the size, composition and usability of reserves and other foreign currency assets, and the expected and potential future inflows and outflows of foreign exchange of the Federal Government and Bank Negara Malaysia over the next 12-month period.
The detailed breakdown of international reserves based on the SDDS format is shown in Tables I, II, III and IV.
As shown in Table I, official reserve assets amounted to USD111,407.1 million, while other foreign currency assets amounted to USD1.8 million as at end-June 2023.
As shown in Table II, for the next 12 months, the pre-determined short-term outflows of foreign currency loans, securities and deposits, which include among others, scheduled repayment of external borrowings by the Government and the maturity of foreign currency Bank Negara Interbank Bills, amounted to USD14,595.1 million. The net short forward positions amounted to USD24,083.5 million as at end-June 2023, reflecting the management of ringgit liquidity in the money market. In line with the practice adopted since April 2006, the data excludes projected foreign currency inflows arising from interest income and the drawdown of project loans. Projected foreign currency inflows amount to USD2,210.7 million in the next 12 months.
As shown in Table III, the only contingent short-term net drain on foreign currency assets are Government guarantees of foreign currency debt due within one year, amounting to USD371.0 million. There are no foreign currency loans with embedded options, and no undrawn, unconditional credit lines provided by or to other central banks, international organisations, banks and other financial institutions. Bank Negara Malaysia also does not engage in foreign currency options vis-à-vis ringgit.
Overall, the detailed breakdown of international reserves under the IMF SDDS format indicates that as at end-June 2023, Malaysia’s international reserves remain usable. Related Assets
International Reserves and Foreign Currency Liquidity (30 June 2023)
Bank Negara Malaysia
31 July 2023
© Bank Negara Malaysia, 2023. All rights reserved.
| null | Press Release |