fraziali ismail : non - performing loans in east asia and the pacific practices and lessons in times of covid - 19 opening remarks by mr fraziali ismail, assistant governor of the central bank of malaysia ( bank negara malaysia ), at the webinar and the launch of world bank ’ s report on non - performing loans ( npl ) in east asia and the pacific, 27 october 2021. * * * a very good morning to everyone! it gives me great pleasure to welcome you to this webinar in conjunction with the launch of the world bank report on “ non - performing loans in east asia and the pacific : practices and lessons in times of covid - 19 ”. this event comes at a time where many of us in the region are still navigating through uncertainties with the pandemic. recovery in many regional economies including malaysia has begun to gather pace in recent periods in tandem with the recovery in global economic activity. however, the outlook remains subject to large downside risks as the potential for new variants of covid - 19 remains high. these developments are also happening amid the gradual expiry of policy support extended to households and businesses affected by the pandemic. the unprecedented level of support extended has so far helped to keep loan impairments at bay. but, as these measures are gradually unwound as the economy recovers, we would expect to have much greater visibility on the true asset quality of banks. let me now continue my remarks by focusing on malaysia ’ s own experience in managing this pandemic, specifically how we have sought to ensure our banks remain well - positioned to manage potential deterioration in asset quality caused by the pandemic once the raft of policy measures expire. malaysia ’ s experience – what, why and how malaysia, like most countries in this region, relied on a coordinated set of fiscal, monetary, and prudential policies to weather the impact of the pandemic. our priority at the onset of the pandemic was to provide immediate financial relief to affected borrowers and ensure uninterrupted flow of credit to the economy. with that in mind, we did 3 things ; i. first, we implemented a blanket, automatic 6 - month loan moratorium for individual and sme borrowers ; ii. second, we introduced and expanded subsidised funds and credit guarantee schemes for businesses, particularly for smes ; and iii. third, regulatory and supervisory flexibilities were

in these economies, but it also poses a potential risk to the rest of the world. for example, it could push even more capital flows in the direction of emerging economies like malaysia. the crisis has also stretched the fiscal position of governments, both in the advanced and emerging economies. in some cases, such deterioration was related to dealing with the effects of the crisis ( e. g., from bank rescues ) and the low gdp growth post - crisis, in others it reflects the outcome of years of unwise fiscal spending. whatever the reasons, constrained fiscal positions mean a reduced capacity to support economic activity and a reduced ability to deal with future crisis and shocks. it also means that monetary policy may be called on to do more than it can realistically deliver – a phenomenon we are already witnessing in the advanced economies. a related policy issue has to do with structural reforms. this is a topic that has been much discussed in the post - crisis years. the trans - atlantic crisis was a blow - up of large imbalances and distortions – both real and financial – built over many bis central bankers ’ speeches years. it reflects policymakers delaying or ignoring needed reforms. the experience has once again provided the lesson that the longer such imbalances are ignored and allowed to pile up, the bigger the mess when the whole pile finally comes crashing down. structural reforms are certainly needed in many of the crisis affected advanced economies. but they are also needed in many emes, including in malaysia. they are needed to ensure that economic growth is based on strong foundations and therefore will be more sustained and sustainable. yet, the pace of structural reforms in most economies has been very slow and has lacked momentum. the main reason behind this inertia is often the stranglehold of vested interest. on this point, let me quote mr. travis kelanik, the founder of the taxi service app uber, which last week caused the black cab drivers in london to go on strike. he was reported in the wall street journal as saying : “ … there ’ s so much corruption and so much cronyism in the taxi industry and so much regulatory capture that if you ask permission up front for something that is already legal, you ’ ll never get it. there ’ s is no upside to them. ” clearly, the taxi industry is not the only one that has this characteristics, nor is it the only one that would be resistant to competition and structural change. another reason for the inertia is that