KUALA LUMPUR — August 27, 2015: Moody’s Investors Service considers the outlook for the Malaysian banking sector as stable because its exposure to foreign currency loans is minimal.
Its vice president-senior credit officer (Financial institutions group) Eugene Tarzimanov said the banks’ current position are quite strong compared to what they were during the Asian financial crisis.
“The banks are as good as the economy and Malaysia still remains one of the fastest growing economies in the region despite the headwind woes such as currency exchange, slowing economy in China and lower commodity prices,” he said at Moody’s media roundtable session here today.
The session was held to assess the impact of market volatility on Malaysian credit.
Tarzimanov said the impact of the weaker ringgit against the US dollar on local banks appeared to be very muted.
“There are strong linkages of the weaker ringgit to foreign currency loans and foreign currency funding.
“Both of those aspects are pretty small in Malaysia. We are talking about 10 per cent of loans in foreign currency and similar amount in foreign currency funding,” said Tarzimanov.
He further noted that the 10 per cent loans in foreign currency mainly involved exporters.
Asked on the challenges faced by the industry, he said profitability and slower growth dynamics would be the major concerns for the local banking
Commenting on the lower commodity prices, he said the loan exposure of Malaysian banks to the commodity segment is less than 10 per cent of total
“This is contrary to regional countries…for instance banks in Indonesia has more loan exposure to commodity as it is their core sector.” — Bernama