taklimat laporan tahunan 2010 dan laporan kestabilan

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1 Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan Kewangan dan Sistem Pembayaran 2010 Gabenor Bank Negara Malaysia 23 Mac 2011

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Page 1: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

1

Taklimat Laporan Tahunan

2010 dan

Laporan Kestabilan

Kewangan

dan Sistem Pembayaran

2010

Gabenor Bank Negara Malaysia23 Mac 2011

Page 2: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

2

Global growth projection for 2011

Challenge for global economy going into 2011 is sustaining growth with job creation

Source: National authorities, IMF World Economic Outlook, January 2011 Update

2009 2010 2011f

Annual change (%)

World GDP -0.6 5.0 4.4World Trade -10.7 12.0 7.1

US -2.6 2.8 3.0

Euro area -4.1 1.7 1.5

Japan -6.3 3.9 1.6

Developing Asia 1/ 7.0 9.3 8.4

China 9.2 10.3 9.6

ASEAN-5 2/ 1.7 6.7 5.5

Note: Forecasts for 2011 are IMF’s projections1/ IMF: Asia ex-NIEs2/ IMF: Indonesia, Malaysia, Philippines, Thailand and Vietnam

• Significant improvement in 2010

• Continued recovery in advanced economies although growth remains slow

• Strong growth in emerging economies, particularly in Asia underpinned by domestic demand and recovery in world trade

• More recently, rising commodity and energy prices are leading to higher global inflation

Page 3: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

3

Global growth mainly from EMEs in 2011

-4-3-2-1012345678

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

f

-80-60-40-20020406080100120140160Advanced economies EM: Africa

EM: Asia EM: Eastern EuropeEM: Middle East EM: Latin AmericaEM: CIS EME contribution to global growth (RHS)

Contribution to world growth, p.p. share of world growth. %

Source: IMF World Economic Outlook Note: CIS is the Commonwealth of Independent States, formerly Soviet republics

While accounting for 47% of global economy, emerging economies expected to contribute more than 70% of global growth

Page 4: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

4

3

5

7

9

11

Dec

-07

Mar

-08

Jun-

08S

ep-0

8D

ec-0

8M

ar-0

9Ju

n-09

Sep

-09

Dec

-09

Mar

-10

Jun-

10S

ep-1

0D

ec-1

0

0

1

2

3

4

5

6

US Euro area UK Japan (RHS)

%% -14

-12

-10

-8

-6

-4

-2

0

22001 2003 2005 2007 2009

-12

-10

-8

-6

-4

-2

0

% of GDP % of GDP

Advanced economies still need to address structural problems

-10

-5

0

5

10

15

Dec

-07

Mar

-08

Jun-

08S

ep-0

8D

ec-0

8M

ar-0

9Ju

n-09

Sep

-09

Dec

-09

Mar

-10

Jun-

10S

ep-1

0D

ec-1

0

-4

-3

-2

-1

0

1

2

3

4

5

6%%

Restrained credit conditionsHigh unemployment rate High fiscal deficit1 32

Source: National authorities, Haver, IMF

Unemployment rate (%) Fiscal deficit, % of GDP

Credit to private sector, growth

Page 5: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

5

0

1

2

3

4

5

6

Dec

-07

Mar

-08

Jun-

08S

ep-0

8D

ec-0

8M

ar-0

9Ju

n-09

Sep

-09

Dec

-09

Mar

-10

Jun-

10S

ep-1

0D

ec-1

0

Index

0

1

2

3

4

5

6

7Index

Korea Singapore Hong KongChina C. Taipei (RHS) Thailand (RHS)

-30

-20

-10

0

10

20

30

40

50

Dec

-07

Apr

-08

Aug

-08

Dec

-08

Apr

-09

Aug

-09

Dec

-09

Apr

-10

Aug

-10

Dec

-10

-15

-10

-5

0

5

10

15

20

25

Regional economies supported by resilient domestic demand

-10

0

10

20

30

40

Dec

-07

Mar

-08

Jun-

08S

ep-0

8D

ec-0

8M

ar-0

9Ju

n-09

Sep

-09

Dec

-09

Mar

-10

Jun-

10S

ep-1

0D

ec-1

0

-8

-4

0

4

8

12

16yoy,%

Continued access to creditRising retail salesUnemployment trending down1 32

Source: National authorities, Haver

Unemployment rate Lending growth *

Note: * Refers to loans as reported in banks’ balance sheet, except for Indonesia which refers to loans outstanding

Indonesia

yoy,%Retail salesyoy,% yoy,%

Page 6: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

6

-3

-2

-1

0

1

2

3

4

5

6

7

8

2003

2004

2005

2006

2007

2008

2009

2010

2011

Rising commodity prices have increased the risk to higher global inflation

0

50

100

150

200

250

300

350

400

450

500

2003

2004

2005

2006

2007

2008

2009

2010

2011

Metals

Crude oil

Food

US

Euro

UK

East Asia-9

…driving up inflation in most economies

Index (Jan ’03 = 100) Yoy (%)

Rising commodity prices amid supply disruptions and geopolitical tensions…

Page 7: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

7

Different degrees of monetary policy response

0

2

4

6

8

10

2008 2009 2010 2011

PR China

Thailand

Indonesia

Korea

%

Malaysia

Ch Taipei

0

1

2

3

4

5

6

2008 2009 2010 2011

%

US

Euro area

UKJapan

…while most regional economies have started to normalise

or tighten since 2010Some advanced economies are expected

to begin to normalise

rates this year…

Key interest rates, % Key interest rates, %

Page 8: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

8

Global shifts in liquidity: Volatile capital flows…Large capital inflows driven by growth differentials and the search for yield…

0 4 8 12 16 20

C. Taipei

Thailand

India

Malaysia

Singapore

Philippines

Korea

Indonesia

PR China

20092010

Total flows into equity and bond markets

USD billionSource: EFPR

0 50 100 150 200

Hong Kong

P.R China

Malaysia

Singapore

Korea

C. Taipei

Philippines

Thailand

Indonesia

Stock market

Property prices

% change from end-2008 till end-2010

Stock market and property price performance

…driving stock and property prices higher

1

1/ till 3Q 10 for property pricesSource: Haver and Bloomberg

Page 9: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

9

Several countries have implemented measures to manage the consequences of these flows

Measures introduced in the region to manage capital flows

Hong Kong SAR & Singapore

Philippines

Indonesia

Thailand

Chinese Taipei

Korea

PR China

Limit capital inflows – capital account measures

Prudential & liquidity measures (macroprudential)

Greater flexibility for capital outflows (liberalisation)

Administrative measures (real estate)

Page 10: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

10

The Malaysian economy is projected to grow by 5% −

6% in 2011

-2

-1

0

1

2

3

4

5

6

7

8

2005

2006

2007

2008

2009

2010

p

2011

f

Annual change (%)

Source: Department of Statistics, Malaysia and Bank Negara Malaysia

5.0%

6.0%7.2%

p preliminary f forecast

• Slower growth in 1H 2011 – High base in 1H 2010, particularly

for exports and investment– Lower demand for electronic

exports

• Growth is expected to improve in 2H– Stronger expansion of domestic

demand, particularly, private consumption and investment

– Higher exports

Page 11: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

11

Strong growth in domestic demand to be driven by private sector activity

2010p 2011f 2010p 2011f

Annual change (%)

Contribution to growth (p.p)

Domestic demand 6.3 6.7 5.6 6.0Private sector 7.8 7.4 4.9 4.7

Consumption 6.6 6.9 3.6 3.7Investment 13.8 9.7 1.4 1.0

Public sector 2.5 5.1 0.6 1.3Consumption 0.1 7.2 0.0 1.0

Investment 5.5 2.7 0.6 0.3Net exports -24.2 2.3 -3.3 0.2

Exports of G&S 9.8 2.7 10.5 3.0Imports of G&S 14.7 2.8 13.8 2.8

Real GDP 7.2 5.0~6.0 7.2 5.0~6.0

Source: Department of Statistics, Malaysia and Bank Negara Malaysia

p preliminary f forecast

• Private domestic demand to be the main growth driver

- Strong private consumption

- Rising investment activity

• Public sector to remain supportive of growth

Page 12: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

12

Strong expansion in private consumption

Stronger expansion in consumer spending supported by:

– Favourable labour market conditions

– Rising disposable incomes

– Sustained consumer confidence

– Continued access to credit

p preliminary f forecast

Source: Department of Statistics, Malaysia and Bank Negara Malaysia

Real private consumption

9.1

6.8

8.5

0.7

6.9

10.5

6.6

0

2

4

6

8

10

12

2005 2006 2007 2008 2009 2010p 2011f

Annual change (%)

Page 13: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

13

Strong performance in private investment

Annual change (%) 2009 2010p 2011f

Real private investment -17.2 13.8 9.7• Increased capital spending in all

economic sectors- Key sectors: services,

manufacturing and mining

• Factors supporting private investment:

- Expansion of new growth areas- Strengthening domestic demand- Implementation of Government

initiatives- Sustained business confidence

Nominal Private Investment

0

10

2030

40

50

6070

80

90

2006 2007 2008 2009 2010p 2011f

RM billion

Agriculture Mining ManufacturingConstruction Services

Source: Department of Statistics, Malaysia and Bank Negara Malaysia

62.1

76.6 79.8

65.2

76.9

86.9

p preliminary f forecast

Page 14: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

14

FDI to increase further in 2011

• Higher net inflows of FDI in 2011

- Better corporate earnings

- Rising business confidence

- Further improvement in global FDI flows

- Liberalisation

- Implementation of Government ETP projects

• Inflows channeled mainly into the manufacturing, services, and oil and gas sectors

Net FDI inflows into Malaysia

29.5

24.1

5.0

27.632.4

0

10

20

30

40

50

2007 2008 2009 2010p 2011f

RM billion

p preliminary f forecast

Source: Department of Statistics, Malaysia and Bank Negara Malaysia

Page 15: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

15

Annual change (%) 2010p 2011f

Agriculture 1.7 3.4

Mining 0.2 2.0

Manufacturing 11.4 5.7

Construction 5.2 5.4

Services 6.8 5.9

Real GDP 7.2 5.0 ~ 6.0

Broad-based growth across all sectors

• Supported mainly by the continued growth of domestic economic activity

• Trade-related services and export-oriented manufacturing industries to record slower growth in line with the expected moderation in external demand

Source: Department of Statistics, Malaysia and Bank Negara Malaysia

p preliminary f forecast

Page 16: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

16

External trade to expand in 2011

• Exports– Moderation from the high base

of 2010, particularly in manufactured exports

– But, strong support from commodity exports due to higher prices and sustained regional demand

• Imports– Modest growth in intermediate

imports– Growth in capital and

consumption imports reflects strong domestic demand

Annual change (%) 2010p 2011f

Gross exports 15.6 5.4Manufactured 13.0 4.4

E&E 9.9 3.7

Non-E&E 17.3 5.2

Commodities 26.9 10.1Agriculture 30.8 12.4

Minerals 23.4 8.0

Gross Imports 21.7 5.7Capital 16.2 10.3

Intermediate 22.1 5.3Consumption 10.1 8.4

Trade balance (RM bn) 110.2 114.6

Source: Department of Statistics, Malaysia and Bank Negara Malaysia

p preliminary f forecast

Page 17: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

17

Current account to remain in surplus

• Larger trade surplus supported by higher commodity exports

• Services surplus, benefiting from higher tourism receipts

• Lower income deficit

- Higher earnings by Malaysian companies investing abroad

- Lower repatriation of profits and dividends by MNCs

Widening current account surplus

-50

-20

10

40

70

100

130

160

190

220

2007 2008 2009 2010p 2011f

RMb

-5

0

5

10

15

20% GNI

Goods ServicesIncome Current transfersCurrent Account, % GNI (RHS)

12.5%12.2%RM90.5b RM100.7b

Source: Department of Statistics, Malaysia and Bank Negara Malaysia

p preliminary f forecast

Page 18: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

18

Headline inflation to range between 2.5 – 3.5% in 2011

Inflation Forecast 2011

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2005 2006 2007 2008 2009 2010 2011/f

Annual growth (%)

2.5 –

3.5%

• Driven mainly by higher global commodity and energy prices, inflation is expected to increase in 2011.

• This trend is similar to other regional economies

Regional Countries Headline Inflation Forecast

3.8%

3.3%

1.7%

2.8%

3.0-5.0%3.0-5.0%

2.5-3.5%

3.0-4.0%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Singapore Malaysia Thailand Phillippines

Annual growth (%)

2010 2011 forecast

Note: Inflation forecast refer to the central bank official forecast

Page 19: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

19

Malaysia has adopted a comprehensive approach to manage inflationary pressures from commodity prices

In addition to macroeconomic policies, other measures taken are

• Increasing food production and its distributional efficiency

• Promoting greater energy efficiency by households and industry

• A more gradual subsidy rationalisation programme

• Providing income support to targeted groups

Page 20: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

20

Monetary policy in 2011 will remain supportive of growth, while managing risks to inflation

2.75%

2.50%

2.0%

3.5%

2.25%

1.5

2.0

2.5

3.0

3.5

4.0

Jun-

08A

ug-0

8O

ct-0

8D

ec-0

8Fe

b-09

Apr

-09

Jun-

09A

ug-0

9O

ct-0

9D

ec-0

9Fe

b-10

Apr

-10

Jun-

10A

ug-1

0O

ct-1

0D

ec-1

0

% Overnight Policy Rate (OPR)

• Given improved economic outlook, the OPR was adjusted in 2010 to

– Normalise monetary conditions

– Prevent the risk of financial imbalances

• For 2011, focus of monetary policy is to manage the risk of a more modest growth and higher inflation

– Monetary policy has the flexibility to remain accommodative

– The degree of accommodation may however, need to be reviewed to ensure sustainable economic growth

Page 21: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

21

Financing conditions expected to remain favourable

Net financing growth sustained…

3

6

9

12

15

Jan-

09

Mar

-09

May

-09

Jul-0

9

Sep

-09

Nov

-09

Jan-

10

Mar

-10

May

-10

Jul-1

0

Sep

-10

Nov

-10

Annual change (%)

Loan growth: 12.7%

Net financing growth: 11.3%

Total Financing

30

40

50

60

70

80

90

100

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

BusinessesHouseholds

Loans Applications by Businesses and Households RM billion

20102009

…supported by robust demand for loans from businesses and households

Page 22: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

22

Two-way capital flows expected to continue

• In 2010, the capital inflows to Malaysia went into both the bond and equity markets• Strong economic fundamentals and positive prospects will continue to attract portfolio inflows• But this is likely to be interrupted by intermittent reversals driven by external events

-15

-10

-5

0

5

10

15

20

25

Q1 Q2 Q32009

Q4 Q1 Q2 Q32010

Q4

Net Portfolio Investment into Malaysia

RM billion

Source: Department of Statistics Malaysia

Cumulative net equity fund flows (since Jan 07)

-40

0

40

80

120

160

200

Dec

-06

Apr

-07

Aug

-07

Dec

-07

Apr

-08

Aug

-08

Dec

-08

Apr

-09

Aug

-09

Dec

-09

Apr

-10

Aug

-10

Dec

-10

USD billion

-0.5

0.0

0.5

1.0

1.5

2.0

2.5USD billion

All Emerging Markets (LHS)Malaysia (RHS)

07

Source: Emerging Portfolio Fund Research Global

Page 23: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

23

Domestic equity market had sustained growth in line with regional trends

KLCI and Bursa Malaysia sectoral indices

80

100

120

140

160

180

200

220

Jan-

09M

ar-0

9M

ay-0

9Ju

l-09

Sep

-09

Nov

-09

Jan-

10M

ar-1

0

May

-10

Jul-1

0

Sep

-10

Nov

-10

Jan-

11M

ar-1

1

Index (Jan 2009=100)

Finance

Industrial

KLCI

Plantation

Construction

Performance of Major Indices (% growth)

87.0

63.2

63.0

49.7

45.2

23.5

64.5

78.3

22.1

52.0

19.0

46.1

40.6

37.6

21.9

19.3

12.8

10.1

9.6

9.0

5.3

-3.0

-20 0 20 40 60 80 100

Indonesia

Thailand

Philippines

Korea

Msia

US

Singapore

Taiwan

UK

HK

Japan

%

20102009

Page 24: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

24

-20 -15 -10 -5 0 5 10 15 20

AUD

JPY

THB

SGD

PHP

IDR

CNY

KRW

USD

GBP

EUR

2010

2009

-21.7%

20.6%

Ringgit performance driven by external and domestic developments• MYR appreciated against most currencies in 2010 following a relatively

subdued performance in 2009• Despite volatile capital flows, ringgit adjustments have been orderly

MYR performance against selected currencies in 2009 and 2010

% MYR appreciation% MYR depreciation

Page 25: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

25

Measures undertaken to allow more efficient management of foreign financial transactions

To allow more efficient management of foreign transactions, several measures have been undertaken, including:

• Allow settlements in local currencies

• Facilitate hedging activities by residents

• Allow unlimited holding of foreign currency accounts

• Allow settlement of transactions in foreign currency by exporters and importers

Page 26: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

26

Large inflows have also led to increases in international reserves

Net International Reserves(Jan’08 - Mar’11)

130.5

110.4

80

90

100

110

120

130

140

Jan-

08

Apr

-08

Jul-0

8

Oct

-08

Jan-

09

Apr

-09

Jul-0

9

Oct

-09

Jan-

10

Apr

-10

Jul-1

0

Oct

-10

Jan-

11

USD bn3.0

3.5

4.0

4.5

5.0

5.5

6.0

USD/MYR

Deleveraging activities by international investors

Resumption of capital inflows

Source: BNM

• Large inflows have led to increases in international reserves

– Since the resurgence of capital inflows in 2H 2009, net international reserves at USD110.4 bn in 15 March-11.

– During previous episode in Aug-08: USD130.5 bn

Page 27: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

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Capital flows currently well intermediated

• More diversified and developed financial system has helped to intermediate the capital flows

• Managed float regime has the necessary flexibility for the exchange rate to adjust to changing conditions

• Wider range of instruments for effective monetary operations

• Rigorous surveillance and information systems

• Stronger fundamentals and a healthy level of international reserves

• Closer cooperation and communication among central banks

Large inflows have increased liquidity in the domestic financial

system but, this has been well managed

Page 28: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

28

Bank Negara Malaysia Annual Financial Statements 2010

Page 29: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

29

Financial position remained strong in 2010:

• Total assets of BNM amounted to RM390.2 billion with International Reserves of RM328.7 billion (USD106.5 billion)

• Net profit of RM6.2 billion

• Dividend paid RM2 billion

Page 30: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

30

FINANCIAL STABILITY AND PAYMENT SYSTEMS REPORT 2010

Page 31: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

31

Financial system expanded in 2010 with higher value-added to the economy

• Contribution of financial sector to GDP at 11.6%

• Banking and insurance sector employs more than 143,000 staff

• Financial intermediation continued to function efficiently with sustained access

to financing

• Money, foreign exchange and capital markets remained orderly with

capacity to

absorb greater volume and volatility

Page 32: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

32

Stability of the financial sector was preserved throughout 2010

- strong fundamentals contributed towards efficient financial

intermediation

- orderly conditions in financial markets and payment and settlement systems facilitated trade and domestic economic

activity

Page 33: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

33

Financial system continues to be resilient

• Strong capital and liquidity buffers

• Improved profitability

• High asset quality

• Stress tests affirmed capacity to withstand extreme macroeconomic and financial conditions

Banking Sector (%) 2009 Jan’11Capital Adequacy

Risk-Weighted Capital RatioCore Capital RatioCapital Buffer (RM bil)

15.413.864.6

14.112.460.5

ProfitabilityReturn on AssetsReturn on Equity

1.214.0

1.819.7

Asset QualityNet Non Performing Loan* Ratio 1.8 2.2

Liquidity PositionLiquidity buffer (<1 mth, % of deposits) 18.2 14.8

Insurance/Takaful Sector (%) 2009 2010Capital Adequacy

Capital Adequacy Ratio^Capital Buffer^ (RM bil)

225.718.6

224.618.6

ProfitabilityProfit Before Tax (RM bil) 14.7 16.3

* Inclusive of impaired loans ^ Conventional industry only

Page 34: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

34

Continued access to financing by all sectors

• Loan outstanding in banking system grew by 13.1% to amount to RM893.3 bil

(January 2011)– Continued expansion to all segments,

including SMEs

• Bank deposits increased by 9.1%– Loan-to-deposit ratio stable at 81.2%

• New PDS issuances of RM76 bil– Danajamin approved RM4.6 bil worth of

guarantees

Financial System: Outstanding Financing1,190.21,145.11,120.11,080.9

0

200

400

600800

1000

1200

1400

Mar Jun Sept Jan 2011

RM bil

6

8

10

12

14%

Large Enterprises SMEHousehold OthersDebt securities Annual growth (RHS)

Banking System: Deposits

1,091.41,073.3 1,159.41,113.7

0200400600800

1,0001,2001,400

Mar Jun Sept Jan 2011

RM bil

8.0

8.2

8.4

8.6

8.8

9.0

9.2%

Business HouseholdOthers Annual growth (RHS)

Page 35: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

35

Overall financing quality remained intact

Net NPL ratio (%)

4.8

3.2

2.21.8

2.3 2.2

0

1

2

3

4

5

6

2006 2007 2008 2009 2010 Jan-11

%Loans in arrears

0

10

20

30

40

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

RM bil

0

1

2

3

4

5%

1 - <2 month (LHS) 2 - <3 month (LHS)

1 - <2 month (% of total loans) 2 - <3 month (% of total loans)

20102008 2009

Banks adopted Financial Reporting

Standards (FRS) 139 since Jan 2010

Loans-in-arrears remained stable to account for 4.1% of total loans

Increase in NPL reflects new accounting standards

Page 36: Taklimat Laporan Tahunan 2010 dan Laporan Kestabilan

36

Rising household indebtedness supported by strong financial buffers…

Household Debt-to-GDP Ratio (%)

50

60

70

80

2006 2007 2008 2009 2010

Household debt-to-GDP ratio unchanged at 75.9%

Household financial assets are 2.4 times of household debts

Household Financial Assets, Deposits and Debts

0

200

400

600

800

1,000

1,200

1,400

1,600

2006 2007 2008 2009 20100

50

100

150

200

250

300

Financial Assets (LHS) Debts (LHS)

Fin. Asset-to-Debt Ratio Deposit-to-Debt Ratio

RM billion %

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Composition of HH Financial Assets(RM1,386 bil)

Savings with EPF

30%

Unit Trust funds

Equity Holdings

17%

Endowment

policies 6%

Deposits with FIs

31%

…and high level of liquid assets, with bulk of borrowings for purchase of assets

Secured financing constitute 64.9% of household debt

Composition of HH Financial Debts(RM581 bil)

Others10%

Purchase of

Securities5%

Car financing

20%

Personal use15%

Credit Card5%

Housing loan45%

Liquid assets accounted for 64.6% of financial assets

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Household NPLs Ratio by Purpose (%)

3.2

1.22.5

1.90.70

3

6

9

12

2006 2007 2008 2009 2010Housing loans Car financingPersonal use Credit cardsPurchase of securities

Quality of household loans continue to improve

• Debt servicing capacity remains sound

– Delinquencies continued to improve– Gross NPL ratio: 2.3% (2009: 3.1%)– LIAs at 4.7% of total loans

• Banks maintain prudent loan underwriting standards and risk management practices

• Supported by comprehensive credit information system and infrastructure

Household NPLs and Loans in Arrears Ratio (%)

0

2

4

6

8

10

2006 2007 2008 2009 2010

NPL ratio

LIA ratio

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Comprehensive, pre-emptive strategies to preserve household sector resilience

Prudential policies

- Maximum loan-to-value ratio and new credit card guidelines

Intensive supervisory oversight

- Risk management practices including pricing

Standards on prudent and responsible lending practices

- Suitability and affordability assessments

Targeted financial education programme by AKPK

- Including advisory and support arrangements

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Ensuring prudent and responsible conduct for retail financing as part of measures to preserve household sector resilience• Inculcate responsible lending practices by financial institutions in dealing with

retail customers

• Requirements NOT intended nor expected to hamper credit availability

• Key requirements include– Suitability and affordability assessment– Verification of customers' income– Product disclosure sheet to facilitate informed decision making– Compensation of sales and marketing personnel to take into account fair dealing

conduct

• Complete submissions should not result in processing delays

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Key contents of product disclosure sheet• Borrowing rate, variable / fixed rate, tenure, repayment structure

• Repayment obligation– Installment amount, total repayment (entire duration), changes to installment

amount for 100-200bps increase in borrowing rate

• Applicable charges – Stamp duty, disbursement fee, processing fee

• Implications of non-repayment – Late payment penalty, review of borrowing rate, legal implications

• Risk associated with the product

• Assistance and redress mechanism

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Financial markets exhibited enhanced capacity to intermediate larger and more volatile portfolio flows

Volatility of asset prices remained low

90-day volatility (%)

0

5

10

15

20

25

30

35

40

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

KLCI MGS (5-year yield) [RHS]

Lehman collapse

European sovereign debt crisis

Lower returns to turnover ratio, denoting higher resilience

Ratio

0.000

0.004

0.008

0.012

0.016

0.020

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

0

0.1

0.2

0.3

0.4

FBM KLCI MGS [RHS]

Ratio

Avg 2010: 0.04

Avg 2010: 0.006

Source: Bloomberg

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Limited impact from developments in Europe and Middle East

• Banks’

exposures at 18.3% of external exposures or 5% of capital base– No adverse spillovers from interbank

funding strains in Europe

– Regional operations of domestic banks’ unaffected due to strong fundamentals

• Counterparty risks to European reinsurers well-contained– High net retention ratio of 71.4%

– Reinsurance exposures to Europe only 8.5% of total capital available for general insurance

Banking System: External Exposures

(RM bil, % of cap base)

GIIPS (0.1, 0.1)

US (0.2, 0.2)

Others (2.0, 1.3)

Asia (25.7, 17.1)Middle

East (2.2, 1.4)

Europe (5.3, 3.5)

Labuan (5.4, 3.6)

Distribution of Premium Income

0% 20% 40% 60% 80% 100%

Direct Insurers Domestic Reinsurers Offshore Reinsurers Foreign Reinsurers

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Foundations for financial stability were further strengthened

Enhanced robustness of risk management,

stress testing and capital management

More effective governance in financial institutions

Strengthened cross-border supervisory cooperation

Strengthened prudential standards for Islamic finance

Enhanced protection for depositors and policyholders

Adoption of more advanced capital approaches under

Basel II

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Malaysian banking system well-positioned to meet Basel III requirements• High level and quality of bank capital

• Liquidity standards have been in place since 2000

– Banks to further strengthen buffers going forward

• Implementation strategy for local adoption of Basel III to be communicated to industry in 2011

– Address specific characteristics of domestic market

– Minimise impact on bank lending and economic growth

Share premium

14.6%

Ordinary share capital22.9%

Retained profits19.5%

Others6.1%

Stat reserve fund14.9%

General provisions

7.1%

Sub debt capital14.8%

More than 70% is comprised of equity and reserves

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Growth potential of financial sector reinforced by further strategic initiatives in 2010

Enhanced inter-linkages with regional and international economies– Expanding regional footprint of Malaysian FIs– Issuance of new commercial banking and family takaful licences– Enhancing post-trade processing infrastructure for capital market– Enhancing cross-border payment infrastructure– Strengthened regional and international frameworks for cooperation

Improved environment for financing to SMEs– With comprehensive institutional framework and proactive measures by FIs

Continued development of human capital– ICLIF Leadership and Governance Center– Asian Institute of Finance

– INCEIF

Improving accessibility and sustainability of motor insurance

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High global financial inclusion rankings

No. 1

for 3 years

No. 2 out of 87 countries

No. 10 in 2010 out of 139 countries (up from no.13 in 2009)

No. 9 out of 110 countries

‘Getting Credit’World Bank (Doing Business 2009, 2010 & 2011 Reports)

‘Loan accountsper 1,000 adults’

CGAP (Financial Access Report 2010)

‘Ease of Accessto Loans’

WEF (The Global Competitiveness Reports

2009-2010 and 2010-2011)

‘Deposit accountsper 1,000 adults’

CGAP (Financial Access Report 2010)

Recent Achievements

Pembiayaan Mikro1

• Financing grew by 25.8% yoy to RM776 million benefiting over 66,000 microenterprises

Physical Outreach of Financial Services

• 8 unserved districts in East Malaysia will have physical access to financial services in 2011 via mini branches, mobile units & Pos Malaysia

Comprehensive Mechanisms for Consumer Education and Protection

• POWER: Educate young adults & first time borrowers on good money management & living with manageable debt

• Mobile LINK: Enhance accessibility of financial assistance & education to non-urban population

2

1

3

1. As at end 2010

Expanded outreach of financial services

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Migration to electronic means of payments has achieved significant advancements

Following successful launch of eShare Payment and eDividend

Capital market

Driving efficiency gains in various economic sectors and expanding the payment infrastructure

Mobile banking and payment

Unit trust, rights issues & refund of unsuccessful Initial Public Offering (IPO) applications

Multi-bank and mobile network operator neutral ecosystem to be piloted in 2H 2011

Internet B anking T ransact io ns

0

50

100

150

200

2004 2005 2006 2007 2008 2009 2010

millionVolume Ind Corp

D ebit C ard T ransact io ns

0

5

10

15

20

2004 2005 2006 2007 2008 2009 2010

million

0

1

2

3

4

5

RM bil

Volume Value (RHS)

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Outlook for domestic financial stability in 2011 remains positive

• Risks to financial stability likely to be largely externally driven

• Pre-emptive measures taken and strong financial buffers ensure that Malaysia’s financial system is well-placed with capacity and flexibility to respond to emerging risks

• Macrosurveillance

and supervisory activities in 2011 will focus on:– Ensuring prudent and responsible risk-taking and market conduct by FIs– Ensuring resilience and robustness of major payment and settlement systems– Active engagement in global regulatory and accounting reforms– Further strengthening of regulatory laws and prudential guidelines– Promoting closer domestic, regional and global cooperation and coordination

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Malaysia maintains a leading role in development of Islamic finance

Malaysia tops global league tables in sukuk equity and fund management

Source: “Gateway to Asia: Malaysia, international Islamic finance hub” by Pricewaterhouse Coopers 2010

…and home to largest sukuk market

Global Sukuk Outstanding by Country*USD148 billion

*Source: Bloomberg Professional Services Terminal, as at end-2010

Malaysia66%

Indonesia4%

Offshore Centres

16%

Others1%

Saudi7%

Bahrain2%

UAE4%

Singapore0.1%

(USD94 billion)

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Malaysia plays key role in development of Islamic international architecture

Islamic Financial Services Board11

• Global standard-setting body based in Malaysia for prudential standards in Islamic finance – 11 standards issued to date

• 195 members of which 53 regulators and supervisory authorities from Muslim and non-Muslim countries

Islamic Financial Stability Forum (IFSF)22

• Established following recommendation in Financial Stability Report led by Bank Negara Malaysia.• Strategic platform for dialogue among regulators of international Islamic financial system to promote financial

stability

International Islamic Liquidity Management Corporation (IILM)33

• Established in 2010 in Kuala Lumpur with participation of 12 central banks and regulatory agencies and 2 multilateral development institutions.

• Milestone in regional & international cooperation to build a robust liquidity management infrastructure at national, regional & international levels

• Facilitate cross-border liquidity management among players in the Islamic financial industry via regular issuances of short term high-grade Shariah-compliant instruments in major reserve currencies

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Significant achievements since 2001 FSMP

Robust regulatory, supervisory & surveillance framework

- Strengthened prudential standards- Risk-based supervisory framework- Stronger cross-border cooperation

Growing Islamic finance and MIFC- Accounts for >20% of banking sector assets- Comprehensive infrastructure and diversified players

- Global leader in sukuk issuances

More developed financial markets

Enhanced financial inclusion- Wider outreach of banking services- Higher lending to SMEs- Comprehensive consumer education and protection framework

Strong and mature domestic players- Larger domestic banks with average assets of >RM95 b

- Domestic banks market share > 75%- Wide array of products and services

Strengthened linkages with international and regional economies

- 6 banking groups in 19 countries- New licences

to global and regional players

- Higher PDS and sukuk financing with active secondary trading

- Increased breadth and liquidity of FX market

More market driven and competitive financial system

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Moving forward…

The new financial sector blueprint will build on the strong foundations of the Malaysian financial system to:

– remain resilient in withstanding any potential disruptions in the financial system and broader economy;

– to best serve the needs of a high value-added and high income economy;

while further promoting financial inclusion and regional financial integration