Take 5: Volume 1
Stress test, IFRS developments, health check
Stress test: Malaysian banking sector’s health
The International Monetary Fund (IMF) has just completed the Financial Sector Stability Assessment Program (FSAP) of Malaysia – a comprehensive and in-depth analysis of Malaysia’s financial sector.
Three macroeconomic scenarios were used to test the impact of four different risks on the banking sector’s health over a five-year period, 2012 - 2016.
- Regardless of the three macroeconomic scenarios, Malaysia’s banks were found to be resilient to a range of economic and market shocks.
- Malaysia has a well-capitalised banking system. Its risk-weighted capital ratio (RWCR) is at 15.2% versus BNM’s minimum requirement of 8%.
- Malaysia’s regulatory and supervisory regime for banks, insurance firms, securities and market infrastructure is well developed and exhibits a high degree of compliance with international standards.
Source: Malaysia: Financial Sector Stability Assessment by IMF, February 2013, BNM Annual Report 2012
IFRS developments: IASB proposes new expected credit loss model
The International Accounting Standards Board (IASB) released a new exposure draft (ED), Financial Instruments: Expected Credit Losses on 7 March 2013. The ED proposes that entities should recognise and measure a credit loss allowance or provision based on expected rather than incurred credit losses.
Expected credit loss model
- The new expected credit loss model would apply to loans, debt securities, trade receivables, lease receivables, irrevocable loan commitments and financial guarantee contracts.
- Credit losses would be measured as the 12-month expected credit losses or, if the credit risk has increased significantly since initial recognition (with some exceptions), the credit losses would be measured as the lifetime expected credit losses.
- A simplified approach would be available for trade and lease receivables.
- The estimate of expected credit losses would reflect a probability-weighted outcome, the time value of money and the best available information.
- The comment period for the exposure draft ends 5 July 2013.
Health check: transformation of Malaysia’s economy
In 2012, private consumption grew strongly at 7.7% and private investment grew at an astounding 22%.
Across sectors, growth is expected to be buoyant in 2013, with uplifts expected in the palm oil and the oil and gas sectors.
In its transition towards a higher value-added and high income economy, the main challenges for the Malaysian economy include sustaining private-sector driven growth, improving productivity, increasing innovation and promoting inclusiveness.
Five key economic indicators for Malaysia
Note: p - preliminary, f - forecast
Source: BNM Annual Report 2012