‘Banks are well-positioned’: BNM

By Isabelle Francis
There is no need to increase the minimum capital requirement for local banks, which are well-positioned to absorb nonperforming loans (NPL) that is currently at historical low of 2%, said Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz.
"Banks' NPL levels are at a historical low of 2%, and even if it rises, the banks are well-positioned to absorb (it)," she told reporters in Kuala Lumpur on Apr 15 after launching the standardise master agreements for deposit and placement transactions for Islamic banks.
Banks, including the largest local lender Malayan Banking Bhd, Public Bank Bhd and RHB Bank Bhd, have recently taken steps to boost capital, which is seen as a pre-cautionary measure amidst the global financial crisis.
Based on current regulations, local banking institutions are required to maintain a minimum risk-weighted capital ratio of 8% at all times at the entity, global and consolidated level.
Zeti also said loans growth recorded by banks are at a "pace" that is supportive to the economy, reiterating that the central bank's focus now is on financing and not lowering interest rates.
To spur bank lending and ease credit flow, especially to smaller companies, the government on April 14, 2009, unveiled a RM10 billion guarantee scheme. Under the programme, the government would guarantee 80% of loans for companies with a shareholder equity of less than RM20 million. The scheme is part of the government's RM60 billion stimulus package.
Meanwhile, president of The Association of Islamic Banking Institutions Malaysia (AIBIM) Datuk Zukri Samat said 17 of its members will soon adopt two standardised Interbank master agreements, namely the Interbank Murabahah Master Agreement (IMAA) and Master Agency Agreement (MAA).
The structure and mechanism of IMMA and MAA have been reviewed by the Shariah Advisory Committees of the respective member banks and the final document reviewed by AIBIM's Shariah advisory Committee.
The adoption of IMAA and MAA will help increase the intensity of Islamic interbank activities as a result of tremendous cost and resources savings, said Zukri.

(This story appeared in The Malaysian Reserve on Apr 16, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)

Bursa Malaysia to launch the Commodity Murabahah House

Bursa Malaysia Bhd plans to launch the Commodity Murabahah House (CMH), an international spot commodity platform which operates under Shariah requirements, by middle of this year.
"Currently, Islamic financial institutions are using commodities which are traded on the London Metal Exchange (LME). So, we are creating an alternative platform for Islamic banks," Bursa's chief executive officer Datuk Yusli Mohamed Yusoff said on Mar 12.
He was speaking at a press conference at the 20th Annual Palm and Lauric Oils Conference and Exhibition 2009: Price Outlook 2009/2010 which ended in Kuala Lumpur.
The CMH infrastructure will be developed as a spot commodity market that uses crude palm oil (CPO) as the underlying commodity to facilitate Islamic financing based on the Murabahah concept. Yusli said the commodity-based Murabahah transactions would be the first for Malaysia that used CPO-based contracts.
"It has never been done and we are creating it here. We are combining Islamic finance and commodity which are our areas of strength in Malaysia," he said.
According to Yusli, CMH has received good support from palm oil producers who have committed substantial value of crude palm oil to be used as the underlying commodity. — Bernama