BNM: Global financial conditions are tightening on higher expectations for longer US interest rates

KUALA LUMPUR: Global financial conditions have tightened amid rising expectations for “higher for longer” interest rate hikes announced by the US central bank, Bank Negara Malaysia (BNM) said.

Malaysia’s central bank said expectations of higher US interest rates were supported by data showing the resilience of the US economy.

“Accordingly, 10-year MGS yields rose by 13 basis points (bps) (in September) compared to the regional average of 28 bps,” it said in a September financial and economic highlights statement.

On the ringgit, BNM said the ringgit depreciated by 1.1 percent last month against the regional average of 1.8 percent due to the increased strength of the US dollar, while the FBM KLCI fell 1.9 percent over the same period due to subdued investor sentiment. .

“Banks maintained a strong liquidity and funding position to support intermediation, and banks continued to record healthy liquidity buffers with the total liquidity coverage ratio at 151.5 percent in September (August 2023: 150.3 percent).

“The ratio between loans and assets of the banking system remained broadly stable at 82.5 percent in September (August 2023: 82.3 percent),” notes BNM.

As for asset quality in the banking system, central banks said it remained unchanged, with aggregate gross and net impaired loan ratios remaining broadly stable at 1.72 percent (August 2023: 1.78 percent) and 1.07 percent (August 2023: 1.11 percent). ) or September.

“The loan loss coverage ratio (including regulatory provisions) remains at a prudent level of 117.5 percent of impaired loans,” he added.

“The ratio of total provisions to total loans remained on a steady easing trend, helped by loan growth and the write-down of provisions following an improvement in asset quality.” – Bernama

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