KUALA LUMPUR: Domestic financial market conditions remained orderly despite heightened volatility in global financial markets in the second and third quarter of 2024, Bank Negara Malaysia (BNM) said in its Financial Stability Review for the first half 2024.
BNM said the shift in investor expectations around major central banks' monetary policy decisions contributed to the volatility in financial markets.
Since the start of 2024, the ringgit has appreciated by 11.4 per cent against the US dollar as at September 30.
Bank Negara Malaysia (BNM) said the ringgit continued to be primarily influenced by external developments.
"Positive economic prospects and domestic structural reforms, complemented by ongoing initiatives to encourage foreign exchange flows, will continue to support the ringgit," said the central bank.
Meanwhile, business activities improved in the first half of 2024 (1H24) supported by the recovery in export and stronger domestic demand.
Business sectors continued to face challenges arising from continuing cost pressures and slower recovery inconsumer demand in some segments for non-essential products.
The credit quality of business loans remained sound, with the impairment ratio stable at 2.6 per cent of business loans. The share of small and medium enterprises (SMEs) with delinquent loans has also declined.
"Consistent with this, the share of SMEs undergoing repayment assistanceprogrammes trended lower to 4.7 per cent of total SME loans (or 0.8 per cent of total loans from the banking system and development financial institutions)," it said.
The central bank expects business resilience to improve further in 2H24 i line with the projected sustained expansion in economic activity.
Input costs are expected to ease amid lower commodity prices and the appreciating ringgit.
It added household resilience continued to be supported by favourable economic andlabour market conditions.
The ratio of household debt-to-GDP has remainedbroadly unchanged at 83.8 per cent as household debt grew in line with the pace ofeconomic activity.
Household borrowings that may be at higher risk of default decreased to 4.4 per cent of total household loans, from 4.8 per cent in December last year.
"BNM continues to raise standardsexpected of financial institutions in response to new and emerging threats.These include introducing enhanced expectations on managing risks posed bythird-party service providers," said BNM deputy governor Jessica Chew.
As at end-June, the banking system's aggregate total capital ratio stood at 18.4 per cent, with capital buffers of RM136.1 billion in excess of the regulatory minimum.
Similarly, the insurance and takaful sector remained resilient, with an aggregate capital adequacy ratio of 227 per cent and excess capital buffers of RM37.4 billion.