Malaysian banks need to adjust to comply with Basel III

PETALING JAYA: Malaysian banks are expected to implement drastic measures to adjust to reforms as required under the new global regulatory framework Basel III, the implementation of which will be progressive phased in by Jan 1, 2013.

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/1/12/business/10246038&sec=business
Published: January 12, 2012

According to international financial advisory firm KPMG, banks in Malaysia would be required to calculate and report their capital, leverage and liquidity positions to Bank Negara based on a standardised reporting template, which would be issued in the first quarter of this year.

“The key challenges facing banks can be summed up in two words – liquidity and capital – and as banks have been tasked with additional capital requirements, there will be continued focus on higher retention of earnings (rather than paying out of bonuses or dividends), cost reduction and reducing on- and off-balance sheet exposures,” said Anita Menon, executive director for financial risk management services at KPMG in Malaysia.

“While reform in the area of capital is non-problematic for most of Asia and likewise Malaysia, the Basel III reforms in the areas of liquidity pose a much greater challenge, and a number of Asian jurisdictions face fundamental issues, particularly in relation to shortage of high-quality liquid assets for banks to hold as liquidity,” she said.

KPMG said it expected Malaysian banks to focus on the setting and maintaining of internal capital targets, determining funding strategies, or pursuing transactions or strategies which could minimise the impact on capital levels in accordance with the implementation of Basel III.

KPMG said prudent earnings retention policies were expected of Malaysian banks to adopt in order to meet the enhanced capital and liquidity requirements prior to the implementation date.