‘Banking system exposure in O&G minimal’

PETALING JAYA: The Association of Banks in Malaysia (ABM) said the oil and gas (O&G) industry’s risks to the banking system remained limited as it only accounted for about 6.5% of total exposure.

The association said in a statement yesterday that the delinquent loans ratio for the O&G sector stood at 0.1% while impaired loans ratio increased to 5% in the third quarter of 2017, due mainly to cash flow issues observed in service providers in certain upstream segments.

“Corresponding figures for the second quarter of 2017 were 0.2% and 4.5%.”

The association was responding to an article in a business weekly entitled “Oil and Gas Conundrum” published over the weekend, which highlighted financing issues faced by oil and gas corporations here.

Nonetheless, ABM said its members have remained supportive and will continue to provide access to financing for viable businesses including O&G sector.

“All O&G cases have been given due consideration by the banks. Credit evaluation is conducted on O&G companies similar to loan applications by any other industries.”

ABM highlighted that feasibility studies such as stress test analyses, due diligence and credit evaluation are conducted as part of the standard assessment procedure to determine the eligibility and viability.

“Common reasons for loan rejection beyond ineligibility include incomplete loan documentation and inadequate supplementary information required to support banks’ assessment of cash flows and financial buffers of companies.”

ABM said the banking industry together with Bank Negara Malaysia have been engaging with the Malaysian Petroleum Resources Corporation to better understand developments in the O&G sector and also to disseminate information on avenues for assistance available for financially distressed companies.

“Viable corporate borrowers with multiple financial creditors can approach the Corporate Debt Restructuring Committee for assistance to work out feasible and marketdriven debt resolutions through mediation.”

The association added that viable small and medium enterprises (SMEs) which are facing financial difficulties, can seek assistance from the Small Debt Resolution Scheme.

“Assistance offered include restructuring or rescheduling of financing facilities and provision of financing (where appropriate) to stabilise business cashflow whilst SMEs implement business turnaround plan.”

ABM comprises of 27 commercial banks in Malaysia.