Central banks in better position to deal with crises
KUALA LUMPUR: Regional central banks will be in a better position to deal with potential economic crises, thanks to the mechanisms and proper structures they are putting in place, according to Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz.
“When we have an imminent crisis that will cause distruption to financial markets or a failure of systemic financial institutions, we will have an integrated mechanism to address this very quickly and pre-emptively. This shows that we have already thought of these issues long before they happen,” she said.
Speaking after the dialogue on Economic Growth and Opportunities in South-East Asia by The Wharton School here yesterday, she said central banks had since 2006 established a monetary and financial stability committee as well as developing an integrated crisis management system framework.
On the Financial Services Bill, which was tabled in Parliament recently, Zeti said: “I would like to inform everyone that a new Act for the financial sector has been put in place, and before the Parliamentary session closed in December at that.”
“This Act accords us powers to do cross-border resolution and activities with other central banks. For example, we have already signed an agreement with Thailand and Singapore that when banks want to obtain liquidity, they can pledge instruments that are offered by other sovereigns within the Asian region and other central banks,” Zeti said.
“This is an advanced way of dealing with liquidity management, which is a big issue in regions like Europe, the United States and the United Kingdom. We want to be in a position to be able to deal with these issues,” she said.
The rationale for regional financial integration, she said was to channel the high regional savings rate into prospective investments.
“We have a high volume of funds that can be mobilised in this region which should be channeled into productive investments. This is why we need this infrastructure. In Malaysia, we have developed our bond and capital markets – we are getting bonds and sukuk being issued by corporations from other parts of the world, including Asia,” she said.
On another note, Malayan Banking Bhd chief executive officer Datuk Seri Abdul Wahid Omar said at the dialogue session that Maybank intended to expand the number of branches in Cambodia to 20 from 12 currently.
“Apart from Malaysia, Maybank regards Singapore, Indonesia, the Phillipines, Cambodia and the Asean region as our home market. In fact, 36% of our operations is now outside Malaysia, contributing to about 30% of group profit,” he said.