Flash Association of Banks in Malaysia assures on lending activities

KUALA LUMPUR: The Association of Banks in Malaysia (ABM) says the new guidelines on classification and impairment provisions for loans/financing will not cause banks to be overly careful and constrained when lending.

In response to public concerns reported in some of the local newspapers recently, it said on Friday, Jan 22 commercial banks in Malaysia will always support customers with viable businesses and good track records even in times of difficulties during a downturn.

"Banks are committed to continue to facilitate the orderly functioning of transactional and lending activities, including the rescheduling and restructuring of loans," said ABM executive director, Chuah Mei Lin.

She said the business of lending is predicated largely on the sound credit judgement and appraisal of the borrower.

"Underpinning the business of lending however is a prudential regime built on effective credit risk management policies and processes and internal controls which are appropriate to the size, nature and complexity of a bank's lending/financing operations.

"The Guidelines form a part of that prudential regime as classification and impairment provisions are necessary so as to enable banks to build up capacity over time to withstand weaknesses in any of its loan/financing."

ABM pointed out the classification of impaired loans based on months-in arrears of 90 days (or 3 months) has been practised by all domestic commercial banks for some time already as a matter of compliance with international best practices.

The Guidelines which are effective for financial years beginning on and after Jan 1, 2010, merely set out formally what the minimum requirements on the classification of impaired loans/financing and provisioning for loan/financing impairment are, following from the adoption of FRS 139 - Financial Instruments: Recognition and Measurement issued by the Malaysian Accounting Standards Board with effect also on Jan 1, 2010Major loan indicators for the business and household sectors have continued to improve.

ABM commented that for November 2009, business loan applications and approvals were higher with business loan disbursements also increasing.

In the household sector, demand for financing remained strong while loan approvals and disbursements remained relatively high.