This underscored how important it is for Boards of Directors to understand products and carefully weigh the risk-versus-return paradigm. Here in Malaysia, parallels have also been drawn with the 1997 Asian Financial Crisis, but interestingly the similarities are arguably few in nature. Correspondingly, the regulatory and policy response at the time was also suitably crafted towards addressing relevant issues and to achieve specific objectives. Today, the consolidation of the banking sector and the significant advances in risk management infrastructure and practices are also firmly in place and institutionalized. Payoffs from these efforts are evident as Malaysian financial institutions are now on a stronger foundation to venture into new businesses and countries, undertake more complex risks and withstand shocks. Their enhanced capabilities are now backed by stronger balance sheets, with the risk-weighted capital ratio of the banking sector at 13.4% and net non-performing loans ratio of 2.2% as at 31 March 2009. Our financial institutions have also continued their lending activities despite the global slowdown. Total aggregate outstanding loans have grown by 12.0% to RM727.0 billion during 2008 and by 11% yoy as at end-March 2009. Dealing with financial risks – from regulatory perspective On the regulatory front, Bank Negara Malaysia has and is now in the process of conducting another series of stress tests to gauge, from a capital standpoint, the collective soundness of the banking sector in absorbing potential losses. Complementing this is the liquidity stress tests conducted to assess specifically the capability to withstand market wide liquidity shocks.
This reflects the heightened state of vigilance in Bank Negara Malaysia as we continue to direct significant effort and resources towards strengthening our surveillance. In addition to macro surveillance, the supervision framework is also more forward looking including increased engagements and dialogue with senior management of financial institution, industry leaders, trade bodies and various chambers of commerce for the early detection of emerging issues and developments. BIS Review 58/2009  1  Facilitating access to credit and easing monetary policy Another area of importance is the continuing availability of credit from the banking sector. We have earlier highlighted the rate of growth in outstanding loans. In addition, the government has introduced specific guarantee schemes while Bank Negara Malaysia also, on its part, maintained a monetary policy easing stance that is conducive to achieve the same goal of facilitating access to credit at reasonable cost. At the same time, to assist the household sector, the Agensi Kaunselling dan Pengurusan kredit (AKPK) is also an avenue for individual borrowers and potential borrowers to seek advice and assistance in managing their finances and debts. Clients of the banking industry may also contact Bank Negara Malaysia hotlines and its LINK and TeleLINK for assistance for info. LINK refers to Laman Informasi Nasihat dan Khidmat. Association of Banks in Malaysia (ABM) has also introduced toll free lines for the benefit of its stakeholders. These combined efforts seek to lower borrowing costs and ease cash flows while at the same time promote financial discipline.