CIMB Bank, CIMB Islamic reverse BLR decision

CIMB Bank and CIMB Islamic Bank have, in an unusual move, changed their
minds about raising their base lending/financing rate (BLR) on Monday.

They announced this late yesterday, a day after saying that the rate
would be raised by 5 basis points to 6.35 per cent following Bank
Negara's decision to double banks' statutory reserve requirement (SRR)
to 2 per cent starting April.

"After further deliberations,
CIMB Bank and CIMB Islamic Bank have revised their earlier decision to
raise (the rate)," their parent CIMB Group said in a press release
yesterday, adding that the BLR would be maintained at 6.3 per cent.

It did not give a reason for its change of mind.




Analysts had found the group's earlier decision to raise the BLR on
the basis of the SRR hike surprising, pointing out that banks tend to
revise the rate only if there is a change in the Overnight Policy Rate
(OPR).

The SRR or the amount of funds that banks must keep in
reserve at the central bank against deposits made is merely an
instrument to manage liquidity in the financial system, and not a signal
on the stance of monetary policy like the OPR.

Thus, raising the BLR on the basis of the SRR hike may have sent the wrong signal to the market.

"This is a surprise to us as we had not expected an increase in BLR so
soon following hints from the central bank last week that there will
likely be a longer time-lag impact before regulators consider banks'
applications to raise BLR," an analyst from AmResearch said in a note to
clients yesterday.

"I've never seen banks raising the BLR because the SRR went up," said another analyst from a foreign research house.

AmResearch and HwangDBS Vickers Research said in earlier reports that
the 5-basis-point increase in BLR would be "positive" for CIMB Group.

They had expected other banks to follow suit in raising their BLR, but no other bank made such moves.




(Biztimes)