European banks struggling, M'sian banks well placed

IT is interesting that at a time when banks in Europe are struggling
with recapitalisation and balance sheet shrinkage, banks in Malaysia are
preparing for the next phase of development.
It is certainly not a time for anyone to blow his horn but that does speak volumes of the strength of Malaysian banks.
They
now face the challenge of weathering the expected slowdown while
delivering on the timelines for further liberalisation and their
enhanced role towards high income growth.
Malaysian banks have
gone through the first phase of liberalisation that basically aimed for
bigger scale, size and capacity while surviving the further opening up
of the sector to foreign players.
While they are not going to cry
over lost turf, many of them have, in fact, gone to develop regional
markets and other income streams.
Lately, a few have expressed
interest to hire the expertise available from the potential shrinkage of
operations at European banks in the region.
Their mandate has basically been expanded beyond just that of enabler of growth to key driver and catalyst of economic growth.
Towards this end, the banking sector has been mandated to be more dynamic, competitive, diversified and yet integrated.
It has to improve in breadth and depth while providing world class financial services and catering to the real sector.
The 10-year blueprint is launched right smack in the middle of a financial crisis arising from debt problems in Europe.
Banks
have to handle the impact of the European crisis and at the same time,
start planning to meet the objectives and strategies of the blueprint.
It is a good thing that they are already aware of the recommendations, having been consulted from the start.
It is just that crisis times may slow them down as they become increasingly cautious and prepare for worse days ahead.
Nonetheless,
the banking sector has weathered many rough patches before, the latest
being the 2008 global financial crisis where inflated values eventually
burst and many had to face tough reality.
Growing the sector in a
big way to contribute towards a high income society carries a lot of
risks and in this respect, constant monitoring of the risk-reward
relationship is vital.
So far, the experience in the banking
sector has shown that things are seldom done in a rush but more on a
planned and gradual basis.
The monitoring is mostly thorough and intense stress tests are conducted.
When
it comes to big money, as in wealth and asset management, large funds
flows and participation in markets, the challenge in risk monitoring is
even more intense.
Markets are volatile and ever changing, thus
requiring robust risk management and monitoring systems as well as
expertise in hedging and derivatives.