'Banking sector to shift to lower gears'

The Malaysian banking system is expected to shift to lower gear this year in anticipation of the bumpy ride ahead, said RAM Rating Services Bhd's Banking Bulletin 2012.

Its head of financial institution ratings, Wong Yin Ching, even so, the
local banking industry was still fundamentally sturdy and the domestic economy remained resilient.

"This underscores our stable outlook on the Malaysian banking sector," Wong
said in a statement today.

She said the local banking sector sailed through 2011, backed by low
interest rates and the domestic economy's commendable growth.

"Nevertheless, the global economy's outlook has become significantly more
subdued since the second half of last year, with lingering concerns over
European sovereign debt crisis and fiscal sustainability in the US," she said.

RAM said domestic loan growth would moderate to about eight to nine per cent
this year, after clocking in a strong 14 per cent expansion last year.

It said the rollout of projects under the Economic Transformation Programme
and the 10th Malaysia Plan was expected to gather momentum in the current year.

RAM also anticipated Bank Negara Malaysia (BNM) to maintain the overnight
policy rate at three per cent with a downside bias this year, as preserving
growth momentum took precedence over curbing inflationary pressures.

The rating agency said BNM's newly-launched Financial Sector Blueprint
2011-2020 would continue be a catalyst for the Malaysian banking industry.

Wong said the blueprint, which advocated further liberalisation, was
envisaged to lift the domestic financial sector to new heights.

"In our view, the regulators will be judicious in opening our doors to
foreign institutional shareholders, ensuring the soundness and stability of the
banking system," Wong said. -- Bernama