Bank Negara Malaysia (BNM) will engage with banks in the coming months regarding the first batch of submissions of their recovery plans, said deputy governor Datuk Jessica Chew Cheng Lian.
She added that the key focus of the meetings is to ensure that the banking industry in Malaysia is sufficiently robust and that the stress scenarios developed by banks are sufficiently severe and diverse.
“This, in turn, aims to reduce the likelihood of a financial institution having to enter into resolution,” she said at the National Resolution Symposium (NRS) 2023 here today
She also said that BNM must ensure the strategic analyses provided by the banks are sufficiently robust and that the stress scenarios developed are appropriately severe and diverse.
“A well-executed recovery plan should significantly decrease the chances of a financial institution needing resolution.”
She said BNM’s approach leveraged the same information contained within the recovery plans to provide critical input for the development of credible resolution strategies.
“This aligns with our expectation that banks should manage risks in proportion to their ability to recover from severe and exceptional stress events that could threaten their viability.
“If the recovery planning process indicates that recovery capacity is unlikely to be met, banks will be expected to consider business and operational measures to reduce their vulnerability to shocks.”
She said this might entail altering the business direction for some banks.
“We believe that this approach is consistent with the primary responsibility of banks, rather than resolution authorities, to ensure that they can withstand periods of severe stress.”
— Bernama
