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Malaysia fully guarantees deposits via PIDM

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Points of Essence:

  • Along with other regional move to preserve confidence in the financial sector, Malaysia has stepped in to calm nervous banking depositors by extending full guarantee on the deposits until 2010.  The protection will be offered through the existing deposit insurance system managed by PIDM which includes coverage for Islamic deposits.

KUALA LUMPUR: The Malaysian government will fully guarantee, with immediate effect, all ringgit and foreign currency deposits with commercial, Islamic and investment banks regulated by Bank Negara.

Bank Negara and the Ministry of Finance said in a joint statement the guarantee also extended to deposit-taking development financial institutions regulated by the central bank.

It said the deposits would be fully guaranteed by the government through Perbadanan Insurans Deposit Malaysia (PIDM) until December 2010.

“The guarantee extends to all domestic and locally incorporated foreign banking institutions; and access to Bank Negara’s liquidity facility will be extended to insurance companies and takaful operators regulated and supervised by the Bank,” it said.

Bank Negara said the government was taking pre-emptive measures, which were consistent with regional initiatives to preserve confidence in respective financial systems.

It added these measures were to maintain the stability of the Malaysian financial system.

“These measures are pre-emptive and precautionary, since Malaysian financial institutions are well-capitalised with ample liquidity, and confidence of depositors remains intact,” it added.

Bank Negara also said given the soundness and strong capitalisation of the Malaysian banking institutions, “it is unlikely that these guarantees will be called upon”.

“Malaysia has a strong regulatory and supervisory framework, which is reinforced by the financial discipline that is imposed by PIDM.

“Its differential premium system provides strong incentives for banks to adopt sound and rigorous risk management practices including the maintenance of strong capital buffers. PIDM also has the necessary resolution powers to protect depositors,” it added.

Source: biz.thestar.com.my

Note: Updates: Malaysia and Singapore provided a blanket protection on the deposits as a pre-emptive and cautionary measure to contain the credit crisis to spiral into the region. Read the report here. But Tan Sri Ramon Navaratnam of the Malaysian Asli Centre of Public Policy Studies said the Government has not done enough  in here.

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Written by Suapi Shaffaii

October 17, 2008 at 12:30 am

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