Financial Crisis In Malaysia

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1. Malaysia’s recovery from the Asian financial crisis has been remarkable. The lessons of the crisis and the reform measures put in place then served to transform the financial sector into what it is today; resilient, diversified and sound. Malaysia emerged from the crisis with no bank closures, high recovery rate on NPLs and stronger banking institutions.
2. At the onset of the crisis, Malaysia adopted the same measures adopted by the other crisis countries: cutting government spending, interest rates were kept high, loan growth rate was to be moderated (from 29% end Sept 1997 to 15% by end 1998), and prudential regulations were tightened to be consistent with international standards – classifying a loan as non-performing was shortened to …show more content…

Danamodal raised funds through issuance of MYR bonds and injected capital into domestic banks in the form of equity or hybrid instruments. Once its objective was achieved, it would sell its stakes in the banks. Banks being recapitalised would have Danamodal representatives on the Board of banks and would be required to sell all eligible NPLs to Danaharta. During its operations, Danamodal injected a total of RM7.6 billion into 10 banking institutions and was wound down at the end of 2003 having redeemed its entire RM11 billion 5-year zero-coupon unsecured redeemable bonds on 21 October 2003. As a strategic shareholder in the banks it recapitalised, Danamodal could seek mergers of banks. This expedited the plans to consolidate the banking sector and by the end of 2000, the banking sector consolidation exercise successfully had reduced the domestic banks to 10 banking groups to anchor the banking sector. These banks would now have the financial resources to compete regionally backed by stronger, more resilient institutional …show more content…

11. The financial sector in Malaysia has undergone major transformations since the 1997- 98 Asian financial crisis. Post-crisis reforms have enhanced financial stability with a resilient banking sector and a deeper bond market
12. The transformation is underpinned by two blueprints that set out the medium and long term development of the financial sector. The first 10-year Financial Sector Master Plan (FSMP), which was implemented in 2001 and concluded in 2010, liberalised the banking system and the recommendations resulted in more resilient financial institutions, increased competition among financial institutions, introduced greater foreign participation; and improved the institutional framework for consumer protection and development of a deposit insurance scheme.
13. Under the Financial Sector Blueprint (2011-2020) the focus of financial sector reforms has shifted to the financial sector to be a key enabler and catalyst of economic growth to support the demands of a growing economy and facilitate the transition of the economy up the value

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