The nation's banking system has sufficient liquidity to ease financial strains and support intermediation activities, the central bank said on Tuesday, as a coronavirus pandemic sharply slows economic growth.

Bank Negara Malaysia (BNM) said its recent 100 basis-point reduction to its statutory reserve requirement had released some RM30 billion into the banking system, on top of RM160 billion in excess liquidity.

"Of this, approximately RM100 billion placements with the bank under open market operations can also be used to meet the liquidity needs of the banking system," BNM said in a statement.

"The bank will continue to closely monitor developments and ensure sufficient liquidity in the financial system at all times."

The central bank said it will continue to supply daily ringgit liquidity to banks via various tools under its open market operations, including the outright purchase of government securities, foreign exchange swaps, reverse repos and the standing facility.

The moves mirror sweeping steps by global policymakers over the past few weeks aimed at unclogging gummed up credit markets and easing broad strains in financial markets braced for a deep global recession.

Most analysts say the coronavirus pandemic, which has killed nearly 19,000 worldwide with more than 400,000 infections, could lead to a prolonged economic downturn globally.

BNM said it will also allow banks to drawdown on the capital conservation buffer of 2.5 percent, operate below the minimum liquidity coverage ratio of 100 percent, and utilise the regulatory reserves that were set aside during periods of strong loan growth. Banks would be expected to restore the buffers "within a reasonable period" after the end of the year.

The central bank said it will proceed to implement the net stable funding ratio on July 1 as scheduled but at a lowered rate of 80 percent. The rate will be raised to 100 percent on Sept 30, 2021.

- Reuters

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