Less than a quarter of Malaysian bank assets sit in bonds. Silicon Valley Bank had more than half.
That gap, laid out by RAM Rating Services Bhd on March 17, explains why the rating agency sees no spillover from the US failures. “Compared to SVB, we see fundamental differences in the business and balance sheet profiles of commercial banks in Malaysia,” the agency said in a statement. Domestic lenders rely on lending, not bond investments exposed to market volatility. The proportion of banking-system assets in bond securities is less than 25 per cent. SVB topped 50 per cent.
The mechanics here are straightforward. When US rates rose fast, those long‑term bonds generated massive unrealised losses. Malaysian banks took a different path. On average, less than 40 per cent of bond holdings at the eight major lenders are classified as held‑to‑maturity. The rest are marked to market. Fair‑value losses are already reflected in capital. SVB classified almost 80 per cent as held‑to‑maturity, delaying recognition until collapse.
RAM Ratings said fair‑value losses in Malaysia were also significantly smaller, thanks to Bank Negara Malaysia’s milder pace of rate hikes and banks’ prudent strategy of holding shorter‑tenure bonds. “Further valuation losses, if any, should be less severe given the central bank’s cautious stance on further rate hikes,” the agency added.
The common equity tier‑1 capital ratio stood at 14.9 per cent at end‑2022, down from 15.5 per cent in 2021 but comfortably above regulatory minima.
Funding is another buffer. Malaysian banks are predominantly funded by customer deposits with high granularity. Liquid assets to deposits hover around 20 per cent. Net loans to deposits sit at 88 per cent. Ample cash and marketable securities mean withdrawal demands can be met without forced sales of long‑term assets.
Bank Negara Malaysia confirmed domestic banks have no direct exposure to the three failed US banks. “The central bank’s robust prudential oversight and good track record — which have been evident in previous financial crises — should ensure the continued financial stability of the Malaysian banking system,” RAM Ratings noted.
