KUALA LUMPUR: Bank Negara Malaysia will engage with banks in the coming months regarding the first batch of submissions of their recovery plans.
A key focus of the engagements will be on ensuring that the strategic analyses are sufficiently robust, and stress scenarios developed by banks are sufficiently severe and diverse.
"This is consistent with our expectation for banks to manage risks at a level commensurate with their capacity to recover from severe stress events that could threaten their viability," Bank Negara deputy governor Datuk Jessica Chew Cheng Lian said at the National Resolution Symposium (NRS) 2023 here today.
"If the recovery planning process indicates that that recovery capacity is unlikely to be met, then banks will be expected to consider business and operational measures to reduce their vulnerability to shocks," she added.
Recovery and resolution plans should not be seen as distinct exercises in mere compliance, but essential, integrated tools that enhance our individual and collective capacity to respond to severe stress events – not if, but when they occur.
Chew said the central bank's early engagements with pilot banks already point to substantial benefits from undertaking the process of developing a recovery plan, including a vastly improved organisational awareness that enabled banks to think more broadly about recovery options.
"This is a good starting point. But it is insufficient. The ultimate destination must be a greater alignment between business and operational strategies, and recovery plans," she said.
Chew said close collaboration between PIDM and Bank Negara will continue to underpin recovery and resolution planning efforts in Malaysia.
To this end, she said Bank Negara, working closely with PIDM, will continue to examine a range of issues – including the changing nature and speed of interactions between liquidity and solvency, as well as the practical operation of contractual bail-ins and blanket deposit guarantees to safeguard financial stability.
"While authorities in other jurisdictions have deployed these tools to varying effects in bank resolutions, their use comes with a unique set of challenges and considerations.
"This NRS presents a valuable opportunity to engage in these vital discussions," she added.