THE collapse of US-based Silicon Valley Bank (SVB) poses minimal and limited impact based on Malaysia’s banking institutions, Deputy Finance Minister Steven Sim Chee Keong said.

He said an assessment made by local financial authorities affirmed that the country’s banking system remained competitive and resilient.

Sim was replying to a query during the ministers’ question time in the Dewan Rakyat today from Mohd Syahir Che Sulaiman (Bachok-PN), who wanted to know the early mitigation measures taken by the Finance Ministry, Bank Negara Malaysia (BNM) and Securities Commission to address possible effects of the SVB crisis.

“Malaysia has tight regulations and stress tests in the banking system are conducted periodically to ensure the system’s preparedness,” he said.

“The monetary policy falls under the jurisdiction of BNM. The Finance Ministry is not involved in any decision on the policy, as enshrined in the Central Bank of Malaysia Act 2009.”

Under the act, he said, BNM’s Monetary Policy Committee (MPC) has been accorded the responsibility to formulate the monetary policy autonomously to ensure price stability and sustainable economic growth.

He said the aforementioned assessment was not made only based on the US Federal Reserve’s action but more towards the domestic impact.

Earlier, Azli Yusof (Shah Alam-PH) asked about the ministry’s strategies to contain inflation and ensure financial stability for national economic growth.

Sim said among the government’s strategies to manage inflation is to provide consumption subsidies and impose price control on selected essential goods.

Through that move, he said, the country’s inflation, which stood at 3.3% last year, is expected to remain manageable this year.

He also said based on the Department of Statistics Malaysia’s research in 2022, the country’s inflation could hit 10% if the government were to abolish all subsidies being enjoyed by the people.

“In Budget 2023, the government has allocated RM64 billion to fund the various subsidies, assistance and incentives for the people,” he said.

On the monetary policy, he said MPC, at its meeting on March 8-9, has decided to maintain the overnight policy rate (OPR) at 2.75%, the rate kept during its first meeting of the year on January 18-19.

He said the decision to pause an OPR hike would allow it to assess the impact of the cumulative 100-basis point OPR adjustments last year on the country’s inflation and economic prospects, given the lag effects of monetary policy on the economy from the four consecutive OPR hikes.

“This will allow MPC to have a clearer picture of the impact of the higher OPR on reducing demand pressure related to changes in household and business behaviours, which usually would take a while,” he added. – Bernama, March 15, 2023.