Islamic banks to account for 25% of Malaysian banking sector by 2017, says RAM

RAM Ratings said the Malaysian Islamic banking industry’s assets have almost doubled in the last five years, expanding to RM423bil as at end-February 2014 and accounting for 21% of the banking system’s assets. Gross financing continued to outpace deposits last year. In terms of asset quality, RAM said the the Islamic banking system’s gross impaired-financing (GIF) ratio stood low at 1.4% as at end-February 2014. RAM noted Islamic banks in Malaysia are well capitalised, with common-equity tier-1, tier-1 and total capital ratios of 12.5%, 12.5% and 14.7%, respectively, as at end-February 2014. The gradual derecognition of Basel II securities as qualifying capital, besides being an alternative source of long-term funding, will support the issuance of Basel III-compliant capital instruments for Islamic banks in Malaysia.