How will the 50bp cut in the Statutory Reserve Requirement affect Malaysian banks?

It will hardly make any impact, says an analyst.

The 50bp reduction in the Statutory Reserve Requirement (SRR) ratio to 3.5% could free up about MYR5b in liquidity, but this is just about 0.3% of total banking system deposits. Neutral impact on banks.

Maybank Kim Eng says BNM has kept the Overnight Policy Rate (OPR) unchanged at 3.25%, but cut the SRR by 50 bps to 3.50%. Malaysia’s SRR ratio hit a peak of 13.5% of total eligible liabilities in June 1996 and trended down to a post-GFC low of 1% in Mar 2009, before it was restored to 4% in Jul 2011.

"Presently, the statutory reserves held at BNM total about MYR40b, so the 50bps cut would free up about MYR5b in liquidity, representing just about 0.3% of total banking system deposits. The cut could also technically influence the Base Rate (BR) down by 2bps, but given that the move is not material, we do not expect Base Rates to change. All in, the impact of this move is neutral on the banking system."

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