Banks reminded to continue lending

BANKS have been reminded again to continue lending to the private sector during these trying times.

Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz reminded banks of their important role in keeping domestic demand strong and supporting the economy.

The economic situation will remain challenging in the coming quarters and the role of banks is one of two vital factors in ensuring that a range of policy responses works, she said.

Speaking at the launch of Public Islamic Bank Bhd in Kuala Lumpur, Zeti said the second factor is fiscal stimulus cushioning the Malaysian economy from external developments and positioning the country to resume growth once the global economy stabilises.

She also said that the global ramifications of the crisis called for more concerted efforts to enhance the resilience of Islamic finance.

"The process of innovation in the formulation of Islamic financial products and services must be done carefully and in accordance with Syariah, and take into account the distinct risk characteristics of Islamic banking," Zeti said.

Islamic banking assets in the country account for 17.4 per cent of the total banking assets in the financial system.

In the bond market, Sukuk constituted 57 per cent of the total market as at end-2008.

Malaysia has 17 Islamic banks, of which nine are subsidiaries of the domestic banking groups.