Based on the general takeaway from the FSR, the investment bank said although challenges remained for pockets of the economy, credit risks in both the business and household segments are very much under control, and the banking system as a whole remains financially solid to deal with these ongoing challenges.

“The overall credit quality remains sound, but there is continued stress in the small and medium-sized enterprise segment.

“Nevertheless, a widespread deterioration in credit quality is not expected amid an improving growth outlook for the economy,” it said.

On the household segment, it said although the household debt-to-gross domestic product ratio remained elevated at 84.2% as at end-December 2023, 70.9% of household banking system debt is held by middle and higher-income borrowers with a monthly income of RM5,000, and above.

“Moreover, household financial assets recorded a healthy growth of 5.8% versus 4.7% in June 2023, and was steady at 2.1 times total household debt,” it said.

Maybank IB said the banking system remains sound, supported by factors such as total loans under repayment assistance programmes which improved to 2.4% of total banking system loans in H2 2023 from 2.5% in June 2023, and a healthy aggregate Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) which stood at 161% and 118%, respectively

Meanwhile, Hong Leong Investment Bank Bhd (HLIB) said the banking system continues to be resilient and supportive of financial intermediation activities, thanks to excess capital and liquidity buffers such as the strong Common Equity Tier 1 capital ratio of 15%, robust LCR of 161% and NSFR of 118%.

“The updated stress-test continues to show that the banking system is resilient and can stomach adverse shocks,” HLIB said in a separate note today.