Brunei’s banking system improves in Q1 as economy continues to recover

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The Ministry of Finance building where the AMBD is headquartered. Image: Ridhwan Kamarulzaman

Fitri Shahminan

Brunei’s banking system has improved in the first quarter of this year as overall assets strengthened and deposits increased with the nation looking to continue its economic recovery, the sultanate’s central bank reported.

The Autoriti Monetari Brunei Darussalam (AMBD), in its Q1 2018 policy statement published on its website last July, stated that overall banking assets increased by 1.3 per cent year on year to $17.2 billlion while deposits saw a year-on-year increase of 3.1 per cent to $14.7 billion.

“Brunei’s banking system has improved in line with the economic recovery,” it said.

Loans or financing marginally declined by two per cent year-on-year from $5.2 billion in the first quarter of 2017 to $5.1 billion in Q1 2018, the central bank added.

“The decline in credit was mainly due to the settlement of outstanding loans/financing by corporate companies,” AMBD explained.

It added that the major contributors to the decline in credit were the transportation and infrastructure sectors.

Meanwhile the rise in deposits was mainly due to the increase in retails deposits, the central bank stated.

The banking industry’s asset quality has improved with the Aggregrate Net Non-Performing Loans/Finance (NPLF) ratio recording a decrease to 2.1 per cent in Q1 2018 from 2.8 per cent in Q1 2017.

The decrease in Net NPL was mainly contributed by corporate sector, particularly manufacturing, transport and the trading sectors.

Brunei’s overall banking system was also resilient during tough economic environment, AMBD said, as it was able to maintain strong capital adequacy ratio (CAR), remain highly liquid and managed to improve profitability ratio.

The average CAR as of Q1 2018 stood at 18.6 per cent, which is well above the minimum of 10 per cent as stipulated in the Banking Order 2006 and Islamic Banking Order 2008, according to the statement.

AMBD said banks in Brunei remained highly liquid with Liquid Assets to Total Asset ratio of 48.9 per cent during the period.

The Aggregate Return on Assets and the Return on Equity indicators stood at 1.2 per cent and 8.6 per cent as of Q1 2018 respectively, the central bank added.

AMBD’s Credit Bureau has progressed with the implementation of its first national credit scoring system, known as Bureau Credit Score, which was rolled out to the banks and financial institutions on April 16, 2018.

Brunei’s credit score is measured in a three digit numerical expression which ranges between 215 and 570, AMBD elaborated.

A high credit score indicates that the borrower has a low credit risk while the opposite is true for a low credit score.

“Based on the Credit Bureau’s repository, the scorable coverage is considerably high at 76.8 per cent of the population in Brunei,” the central bank stated.

It added the additional provision of credit score in the credit report is a “value-added service” made available for banks and financial institutions to provide them with a more objective credit assessment tool.

This should assist banks and financial companies in making better-informed lending decisions to further enhance their credit risk management.

Additionally, the Bureau Credit Score will encourage greater financial discipline and promote responsible borrowing among the public, the policy statement said.

The Bruneian