Kuala Lumpur, Tuesday, 12 December 2017 – In response to a recent article in The Edge titled ‘Oil and Gas Conundrum’ published on 10 December 2017, The Association of Banks in Malaysia would like to state that our member banks which comprise the 27 commercial banks in Malaysia, have remained supportive and will continue to provide access to financing for viable businesses including the oil & gas (O&G) sector.
All O&G cases have been given due consideration by the banks. Credit evaluation is conducted on O&G companies similar to loan applications by any other industries. Feasibility studies such as stress test analyses, due diligence and credit evaluation are conducted as part of the standard assessment procedure to determine eligibility and viability. Common reasons for loan rejection beyond ineligibility include incomplete loan documentation and inadequate supplementary information required to support banks’ assessment of cash flows and financial buffers of companies.
Delinquent loans ratio for the O & G sector stood at 0.1% while impaired loans ratio increased to 5% in the third quarter of 2017, due mainly to cash flow issues observed in service providers in certain upstream segments. Corresponding figures for the second quarter of 2017 were 0.2% and 4.5% respectively. However, risks to the banking system remained limited as exposures to the O&G sector accounted for about 6.5% of total exposures.
The banking industry together with Bank Negara Malaysia have been engaging with the Malaysian Petroleum Resources Corporation (MPRC) to better understand developments in the O&G sector and also to disseminate information on avenues for assistance available for financially distressed companies. Viable corporate borrowers with multiple financial creditors can approach the Corporate Debt Restructuring Committee (CDRC) for assistance to work out feasible and market-driven debt resolutions through mediation. More information on the eligibility criteria and application process to the CDRC can be found in this link: http://www.cdrc.my/
In addition, viable SMEs which are facing financial difficulties can seek assistance from the Small Debt Resolution Scheme (SDRS). Assistance offered include restructuring or rescheduling (R&R) of financing facilities and provision of financing (where appropriate) to stabilise business cashflow whilst SMEs implement business turnaround plan.