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BANKS IN BRUNEI
Brunei Darussalam’s banking system is
characterised by a dual system made up of Islamic
and conventional banks, as well as an Islamic
trust fund set up under its own statute. According
to the Autoriti Monetari Brunei Darussalam
(AMBD) Financial Stability Report 2019, the
country’s economic growth in 2019, particularly
in the non-oil and gas sector, has contributed to
the improved performance of the banking industry
with the expansion of assets, deposits, loans/
financing and profitability.
In spite of an increased external sector risk, the
banking sector remained resilient and stable
given the high level of capitalisation and liquidity;
manageable credit risk of the corporate and
household sectors; and effective and improved
risk management systems. As of year-end 2019,
the Islamic bank and the Islamic trust fund
continued to account for a major portion of total
banking sector assets (65.1 per cent), deposits
(65.6 per cent), and loans/financing (60.8 per
cent).
Conventional banks account for the remaining
banking sector assets (34.9 per cent), deposits
(34.4 per cent) and loans/financing (39.2 per
cent).
The performance of the banking industry also
grew in overall assets by 1.5 per cent, deposits
by 2.3 per cent and loans/financing by 7.6 per
cent compared to 2018. In terms of amount, these
stood at BND18.6 billion, BND15.7 billion, and
BND5.9 billion respectively.
In order to evaluate the resilience of the
country’s banking system in facing potential
macro-financial shocks, AMBD conducted its
first annual top down macro stress test.
The stress test was conducted by assuming
stressed scenarios such as a decline in quarterly
GDP by various percentage points and their
impact on non-performing loans/financing
(NPLF) and the resultant impact on the capital
adequacy. Overall, the test demonstrated that
Brunei’s banking system is resilient and its
capital adequacy ratio (CAR) continues to be well
above minimum regulatory requirement of 10 per
cent for all shock scenarios.
Stress testing is a critical element of risk
management for banks and a core tool for
banking supervisors and macroprudential
authorities. Suitable stress tests can alert bank
management and supervisory authorities on
unexpected adverse outcomes arising from a
wide range of risks. It also provides an indication
of the financial resources that might be needed
to absorb losses should large shocks occur.