Malaysia bank merger failure exacerbates future risks

Wednesday, January 28, 2015

Subject

Malaysian banking outlook ahead of ASEAN financial integration.

Significance

On January 14, Malaysian commercial banks CIMB Group, RHB Capital and Malaysian Building Society (MBS) confirmed in a statement that their merger plan had been cancelled, blaming adverse economic conditions and falling share prices. The merger's cancellation has compounded difficulties facing Malaysian banking, and disadvantaged Malaysia in ASEAN financial industry integration and in expanding its Islamic finance industry.

Impacts

  • Malaysia will face increasing competition in Islamic finance.
  • Until market conditions improve, Malaysian banks cannot realistically strengthen their capital bases.
  • RHB may seek a merger to strengthen its business position.
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