Malaysian central bank ready to provide liquidity

KUALA LUMPUR (Reuters) - Malaysia's central bank stands ready to provide liquidity to financial institutions although it believes the sector is strong enough and that it has "negligible" exposure to problem assets and institutions.

Bank Negara said in a statement on Tuesday that Malaysian banks' leverage is manageable at a risk-weighted capital ratio of 13.2 percent at the end of August. It said the level of non-performing loans was 2.5 percent."

"The bank stands ready to provide liquidity whenever necessary to financial institutions under its purview," it said, adding it was close contact with other monetary authorities in the region to monitor and coordinate any policy response.

It said most of the assets of banks and insurers in the country were ringgit denominated and that foreign financial institutions, which are locally incorporated, had a capital ratio of 12.6 percent, and had committed substantial capital for their domestic operations.

Few economists believe that Malaysia will suffer direct fallout from the global financial crisis but the country's dependence on exports is seen as a more likely source of damage to the economy.

Local investment bank CIMB last week cut its growth forecast for Malaysia to 3 percent for 2009 from 5 percent due to the poorer outlook for exports as a result of the global economic slowdown.

(Reporting by Varsha Tickoo and Faisal Aziz; Editing by David Chance)