Malaysia Impact Part 1

The question -

Is malaysia safe from the global crisis?

The answer -

Yes if steps are taken now and we acknowledge the problems and not hide
behind a false sense of security.

To answer the above I will try to show how we are linked using a few
examples. My first example involves citibank.

Citibank globally lost billions of usd on subprime losses. Now they are
forced to reduce assets globally to stay afloat. The first thing they will
do is restrict lending, secondly they will look to pull as much available
capital back to their head office and finally if all else fails - they will
sell assets.

So in malaysia, citi malaThe question -<br /><br />Is malaysia safe from the global crisis?<br /><br />The answer -<br /><br />Yes if steps are taken now and we acknowledge the problems and not hide<br />behind a false sense of security.<br /><br />To answer the above I will try to show how we are linked using a few<br />examples. My first example involves citibank.<br /><br />Citibank globally lost billions of usd on subprime losses. Now they are<br />forced to reduce assets globally to stay afloat. The first thing they will<br />do is restrict lending, secondly they will look to pull as much available<br />capital back to their head office and finally if all else fails - they will<br />sell assets.<br /><br />So in malaysia, citi malaysia will first restruct its lending to corporates<br />and to individuals. this will lead to tightening of credit. Some Good<br />borrowers will go to 2nd tier banks like ambank. Ambank now gets to service<br />a higher grade of clients and reduces its lending to the lower rated<br />corporates and individuals. Ultimately corporates will not be able to<br />pursue growth strategies. Their income drops and some will default and the<br />cycle gets worse and once they start cutting jobs - recession will become a<br />reality.<br /><br />At the same time, citi hq will request citi malaysia to return excess<br />capital. So at the end of every quarter, citi malaysia will retain the min<br />earnings requires to maintain their regulatory capital. The balance will go<br />back to their hq's and less for the domestic economy.<br /><br />Everything is linked