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Maldives’ Banking System: Key Findings from the Report

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The report on Maldives’ banking system provides valuable insights into the current state of the sector. Here are the main points from the report.

Asset Allocation

  • Loans account for 37% of total assets, while investments account for 30%.
  • Some banks have a significant investment portfolio, which may expose them to sovereign risk.
  • The system’s profitability may be influenced by these exposures.

Asset Quality

  • Non-performing loans (NPLs) are relatively low at 5.9% of total loans and declining.
  • Most NPLs are in the:
    • Tourism sector: 10.6%
    • Commerce sector: 8.9%
  • Legacy high-value loans to the tourism sector and in foreign currency contribute to NPLs.

Liquidity and Funding

  • Liquidity is ample, especially in local currency.
  • Excess liquidity is placed in short-term government securities.
  • Foreign currency availability is scarce and subject to central bank allocation or a premium in the parallel market.
  • Deposit dollarization is 49% of total deposits.

Capitalization

  • The system appears well-capitalized with a capital adequacy ratio (CAR) of 50.9% of risk-weighted assets (RWA).
  • Capital ratios are biased upward by large government paper holdings with zero risk weights.
  • High capitalization is led by the three largest banks in the country.

Other Observations

  • Loan growth has slowed, and most securities held are at short maturities, which matches available funding.
  • A secondary market for government securities does not exist, blurring HFT, AFS, and HTM distinctions.