THE banking industry in Brunei Darussalam is small when compared to other countries in Southeast Asia.
Over the past few years, the industry shrunk when we lost Citibank, HSBC, Royal Bank of Canada and AM Capital – to name a few.
According to the figures released in February 2019 by Autoriti Monetari Brunei Darussalam’s (AMBD) 2018 Performance Review of Banks & Finance Companies, the total size of Brunei’s banking industry by assets was at BND18.3 billion.
One could argue that the market size is reflective of the population size and so on. There may be some justification to that.
Perhaps, the issue here is not on the industry size, but rather the size of the industry players.
We all can agree, the biggest bank in Brunei is Bank Islam Brunei Darussalam (BIBD).
Based on the 2018 annual reports released, BIBD stands at BND10.06 billion.
To put that into perspective – that equates to 55 per cent of the market.
One must laud and appreciate the success of BIBD.
With the help of Fajr Capital, they truly have become a giant in the industry.
But the more pressing issue here now is that BIBD has become a SIFI – Systemically Important Financial Institution.
If BIBD fails and this is a very big IF, not only will the banking industry be affected, but rather the whole economy will feel its effects.
No one expected the Lehman Brothers to fail but it did.
The thought of BIBD failing is not something that can be comprehended.
In addition to all this, the bank’s shareholders comprising government agencies will be affected.
Will the Brunei Government being a shareholder be able to help support the bank when in need?
Bringing it all together, it is obvious that BIBD should not be penalised for being too big or too successful.
BIBD should be proud of its own achievements.
But perhaps, the correct question is that, does the central bank being the market regulators realise the magnitude and the size of BIBD.
Are the shareholders prepared to provide support when it truly matters?
Does BIBD have a contingency plan in place to avoid its failure?
BIBD is one of the largest and most successful entities in Brunei but we just cannot afford to lose BIBD at all cost. BIBD is just way too big to fail.
– Bru Bernanke