KUALA LUMPUR: The Trans-Pacific Partnership Agreement (TPPA) is expected to improve global market access for Malaysian banks in the long run, says Ram Ratings.

Financial Institutions Rating Specialist Joanne Kek said the more sizeable trade flows among TPP member countries will result in demand for trade finance services such as letters of credit or guarantees and hedging products.

This will provide Malaysian banks with avenues to expand their customer bases as well as grow their interest and fee-based revenue.

"We see strategic opportunities for Malaysian banks arising from the TPPA.

"It is likely however, that most of this would materialise over the long term, given the current challenging domestic landscape," she said in a statement here today.

Malaysia and 11 other countries signed the TPPA on February 4, which also encompass financial services and is expected to be effective in 2018.

Kek said Bank Negara Malaysia (BNM) will maintain its ability to enforce prudential measures that are critical to the integrity of the domestic financial system in the post TPPA era.

She said measures that are fundamental to Malaysia's financial market structure and development plans, such as, terms on licensing and approval, shareholding requirements and developmental financial institutions have been retained under the TPPA.

Meanwhile, provisions for regulatory transparency, where member countries agree to first announce any proposed banking regulation and permit comments on the published document, will build on BNM's existing market practices and be beneficial to market participants as a whole.

Kek said the impact of new competition attributable to banks originating from TPP member countries is likely to be muted, given the inherently competitive nature of the Malaysian banking system.

"We could see locally-incorporated foreign banks from TPP countries benefiting from additional branching capabilities.

"However, this would still be within the constraints of regulatory reciprocity arrangements," she added--BERNAMA