Banking, Finance and Exchange Administration
1. The Banking System in Malaysia
The banking system, comprising commercial banks, investment banks, and Islamic banks, is the primary mobiliser of funds and the main source of financing to support economic activities in Malaysia. The non-bank financial intermediaries, comprising development financial institutions, provident and pension funds insurance companies, and takaful operators, complement the banking institutions in mobilising savings and meeting the financial needs of the economy.
1.1 The Central Bank
Bank Negara Malaysia (the Bank), the Central Bank, is the apex of the monetary and banking structure of the country. Its main objectives as defined in the Central Bank of Malaysia Act 1958 are to:
• Issue currency and keep the reserves safeguarding the value of the currency;
• Act as a banker and financial adviser to the Government;
• Promote monetary stability and a sound financial structure;
• Promote the reliable, efficient and smooth operation of national payment and settlement systems and to ensure that the national payment and settlement systems policy is directed to the advantage of Malaysia; and
• Influence the credit situation to the advantage of Malaysia.
To meet its objectives, the Bank is vested with legal powers under various laws to regulate and supervise the banking institutions and other non-bank financial intermediaries. The Bank also administers the country's foreign exchange control regulations and act as the lender last resort to the banking system.
1.2 Financial Institutions
The following table provides and overview of the number of financial institutions as at end-September 2008:
Financial Institution | Total | Malaysian - | Foreign - |
| Commercial Banks | 22 | 9 | 13 |
| Investment Banks/ Merchant Banks | 15 | 15 | - |
| Islamic Banks* | 15 | 10 | 5 |
| International Islamic Banks | 1 | - | 1 |
| Insurers | 41 | 25 | 16 |
| Islamic Insurers (takaful operators) | 8 | 8 | - |
| International Takaful Operators) | 1 | - | 1 |
| Reinsurers | 7 | 3 | 4 |
| Islamic reinsurers (retakaful operators) | 3 | 1 | 2 |
| Development financial institutions | 13 | 13 | - |
*Includes one foreign Islamic bank that commenced operations in October 2008
Banks, including Islamic banks, operate through a network of more than 2,200 branches across the country. Six Malaysian banking groups have presence in 18 countries through branches, representative offices, subsidiaries and joint ventures. There are also 21 foreign banks which maintain representative offices in Malaysia. They do not conduct normal banking business but provide liaison services and facilitate information exchange between business interests in Malaysia and their counterparts.
The introduction of the framework for investment banks in 2005 provided for the development of full-fledged investment banks through consolidation and rationalisation between merchant banks, stockbroking companies and discount houses. Investment banking activities mainly include capital raising activities such as underwriting, loans syndication and corporate financing, management advisory services, arranging for the issue and listing of shares, as well as investment portfolio management. The development of investment banks will enhance the capacity of financial institutions in Malaysia to better serve its corporate customers through a wider range of financial and advisory activities on par with the services provided by international investment banks.
Malaysia also has a comprehensive Islamic banking system. Presently, Malaysia has fifteen full-fledged Islamic banks, three of which are from the Middle East, providing a broad spectrum of financial products and services based on Shariah principles. At the same time, there are five conventional banks three of which are major foreign banks, offering Islamic banking products and services via the Islamic banking window set up.
The entry of the three foreign Islamic banks enhances the competition and stimulates innovation among the Islamic banking players, and at the same time complements the Malaysian players in tapping into strategic growth areas such as investment banking and wealth management. In addition, these institutions also have plans to make Malaysia as their financial hub for this region.
In terms of product offering, more than 60 Islamic financial products and services are made available in the market. The emergence of new innovative products and financial instruments that incorporate globally accepted Shariah principles such as commodity murabahah deposits, Islamic profit rate swap, musyarakah mutanaqisah home financing and sukuk musyarakah in the industry have further elevated the domestic Islamic financial sector to the next stage of advancement.
Malaysia has several development financial institutions (DFIs) that were set up with specific objectives to develop and promote strategic economic sectors, including the manufacturing and export sectors, small and medium enterprises (SMEs), as well as the agriculture, infrastructure and maritime sectors. These DFIs complement the banking institutions by providing an array of financial and non-financial services to support development of the strategic sectors. These include the provision of medium to long-term loans, equity capital, guarantees for loans and a range of supplementary financial and business advisory services. ‘Bank Perusahaan Kecil & Sederhana Malaysia Berhad' or the SME Bank, which was established in October 2005, offers financial products such as term loans and working capital including start-ups and SMEs in new growth areas, particularly to those in professional services, export-oriented activities and franchise businesses. Bank Pertanian Malaysia has recently been corporatised to Bank Pertanian Malaysia Berhad (Agrobank) in order to strengthen its role to be more effective in meeting the needs of the entire value chain of agricultural activities, including the agro-based industries.
1.3 Malaysia as an International Islamic Financial Centre
Malaysia's continuous efforts in strengthening the Islamic financial system domestically and internationally have gained acceptance and recognition by the international financial fraternity. An important initiative that has been introduced is to enhance the position of Malaysia as a leading international Islamic financial hub.
On August 2006, the Malaysian Government launched the Malaysia International Financial Centre (MIFC) initiatives. The MIFC initiative is a collaborative effort formed by Malaysia's financial and market regulators together with top officials from relevant Government agencies and participants from the banking, takaful and capital market sectors. The establishment of the MIFC as one of the key intermediation linkages in the global market place, has an important role in accelerating the process bridging and strengthening the relationship between international Islamic financial markets and thereby expand the investment and trade relations between the Middle East , West Asia and North Africa with East Asia . Situated centrally in the Asian time zone, Malaysia presents itself as a meeting place for those with surplus funds and those who seek to raise funds from any part of the world.
Under the MIFC initiatives, Malaysia offers strong value propositions as a key provider of Islamic financial services, with five focus areas:
Major incentives introduced to attract more participants to MIFC include:
| • | Issuance of new International Islamic Banking (IIB) licences under the Islamic Banking Act 1983 to qualified foreign and Malaysian financial institutions to conduct the full range of Islamic banking business with residents and non-residents in international currencies either as a subsidiary or a branch. The entity will enjoy full income tax exemption for ten years up to year assessment 2016 under the Income Tax Act 1967. |
| • | Issuance of new International Takaful Operator (ITO) licences to qualified foreign and Malaysian financial institutions to conduct full range of takaful business with non-residents and residents in international currencies, either as a subsidiary or a branch. The entity will enjoy similar income tax exemption as the IIB entity. |
| • | Islamic fund management companies (IFMC) are allowed to invest all their Shariah funds abroad. The entity will enjoy tax exemption on all fees for managing Islamic funds for foreign and Malaysian investors up to year of assessment 2016 under the Income Tax Act 1967. |
| • | Provision of start-up fund by Employees Provident Fund (EPF) for the establishment of foreign IFMC. |
| • | Up to 100% foreign equity ownership is allowed for IIB, ITO and IFMC. |
0 comments:
Post a Comment