Introduction make sure economy stable. 1. REGULATORY FRAMEWORK 1.1

Topic: BusinessComparative Analysis
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Last updated: August 17, 2019

Introduction Thisreport is consists the overview of regulations financial institutions and allsupervision in Malaysia. In this report we will focuses on six things that wethink that it could be the most important things that all financialinstitutions must have.  Before that, wemust make sure that, we know the meaning of the regulations.

In simple word,regulations can be defined as a rule that all financial institution mustfollow. AsI mention before, we will discuss about six things in this report. First ofall, we will discus about the regulatory framework. There are three mainregulatory in this framework. Second are authorities and regulators. In thissection the discussion is about the nature of the financial institution.

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Thirdis we will discus about the banking license. Here, we will discuss about how abank can get the license and the procedure to get the license. Next,we will discuss about the forms of banks. There are many types of banks inMalaysia and because of that, we must know the function of the every bank. Thenwe will talk about the organization of bank in Malaysia. Lastly, we will discusabout the regulatory development and tropical trends.

Ourobjectives report to know that every financial institution must have rule thatthey follow. Yes, we know that, financial institutions have the power to givethe services to us however they can’t charge the interest based on they want.BNM also want to secure the rights of the consumer. Beside that, thisregulations is also want to make sure that, the financial institutions have thebackup and to make sure the financial services can give the best services tomake sure economy stable.       1.    REGULATORY FRAMEWORK 1.1  Financial Sector Blueprint 2011-2020Financial Sector Blueprint was launched in December 2011 against abackdrop of uneven global growth in the aftermath of the 2008/09 globalfinancial crisis.

BANK Negara Malaysia is starting a review of its FinancialSector Blueprint (2011-2020) as this year is the midway point of the 10 yearplan. Sources say the central bank has put together several multi-party workinggroups to discuss the various aspects of the existing blueprint. It is learntthat these working groups are tasked with reviewing the implemented or ongoingimplementation of initiatives with a view of making recommendations on whatother policy measures are required over the next five years.The techniques and recommendations of the Blueprint will build on thestrong foundation of the Malaysian financial system.

Malaysian Financial institutionsthese days are well capitalized with strong buffers, advanced risk managementand corporate governance practices, and more regional presence. The financialinfrastructure in Malaysia has additionally been drastically strengthened, suchas the development of a deep and vibrant bond marketplace, strong fee andagreement systems, and an powerful financial stability. This has been supportedby means of a complete and sturdy regulatory and supervisory framework andpowerful surveillance this is forward searching and focused on addressing therisks to standard economic stability.

In addition, Malaysia has a comprehensiveIslamic financial system that is recognized as among the most advanced in theworld.1.2             MalaysiaInternational Islamic Financial Centre (MIFC)The Malaysia International Islamic Financial Centre (MIFC) initiativewas launched in 2006 to develop Malaysia as a global marketplace for Islamicfinance. Due to the fact inception more than 30 years ago, Islamic finance inMalaysia has developed into a complicated Islamic finance marketplace that ischaracterized by a means regulatory and supervisory framework, a deep primarymarket and active secondary sukuk market, a diverse talent base with globalcapabilities and connectivity, and product breadth and depth.

The Malaysianmarketplace also offers an efficient system for multi-currency clearing andsettlement.The MIFC initiative accommodates a community network of thecountry’s financial sector regulators, including Bank Negara Malaysia (CentralBank of Malaysia), Securities Commission Malaysia, Labuan Financial ServicesAuthority and Bursa Malaysia (Kuala Lumpur Stock Exchange), Governmentministries and agencies together with industry participation from the banking,takaful, re-takaful, capital market institutions, human capital developmentinstitutions and professional ancillary services companies which areparticipating and working collaboratively in Islamic finance. Malaysiawelcomes industry practitioners to conduct international business in Islamicfinance, while enjoying a highly conducive business environment. As adestination for financial investment, Malaysia provides a marketplace forglobal Shariah-compliant investment opportunities through wide range ofinternational financial institutions, extensive expertise and an array ofIslamic financial products and services 1,3 Labuan International Business Financial CentreLabuan was designated as thecountry’s International Business and Financial Centre (IBFC) (formerly known asInternational Offshore Financial Centre) in 1990. There have been severalagencies that were involved at the early stages of Labuan’s establishment asInternational Business and Financial Centre. The Malaysian government set upLabuan Financial Services Authority (FSA) as a one-stop agency to rationalizethe regulatory framework of the business and financial centre. In 2008, anofficial agency namely Labuan IBFC Incorporated was established as thejurisdiction’s marketing arm. Labuan FSA and Labuan IBFC Incorporated worktogether to achieve the objective of enhancing Labuan’s reputation as a premierInternational Business and Financial Centre in the Asia region.

      2.    AUTHORITIES, REGULATORSBank Negara Malaysia (BNM) is authorized toact because the regulator ofbanking establishments underneath the Financial ServicesAct 2013 (FSA), the Islamic Financial Services Act 2013 (IFSA)and therefore the central Bank of MalaysiaAct 2009 (CBA). BNM has broadpowers of supervision and control over banking institutions licensed under theFSA and the IFSA. In discharging its supervisory functions, BNM adopts arisk-based supervision approach, under which financial institutions areassessed and monitored based on risk profiles and adequacy of risk managementsystems.Role of Central Bank of Malaysia is entrusted to BNM under CBA. BNMreports to the Minister and keeps the Minister informed of matters relating tomonetary and financial sector policies. Some of principal of BNM are to promotemonetary stability and financial stability conductive to the sustainable growthof the Malaysian economy. In promoting monetary stability, BNM needs monetarythat serves the interest of the country, with the most important of objectiveis maintaining the price stability giving due to development within theeconomy.

            BANKING LICENCECharacteristic andNature Activities whichrequire a banking licence under the Financial Services Act 2013 (FSA) arebanking and investment banking business while Islamic bank and InternationalIslamic Bank which are issued by under Islamic Financial Services Act (IFSA) .Under banking business is consist of accepting deposits, paying or collectingcheques, providing finance and others .While investment banking businessconsist of accepting deposits on deposit account and providing finance.

Theseactivity carried on pursuant to a Capital Markets Services Licence under theCapital Markets and Services Act 2007 (CMSA).While other business prescribed byBank Negara Malaysia (BNM), with the approval of the Minister.  BNM and The Minister have different functionto issue guidelines which are under the FSA or IFSA. BNM has many issuedguidelines in relation to capital adequacy, financial reporting, anti-moneylaundering and prudential limits and standards.

Other than that, BNM also has issued guidelines for the establishment ofan international Islamic bank.  In Labuan, anyactivities in Labuan banking business is defined under the Labuan Financial Services and SecuritiesAct 2010 (LFSSA) and Labuan Islamic Financial Services and Securities Act(LIFSSA) which are receiving deposits, Labuan investment banking business, Labuanfinancial business, Labuan Islamic banking business, While other businessspecified by the Labuan FSA, with the approval of the Minister subjectcompliance with the applicable exchange control restrictions under the FSA. LIFSSA empowers the Labuan FSA to grantlicences for the conduct of ‘Labuan Islamic banking business’, meaning thecarrying on of ‘Labuan banking business’ in compliance with shariah principles.

          Licensing Procedures              An applicantfor a commercial banking licence, an investment banking licence or an Islamicbanking licence must be a public company incorporated under the Companies Act2016 (CA). IFSA aslso allows aforeign institution to operate an international Islamic banking businessthrough a branch registered in Malaysia. And that application must be made inwriting to the Minister by submitting the application through BNM. If BNM issatisfied that the applicant fulfils the set criteria and that it would not,among others, be detrimental to the financial system of Malaysia to grant alicence, BNM can make a recommendation to the Minister of Finance (Minister) asto whether the licence should be granted or refused and the conditions, if any,to be imposed on the licence.

While to get the licences for Islamic banking andInternational Islamic Banking are similar in application for the procedures.But, there are certain criteria that must be satisfied before BNM can recommendthe granting of an Islamic banking licence which are ;(i)theaims and operations of the banking business of the proposed Islamic bank do notinvolve any element which is contrary to the Shariah and (ii) There must be aprovision in the articles of association of the bank for the establishment of aShariah committee.             While theapplication for a Labuan banking licencemust be a Labuan company, a foreign Labuan company  or a Malaysian bank .

An application for alicence to carry on Labuan banking business or Labuan investment bankingbusiness must be made in writing to the Labuan FSA by or on behalf of theapplicant. The difference between Labuan banking business and Labuan investmentbanking business for application the licence is Labuan Investment bank notallowed to conduct business of receiving deposits on a current account , savingaccount and saving account.        FORMOF BANK State-owned Bank            In Malaysia , there are nostate-owned bank although there are government linked investment companieswhich control significant stakes in larges domestic financial group.  Universal banks,commercial and retail banks Now a days, many large banks in Malaysia suchas commercial bank and retail bank can able to a full suite of banking andfinancial services. However, there are no universal bank in Malaysia.

Commercial banks are allowed to provide Islamic banking services, subject tothe prior written approval of BNM. As some of the activities of commercialbanks could involve dealing in securities, advising on corporate finance, theprovision of investment advice and fund management ,there is a regime forlicensed commercial banks to register themselves with the SC in accordance withthe CMSA. Investment Bank             In 2005,investment bank was created through rationalisationof existing merchant banks, discount houses and stock broking companies withindomestic banking groups.The function of investment bank is to  conductactivities based on the types of licences held prior to their rationalisation,and are additionally allowed to undertake fund management and unit trustbusinesses in line with securities laws and guidelines issued by the SC.

Investment bank also a private companythat provides various financial and services to individuals, corporations, andgovernments such as raising financial capital by underwriting or acting as theclient’s agent in the issuance of securities. Example of investment in Malaysiais Maybank Investmet Bank Berhad and Public Investment Bank Berhad.       Private Bank              Private banking is a special service to ease the transactions ofhigh net worth people.Each banks has a minimum amount that need to have in the account to be eligiblefor private banking services. For example ,CIMB Private Banking .Other Bank            There are two other categories offinancial businesses which come within the purview of the FSA, but do notrequire banking licenses. One is approved business that required registrationunder BNM.

The final category of businesses includes factoring, hire purchase,and financial .These businesses require neither approval nor registration withBNM, but are still subject to the regulatory oversight of BNM under the FSA.                

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