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Topic 1 Introduction To Malaysian Financial System (S)
Topic 1 Introduction To Malaysian Financial System (S)
Financial System
TOPIC 1
Introduction
http://www.investopedia.com/terms/f/financial-system.asp
Definition of Financial System
http://www.investopedia.com/terms/f/financial-system.asp
What Purpose does Financial System serve?
The financial system and the banks in it play a crucial role in the
economy's use of currency.
Banks run the payment systems that enable local markets to
operate and individuals and companies to travel to distant places
and act there.
Banks are also essential as financial intermediaries. In other words,
they take the savings of people with surplus resources and make
them available to others who need them.
Introduction of Money
History
Central to evolution of the financial system is trade.
Started with barter trade system; inability to strike right exchangeability
between two sets of goods
Surplus good could not be stored
Good medium of exchange was needed
Money (notes and coins) good medium of exchange
Detail history of Banks in Malaysia can be read from the following link;
http://ecmalaysian.blogspot.my/2013/03/a-brief-history-of-banks-in-straits.html
Money
Branch banks
The Chartered Mercantile Bank of India, London and China in
Penang 1859.
Chartered Bank in 1875
Singapore-incorporated banks 1917 in Malacca and Muar
Domestic banks
Kwong Yik Banking Corporation 1913
Currency Board and Bank Negara Malaysia
The Central Bank of Malaysia Ordinance 1958 (CBO) provides for the
Central Bank to be the sole currency issuing authority in the country.
The Central Bank commenced to issue its own currency on June 12, 1967,
thereby replacing the Currency Board as the sole currency issuing
authority in Malaysia.
Institution Building Program by Bank Negara Malaysia
Law, Institutions and Malaysian Economic Development
edited by Jomo Kwame Sundaram, Sau Ngan Wong
Banking Act 1973
Law, Institutions and Malaysian Economic Development
edited by Jomo Kwame Sundaram, Sau Ngan Wong
Regulatory process
Due to rapid growth and stiff competition in the banking system, there
were no longer clear lines between the businesses of commercial
banks, finance companies and merchant banks
These three groups of institutions were regulated separately by Bank
Negara Malaysia (BNM) in accordance with the old acts (Banking
Act, 1973 and Finance Companies Act, 1969)
The control over the three groups became more and more joint over
time.
BAFIA, 1989 enables BNM to supervise and control all financial
institutions, including those controlled by way of administration, under
one regime.
BAFIA 1989
After the economic recession in the late 1980s, a number of financial control
measures were introduced by the government.
The rules were written into the Banking and Financial Institutions Act (BAFIA),
1989,
The new act combined most of the provisions already existing in the two old
acts (Banking Act, 1973 and Finance Companies Act, 1969) plus new laws on
several matters.
BAFIA, 1989 was introduced to provide;
An integrated regulation system for the financial system in Malaysia,
To modernise and coordinate laws related to banking and other financial
institutions.
BAFIA 1989
Bank Negara (the National Bank of Malaysia) had given August 31, 2000 as the deadline for the many Malaysian
banks to consolidate and merge into 10 groups of their choice. The 10 anchor banking groupsthat managed to ink
their sale and purchase agreements by that deadline are:
1. Maybank group
Malayan Banking, Mayban Finance, Aseambankers, PhileoAllied Bank, Pacific Bank, Sime Finance, Kewangan
Bersatu.
Bumiputra Commerce Bank, Bumiputra Commerce Finance, Commerce International Merchant Bankers.
3. RHB Bank
RHB Bank, RHB Sakura Merchant Bank, Sime Bank, Delta Finance, Interfinance.
4. AMMB
Arab-Malaysian Bank, Arab-Malaysian Finance, Arab-Malaysian Merchant Bank, Bank Utama Malaysia, Utama
Merchant Bankers.
Hong Leong Bank, Hong Leong Finance, Wah Tat Bank, Credit Corp Malaysia.
Consolidation of the Banking Sector
Perwira Affin Bank, Affin Finance, Perwira Affin Merchant Bankers, BSN Commercial, BSN Finance, BSN
Merchant Bank.
7. Multi-Purpose Bank
MPB, International Bank Malaysia, Sabah Bank, MBf Finance, Bolton Finance, Sabah Finance, Bumiputra
Merchant Bankers, Amanah Merchant Bank.
8. Southern Bank
Southern Bank, Ban Hin Lee Bank, Cempaka Finance, United Merchant Finance, Perdana Merchant
Finance.
9. EON Bank
EON Bank, EON Finance, Oriental Bank, City Finance, Perkasa Finance, Malaysian International Merchant
Bankers.
From the previous slides the development of Financial System Malaysia can be summarized as
follows;
The establishment of banks; Foreign branches starting from 1859, establishment of domestic bank in 1913.
The establishment of the Currency Board in 1907
Establishment f BNM in 1959
Finance Companies Act 1969
The Banking Act 1973
The Banking and Financial Institutions Act 1989
Consolidation of the Banking Sector 1999-2002
Financial Sector Master Plan 2004
Central Bank of Malaysia Act 2009
Financial Sector Blue print 2011-2020 10-year Blueprint of the financial system
Financial System