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Anis Munira

on 25 August 2014

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Plays a critical role in the economy.
It enables the financial intermediation process which facilitates the flow of funds between savers and borrowers
Ensuring that financial resources are allocated efficiently towards promoting economic growth and development.
Financial stability describes the condition where the financial intermediation process functions smoothly and there is confidence in the operation of key financial institutions and markets within the economy.
What is financial stability?

Function of Regulation Department
Overview of Development Financial Institutions (DFIs) in Malaysia
Malaysian Payment Systems
It may lead to a financial crisis with adverse consequences for the economy.
Functions of Supervision Departments
Types of Payment System
Administered Legislation
To support the efficient allocation of resources & distribution of risks across the economy
To promote & maintain monetary & financial stability as it contributes to

Healthy Economy
Sustainable Growth

Discharge the responsibilities for efficient Malaysia financial system by preserving the soundness of financial instructions & the robustness of the financial infrastucture.
Remain vigilant(berwaspada) to new emerging trends and challenges to the Malaysian financial system which could undermine financial stability
BY: Devoting significant resources towards instituting robust surveillance process

Identify vulnerabilities & support pre-emptive actions to prevent systemic distances
1) Financial Sector Development (Pembangunan Sektor Kewangan)

To promote competitive & robust financial institutions & financial infrastucture enhancement
2) Financial Surveillance (Pemantauan &Pengawasan Kewangan)

Control over the comprehensive &integrated macro-prudential.
Assess of emerging trends & vulnerabilities of financial system.
3) Prudential Financial Policy (Dasar Kewangan Berhemat)

Development of a sound & Robust prudential framework for FIs that promotes humanisation.
4) Consumer & Market Conduct ( Pengguna & Pengendalian Pasara)

Formulates & enforces market market conduct policies to ensure fair retirement of financial consumers.
Undertakes initiatives to increase the financial literacy levels of Malaysian Consumers
5) Islamic Banking & Takaful (Perbankan Islam dan Takaful)

Create an enabling environment through improvements in the regulatory regime
Develop relevent prudential policies to effectively support an Islamic financial system.
6)Development Finance & Enterprise (Perkembangan Kewangan dan Syarikat)

Promote the roles of development financial institutions in effectively
Efficiently delivering its mandated roles of promoting strategic sectors of the economy.
Influence financial services providers to provide financing to strategic targeted sectors and the underserved stakeholders
7) MIFC Promotion Unit (Unit Promosi MIFC)

Develop and implement a comprehensive range of MIFC promotional strategies and initiatives to position Malaysia as an international Islamic financial hub.

1)Financial Conglomerates Supervision (Penyeliaan Konglomerat Kewangan)

Supervision of domestic financial conglomerates and Islamic banks which are part of the domestic banking groups.

Conglomerate- A combination of two or more corporations engaged in entirely different businesses that fall under one corporate group
Banking Supervision (Penyeliaan Perbankan)

Supervision of foreign banks, stand-alone investment banks, stand-alone and foreign licensed Islamic banks, and development financial institutions.
3) Insurance & Takaful Supervision (Penyeliaan Takaful & Insuran)

Supervision of insurance companies, reinsurance companies, takaful operators, retakaful operators as well as international takaful operators.
4) Payment Systems Policy (Polisi Sistem Pembayaran)

Development of policies and strategies to promote the safety, security & efficiency of payment systems & payment instruments, and drive migration to e-payment initiatives.
5) Specialist Risk Unit (Unit Pakar Risiko)

Provide prompt independent assessment and advice on emerging risks in specific and across regulated financial institutions to facilitate pre-emptive actions.

Functions of Regulation and Supervision Administration (Fungsi Peraturan dan Penyeliaan Pentadbiran)

Provide centralised administration services, knowledge management support and coordinate learning/development initiatives for both regulation and supervision departments.

What are DFIs

The DFIs in Malaysia are specialised financial institutions established by the Government with specific mandate to develop and promote key sectors that are considered of strategic importance to the overall socio-economic development objectives of the country. Including:-

Small and medium enterprises (SMEs),
Export-oriented sector
High-technology industries.

Roles & Function of DFIs (Specialised Institutions)

DFIs provide a range of specialised financial products and services to suit the specific needs of the targeted strategic sectors.
Ancillary services (Perkhidmatan sampingan) in the form of consultation and advisory services are also provided by DFIs to nurture and develop the identified sectors.
DFIs therefore complement the banking institutions and act as a strategic conduit (penghubung strategik) to bridge the gaps in the supply of financial products and services to the identified strategic areas for the purpose of long-term economic development.
Strenghtening Financial Conditions and Operational Structure of DFIs

Given the significant role of DFIs in developing and promoting the identified strategic sectors of the economy, it is important for DFIs to be strong, effective and efficient in performing its mandated roles better.

Initiatives taken towards achieving these objectives include -

Strengthening the regulatory and supervisory framework
Building capacity and capability
Enhancing operational efficiency of these institutions.

Placement of DFIs under Bank Negara Malaysia

With the enactment of the DFIA, selected DFIs have been placed under the purview of Bank Negara Malaysia (the Bank).

As part of the regulatory and supervisory framework, the Bank monitors the activities and financial performance of these institutions to ensure that they perform their mandated roles in a prudent manner, supported by strong corporate governance and best practices.
A well-functioning payment system is crucial for the efficient operation of the financial market as well as to support the Malaysian economy. As such, the promotion of a safe, secure and efficient payment system is an important objective of Bank Negara Malaysia.
Introduction to Payment Systems

Bank for International Settlements (BIS) definition

A payment system consists of instruments, banking procedures, and typically interbank funds transfer systems that ensure and facilitate the circulation of money. In essence, it facilitates corporations, businesses and consumers to transfer funds to one another.

Central Bank of Malaysia Act 2009-
As any system or arrangement for the transfer, clearing or settlement of funds or securities

In essence, it facilitates corporations, businesses and consumers to transfer funds to one another.
The Importance of Payment Systems
Payment systems are a vital part of the financial infrastructure of a country.
Enables the transfer and settlement of high-value interbank payments and securities.
Its failure could contribute to systemic crisis and transmit financial shocks to the financial system.
Safe and efficient payment systems are fundamental to promote financial stability, facilitating Bank Negara Malaysia in the conduct of its monetary policy by allowing greater use of market-based instruments to achieve its objectives, while enhancing the efficiency of the financial system and the economy as a whole.

Role of Bank Negara

Bank Negara Malaysia plays its role as overseer in ensuring the safety, reliability, and efficiency of payment systems infrastructure, and to safeguard the public's interest.

As an overseer, it formulates regulatory framework and conducts oversight on both large value and retail payment systems.

Facilitates improvements in payment services and market developments through fostering payment innovations and ensuring public confidence in the retail payment systems and the use of payment instruments.

The Bank undertakes active consultation and cooperation with market players and stakeholders.
Real Time Electronics Transfer of Funds and Securities (RENTAS)

Objective to improve the overall efficiency of the large value payment system, particularly in respect of reducing interbank settlement risk.

It enables the transfer and settlement of high value interbank ( involving, or connecting two or more banks) funds and scripless securities transactions.

There are two types of transactions handled by RENTAS

-Interbank Funds Transfer System (IFTS)
-Scripless Securities Transfer System (SSTS).

There is no limit set for the transfer of funds between members.

However, the minimum transaction amount for third party payments (payments that originate from a non-RENTAS member or beneficiary) is set at RM10,000.

This limit does not apply for payments to and from Bank Negara Malaysia and government agencies.

1) National Electronic Cheque Information Clearing System (eSPICK)

Bank Negara Malaysia had in 2008 implemented the National Electronic Cheque Information Clearing System (eSPICK) to replace the previous Sistem Penjelasan Imej Cek Kebangsaan (SPICK) cheque clearing system.
The implementation of eSPICK was part of the Bank's effort in enhancing the efficiency of the payment system.
The Bank together with the banking industry have migrated the cheque processing phase from physically sending cheques for clearing at the clearing centres into ---->
into a fully image-based cheque clearing process.
Customers and businesses will BENEFIT from the speedier and more efficient cheque clearing system, especially in the timing of the availability of funds from the deposit of outstation cheques.

Under the eSPICK, customers will receive funds from the cheques deposited during business hours on the next business day, compared to between 2 to 8 business days previously.
2)Shared ATM Network
Shared ATM Network (SAN) enables bank customers to access their funds from any of the participating banks’ automated teller machine (ATMs).
3)InterBank GIRO The Interbank GIRO (IBG)

Refers to a payment system that provides funds transfer services amongst its participating financial institutions
4)Direct Debit

Direct debit, which is operated by MyClear Sdn Bhd, is an interbank collection service for regular and recurring(berulang) payments enabling automated collection directly from a customer’s bank account at multiple banks with a single authorization.
5)Financial Process Exchange (FPX)

An Internet-based multi-bank payment platform that leverages(bermanfaat) on the Internet banking services of banking institutions to offer online payment for electronic commerce (e-commerce) transactions.

Types of retail payment instruments

Credit Cards

Charge Cards

Debit Cards


E-money is a payment instrument that contains monetary value that has been paid in advance by the user.

E-money users can use their e-money to purchase goods and services from merchants.

When users pay using e-money, the amount will be automatically deducted from their e-money balance.

E-money comes in different forms and can be broadly categorised as card-based and network-based, which are currently accessible via the internet and mobile phones.
Charge card

Similar to a credit card.

However, charge card holders must settle their outstanding amount in full by the due date every month. Since charge cards are often associated with prestige, the fees are generally higher than credit cards. This is compensated by the differences in terms of benefits, with charge cards generally offering more privileges. Its popularity has dropped in Malaysia.
Types of retail payment channels
Internet Banking

Mobile Banking

Mobile Payment
The Bank's Logo
Who conceived the idea of having a Kijang motif for the official logo of the Bank?
It was the first Malaysian Governor of Bank Negara Malaysia, the late Tun Ismail Mohamed Ali.

This motif was derived from the depictions of Kijang (barking deer) on gold coins of the State of Kelantan, which was among the earliest coins of the Malay Sultanate.
The Bank's logo was formalised in 1964 and features a Kijang, a sun and a crescent moon. and the crescent moon represents Islam, the official religion of Malaysia.
The sun symbolizes power !
The crescent moon represents Islam, the official religion of Malaysia.
To enable the Bank to meet the objectives of a central bank, it is vested with comprehensive legal powers under the following legislation to regulate and supervise the financial system. These pieces of legislation includes:
1)The Central Bank of Malaysia Act 2009 (CBA)

Came into force on 25 November 2009.

Replaces the Central Bank of Malaysia Act 1958.

It provides for the continued existence of the Central Bank of Malaysia (the Bank).

Provides greater clarity to the Bank’s mandates on promoting monetary and financial stability, and to exercise oversight over payment systems.

Drawing lessons from the global financial crises in financial regulation, surveillance and crisis management framework and the need for effective coordination not only across sectors but also across border, the CBA aims to adequately capture and pre-emptively (lebih awal) address sources of risks to financial stability.

In doing so, it vests (menguatkan) the Bank with the necessary powers and instruments to achieve its mandates effectively. It also gives due recognition to the Islamic financial system in Malaysia by providing the legal foundation for its development in the overall Malaysian financial system.
2)Financial Services Act 2013

The FSA came into force on 30 June 2013 consolidating (mengukuhkan) the regulatory and supervisory framework for Malaysia’s banking industry, insurance industry, payment systems and foreign exchange administration matters.

Under the FSA, the Bank's principal regulatory objective:

Promoting financial stability, which is pursued by fostering the safety and soundness of financial institutions

Be integrity and orderly functioning of the money and foreign exchange markets, safe, efficient

To be a reliable payment systems and payment instruments.

To be fair, responsible and professional business conduct of financial institutions.

To strive to protect the rights and interests of consumers of financial services and products.

This legislation (FSA) provides:

For the regulation and supervision of financial institutions, operators of payment systems and players in the money and foreign exchange markets.

The Bank with powers for oversight over financial groups and to respond effectively to new and emerging risks to the financial system with the aim to preserve public confidence in the system .

Ensure that critical financial intermediation activities which are vital to the economy are not disrupted.
3)Islamic Financial Services Act 2013

Came into force on 30 June 2013 and sets out the regulatory framework for Malaysia’s Islamic financial sector with the principal regulatory objectives of promoting financial stability and compliance with Shariah.

Similar to the FSA.

IFSA equips the Bank with adequate regulatory and supervisory powers.

In promoting compliance(patuh) with Shariah, IFSA imposes(mewajibkan) a duty on Islamic financial institutions to ensure compliance with Shariah at all times and also empowers the Bank to issue standards on Shariah requirements to facilitate institutions in complying with Shariah.

A dedicated Part on Shariah requirements and other specific provisions( peruntukan khusus) on Shariah compliance throughout the Act provide a comprehensive regulatory framework to ensure an end-to-end Shariah compliance by Islamic financial institutions.

4)Insurance Act 1996

An Act to provide new laws for the licensing and regulation of insurance business, insurance broking business, adjusting business and financial advisory business and for other related purposes.
5)Development Financial Institutions Act 2002 (Act 618)

Has been in force since 15 February 2002.

Provides for a comprehensive regulatory framework

ensure safe and sound financial management of Development Financial Institutions (DFIs).

DFIs are specialised financial institutions established by the Government with specific mandate

develop and promote key sectors like agriculture, small and medium enterprises, infrastructure, maritime, export-oriented sector, capital-intensive and high-technology industries of strategic importance to the country.

There are six DFIs regulated and supervised pursuant to the DFIA, each subject to the regulation, supervision and corporate governance standards under the DFIA.

The DFIA ensures that DFIs remain resilient and efficient in order to meet their developmental mandates in a financially sustainable manner, while contributing to the overall stability of the financial system.
6)Anti-Money Laundering and Anti-Terrorism Financing Act 2001 (Act 613)

The AMLATFA provides for the offence of money laundering,

The measures to be taken for the prevention of money laundering and terrorism financing offences, investigation powers and the forfeiture of terrorist property and property derived from, or involved in money laundering and terrorism financing offences.

The First Schedule of the AMLATFA contains a list of the reporting institutions under the AMLATFA.


-Financial institutions
-Designated non-financial businesses

Professions which are required to perform certain obligations which are designed to prevent money laundering and terrorism financing offences.

The Second Schedule of the AMLATFA lists serious offences from various legislation, which if committed, are likely to result in a person benefitting or deriving proceeds from the offence.
7)Money Services Business Act 2011

(MSBA) came into force on 1 December 2011.

Provides for the licensing, regulation and supervision of the money services business industry which comprises of the money changing, remittance and wholesale currency businesses.

The MSBA was enacted with the aims to modernize and elevate the status of the money-changing and remittance business into a more dynamic, competitive and professional industry, while strengthening safeguards against the threats of money laundering, terrorist financing and other illegal activities.

The Bank has the power to regulate the industry through the issuance of regulations, guidelines, circulars, standards and notices.

Apart from the power to compound and prosecute any person who contravenes the MSBA, the Bank is also empowered with other enforcement powers, namely to issue directive to a licensee or money services agent if it is contravening or has contravened the MSBA or is carrying on money services business in a manner detrimental to the interest of customers and public generally.

The Bank may also take administrative action or institute civil actions against any person who has contravened the MSBA.
The AMLATFA promotes a collaborative and multi-agency approach by setting out the powers and functions of:

(a)The competent authority which is responsible to oversee the performance of obligations by the reporting institutions, facilitate the enforcement of the AMLATFA and co-operate with the foreign financial intelligence units;

(b)Enforcement agencies which are responsible to investigate the offences under the AMLATFA; and

(c)supervisory and regulatory authorities which are responsible to facilitate in the implementation of the AMLATFA.

Retakaful- Reinsurance Islamic companies

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