STRUCTURE OF THE MALAYSIAN

FINANCIAL SYSTEM
 Main purpose BNM to issue currency, act as banker and
Bank Negara Malaysia adviser to the government, credit system and monetary
policy.
(BNM).
the Banking and Financial Institutions Act (BAFIA) extended
BNMs powers for the supervision and regulation of financial
institutions and deposit-taking institutions who are also
engaged in the provision of finance and credit.
Ministry of Finance
(Malaysia)
MOF, is a ministry of the Government of Malaysia
that is charged with the responsibility for government
expenditure and revenue raising. The ministry's role is
to develop economic policy and prepare the Malaysian
federal budget. The Ministry of Finance also oversees
financial legislation and regulation.
securities commission
malaysia.
The Securities Commission Malaysia (SC) is a
statutory body entrusted with the responsibility of
regulating and systematically developing the
Malaysias capital markets. It has direct
responsibility in supervising and monitoring the
activities of market institutions and regulating all
persons licensed under the Capital Markets and
Services Act 2007.
The Malaysian financial system is structured into two major categories, Financial
Institutions and Financial Market. The Financial Institutions comprise Banking System
and Non-bank Financial Intermediaries. The Financial Market in Malaysia
comprises four major markets namely: Money & Foreign Exchange Market, Capital
Market, Derivatives Market, and Offshore Market.

Financial System Structure in Malaysia

FINANCIAL INSTITUTIONS
 BANK NEGARA MALAYSIA
Established on 26 January 1959 (Central Bank Ordinance 1958)
Main objectives
Act as the governments banker and financial adviser
Ensure financial stability
Act as commercial banks banker
Control the value of Malaysian currency
 COMMERCIAL BANKS
Section 2 , BAFIA 1989
an entity carries out banking business which in turn are defined as ;
a. Business that involves
Accept deposit for current account
Deposit account
Saving account
Other similar account
b. Make payment to or collect cheques written by or paid by the customers
c. Provide financing through
-Lending
-Leasing
-Purchase of bill of exchange
-Acceptance of or guarantee for an individuals liabilities
d. Other business as permitted by the central bank and approved by the Ministry
of Finance
 ISLAMIC BANKS
Commercial bank operating in accordance with Islamic law or Syariah
Islam with forbid of elements the interest or usury
Types of Islamic Banks
Bank Islam Malaysia Berhad (BIMB)
Bank Muamalat Malaysia Berhad (BMMB)
 FINANCE COMPANIES
Section 2, BAFIA 1989

an institution that conduct finance business which

a. Accept deposit for deposit accounts or other similar account
b. Provide lending, leasing and hire purchase facilities
c. Other business permitted by BNM and approved by MOF

Eg: Alliance Finance Berhad, EON Finance Berhad

 Merchant Banks
Section 2, BAFIA 1989

a. Accept deposits for deposit account and provide financing

b. Provide consultancy and advisory services (corporate & investment

matters, make/manage investment on behalf of others parties)

c. Other business permitted by BNM and approved by MOF

eg: Affin Merchant Bank Berhad

 DISCOUNT HOUSES
Financial intermediaries deal specifically in short term fund for ST
investors and ST borrowers

Move funds from other financial intermediaries, statutory bodies, &

large corporations in large quantity in the from ST deposit. ( overnight
money)

Eg: CIMB Discount House Berhad

 LABUAN OFFSHORE BANKS
Set up on 1 October 1990

Conducted in foreign currencies

Enable local as well as international companies & investors to carry

out investment & financial activities at international level.
NON BANK FINANCIAL
INTERMEDIARIES
 Non Banking Financial Intermediaries System
direct control of various government departments and agencies.
indirectly under BNM through periodic reporting
 INSTITUTIONS OF DEVELOPMENT FINANCE
aim to promote investment in the industrial and agricultural sectors.
identify new project
complements the services
 SAVING INSTITUTIONS
Promote and mobilize savings
Savings Institutions in Malaysia:
Bank Simpanan National (BSN)
Cooperatives Societies
 PROVIDENT FUNDS, PENSION FUNDS AND
INSURANCE COMPANIES
a) Provident and Pension funds
collect funds and provide funds during a worker's old age.
provide additional pension funds for retirement.

b) Insurance Companies
collected in the form of insurance premium paid for protection against
calamities.
two types of insurance businesses:
-Life insurance
-General insurance
 OTHER NON-BANK FINANCIAL INSTITUTIONS
a) Unit Trust Companies
-financial intermediaries for small investors
b) Housing Credit Institutions
-provide housing loans
c) Leasing Companies and Factoring Companies
-Leasing is an agreement between an asset owner (lessor) and a lesse
-Factoring provide management and administration services
d) Venture Capital Companies
-Financing of high-risk investment or assets
e) Lembaga Urusan Dan Tabung Haji (LUTH)
-to promote and to coordinate activities that related to the fulfilment of
religious obligations
 Financial market
Money market
- short term instrument eg. Treasury Bill
Foreign exchange Market
- Trade of foreign Currency eg. Spot & Forward contract
Capital market
- Long term instrument eg. Stock ,bond
Derivative market
- Future/option instrument derive from underlying securities eg
KLIBOR Future, KLCI Future
 OFFSHORE FINANCIAL MARKET
The offshore financial market in Malaysia was set up following the
establishment of the Labuan International Offshore Financial
Centre (IOFC) in 1990, with the aim of promoting Malaysia as a regional
financial services Authority Act 1996.
 Crisis Financial system in Malaysia
Dark money trick
-double the money
-yellowish powder
-fraudulently obtain money

Low Financial literacy

-lack of education
Management of personal finances
Cont...
Security policy in internet banking Malaysia
-Fake Website
-Stole username and password
-Trojan A$ack
-Make any fraudulent transaction

Electronic banking Malaysia

-Technology Risk
-Lack of Knowledge
 Conclusion
The Malaysian monetary framework needs to keep on evolving pair
with changing world patterns and conditions, to be more powerful in
meeting the progressions and the difficulties these bring along.