The New and Im­proved Malaysian Fi­nan­cial Ser­vices Land­scape: What It Means To YOU

The New And Im­proved Malaysian Fi­nan­cial Ser­vices Land­scape

Insurance - - CONTENTS - by Angie HC Wong Ex­ec­u­tive Di­rec­tor, As­sur­ance Fi­nan­cial Ser­vices Price­wa­ter­house­Coop­ers The au­thor can be con­tacted at angie.h.wong@my.pwc.com

Angie Wong pro­vides a brief on the evo­lu­tion of the Malaysian Fi­nan­cial Ser­vices land­scape and ex­plains the im­pli­ca­tions of the greater over­sight power of Bank Ne­gara Malaysia on the fi­nan­cial sec­tor es­pe­cially for the insurance in­dus­try while pro­vid­ing greater con­sumer pro­tec­tion. She also pointed out that the big­gest chal­lenge for the reg­u­la­tors and the insurance in­dus­try is main­tain­ing mar­ket fo­cus while putting the FSA into prac­tice with more co­or­di­na­tion and proac­tiv­ity in the re­la­tion­ship be­tween the reg­u­la­tors and the in­dus­try to make the FSA suc­cess­ful.

The United King­dom, the United States of Amer­ica, the Euro­pean Na­tions. Closer to home, we have Thai­land, In­done­sia and Sin­ga­pore. What do th­ese coun­tries have in com­mon with Malaysia? One can now add onto that list as coun­tries that have in­tro­duced sig­nif­i­cant reg­u­la­tory re­forms in the fi­nan­cial ser­vices sec­tor in their re­spec­tive ju­ris­dic­tion in the past 5 years. The US for in­stance, in­tro­duced the Dodd-Frank Wall Street Re­form and Con­sumer Pro­tec­tion Act in 2010 with the ob­jec­tive of reg­u­lat­ing the fi­nan­cial mar­ket so as to en­sure that the like­li­hood of another fi­nan­cial cri­sis oc­cur­ring is min­imised. Just last year, the Euro­pean lead­ers agreed to in­sti­tute a sin­gle reg­u­la­tor with broad over­sight over the 17-na­tion euro zone. In­done­sia and Sin­ga­pore also in­tro­duced new re­forms in their fi­nan­cial mar­kets, with the es­tab­lish­ment of the Fi­nan­cial Ser­vices Au­thor­ity or Otori­tas Jasa Keuan­gan, and the amend­ments to the Mone­tary Au­thor­ity of Sin­ga­pore Bill 2013 and the Fi­nan­cial In­sti­tu­tion Bill 2013, re­spec­tively, with both coun­tries seek­ing to cre­ate and en­sure a sus­tain­able and sta­ble en­vi­ron­ment whilst seek­ing to pro­tect con­sumer and pub­lic in­ter­est.

The evo­lu­tion of Malaysia’s fi­nan­cial ser­vices reg­u­la­tions

As with the other na­tions, Malaysia has also taken the step for­ward in in­tro­duc­ing new re­forms within the Malaysian fi­nan­cial ser­vices sec­tor with the gazetting of the new Fi­nan­cial Ser­vices Act 2013

Th­ese new Acts places greater re­quire­ments on fi­nan­cial ser­vices in­sti­tu­tions with em­pha­sis on the en­tity’s fi­nan­cial se­cu­rity and busi­ness con­duct, and the ef­fects of th­ese new re­forms are ex­pected to be widerang­ing and may change how Malaysian fi­nan­cial ser­vices in­sti­tu­tions op­er­ate in the fu­ture.

(“FSA”) and the Is­lamic Fi­nan­cial Ser­vices Act 2013 (“IFSA”) which came into ef­fect from 30 June 2013. Th­ese new Acts places greater re­quire­ments on fi­nan­cial ser­vices in­sti­tu­tions with em­pha­sis on the en­tity’s fi­nan­cial se­cu­rity and busi­ness con­duct, and the ef­fects of th­ese new re­forms are ex­pected to be wide-rang­ing and may change how Malaysian fi­nan­cial ser­vices in­sti­tu­tions op­er­ate in the fu­ture. Broadly, the FSA and IFSA will have an im­pact on the fol­low­ing ar­eas: • The es­tab­lish­ment/iden­ti­fi­ca­tion of ‘Fi­nan­cial Hold­ing Com­pa­nies’

• Greater over­sight from Bank Ne­gara Malaysia (“BNM”)

• Lim­its on share­hold­ing • Com­pos­ite li­censees will be­come a thing of the past

• Greater re­spon­si­bil­ity on con­sumer pro­tec­tion

The es­tab­lish­ment/ iden­ti­fi­ca­tion of ‘Fi­nan­cial Hold­ing Com­pa­nies”

Both FSA and IFSA re­quire fi­nan­cial hold­ings com­pa­nies (“FHC”) to be iden­ti­fied and an ap­pli­ca­tion to be sub­mit­ted to BNM to be ap­proved as an FHC. This re­quire­ment has sig­nif­i­cant im­pli­ca­tions for a fi­nan­cial ser­vices group and on those cor­po­rate groups with en­ti­ties in the fi­nan­cial ser­vices sec­tor as the new Acts al­lows BNM over­sight pow­ers over FHCs in ad­di­tion to the re­lated en­ti­ties within the group should any of the other sub­sidiaries pose a risk to the fi­nan­cial in­sti­tu­tion (“FI”).

Greater over­sight from BNM

Key over­sight mea­sures in­clude:

• In­ter­ven­ing in the FI’s op­er­a­tions to en­hance pru­den­tial, risk man­age­ment and gov­er­nance stan­dards

• Guide­lines is­sued by BNM are in­cor­po­rated into law to re­quire FIs to en­sure that their in­ter­nal poli­cies and pro­ce­dures re­flect BNM’s stan­dards on pru­den­tial re­quire­ments • Ac­tion can be taken by BNM against both cor­po­ra­tions and in­di­vid­u­als that fail to com­ply with the pro­vi­sions of the Acts and also take civil ac­tion on be­half of any cor­po­ra­tion or in­di­vid­u­als. The Acts also re­de­fines the term ‘in­di­vid­ual’ as those be­yond di­rec­tors of the en­tity, the CEO and se­nior man­age­ment to any­one who forms part of the de­ci­sion mak­ing process.

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