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