FI­NAN­CIAL SER­VICES ACT 2013 AND IS­LAMIC FI­NAN­CIAL SER­VICES ACT 2013 COME INTO FORCE

Insurance - - INDUSTRY UPDATES -

Source: Bank Ne­gara Malaysia Press Re­lease, 1 July 2013 THE reg­u­la­tory and su­per­vi­sory frame­work of Malaysia en­ters a new stage of its de­vel­op­ment as the Fi­nan­cial Ser­vices Act 2013 (FSA) and Is­lamic Fi­nan­cial Ser­vices Act 2013 (IFSA) come into force on 30 June 2013. The FSA and IFSA amal­ga­mate sev­eral sep­a­rate laws to gov­ern the fi­nan­cial sec­tor un­der a sin­gle leg­isla­tive frame­work for the con­ven­tional and Is­lamic fi­nan­cial sec­tors re­spec­tively, namely, the Bank­ing and Fi­nan­cial In­sti­tu­tions Act 1989 (BAFIA), Is­lamic Bank­ing Act 1983, Insurance Act 1996 (IA), Taka­ful Act 1984, Pay­ment Sys­tems Act 2003 and Ex­change Con­trol Act 1953 which are re­pealed on the same date.

Key fea­tures of the new leg­is­la­tion in­clude:

• Greater clar­ity and trans­parency in the im­ple­men­ta­tion and ad­min­is­tra­tion of the law. This in­cludes clearly de­fined reg­u­la­tory ob­jec­tives and ac­count­abil­ity of Bank Ne­gara Malaysia in pur­su­ing its prin­ci­pal ob­ject to safe­guard fi­nan­cial sta­bil­ity, trans­par­ent trig­gers for the ex­er­cise of Bank Ne­gara Malaysia's pow­ers and func­tions un­der the law, and trans­par­ent as­sess­ment cri­te­ria for au­tho­ris­ing in­sti­tu­tions to carry on reg­u­lated fi­nan­cial busi­ness, and for share­holder suit­abil­ity; A clear fo­cus on Shariah com­pli­ance and gov­er­nance in the Is­lamic fi­nan­cial sec­tor. In par­tic­u­lar, the IFSA pro­vides a com­pre­hen­sive le­gal frame­work that is fully con­sis­tent with Shariah in all as­pects of reg­u­la­tion and su­per­vi­sion, from li­cens­ing to the wind­ing-up of an in­sti­tu­tion; Pro­vi­sions for dif­fer­en­ti­ated reg­u­la­tory re­quire­ments that re­flect the na­ture of fi­nan­cial in­ter­me­di­a­tion ac­tiv­i­ties and their risks to the over­all fi­nan­cial sys­tem; Pro­vi­sions to reg­u­late fi­nan­cial hold­ing com­pa­nies and non-reg­u­lated en­ti­ties to take ac­count of sys­temic risks that can emerge from the in­ter­ac­tion be­tween reg­u­lated and un­reg­u­lated in­sti­tu­tions, ac­tiv­i­ties and mar­kets. The Min­is­ter of Fi­nance may sub­ject an in­sti­tu­tion that en­gages in fi­nan­cial in­ter­me­di­a­tion ac­tiv­i­ties to on­go­ing reg­u­la­tion and su­per­vi­sion by Bank Ne­gara Malaysia if it poses or is likely to pose a risk to over­all fi­nan­cial sta­bil­ity; Strength­ened busi­ness con­duct and con­sumer pro­tec­tion re­quire­ments to pro­mote con­sumer con­fi­dence in the use of fi­nan­cial ser­vices and prod­ucts; Strength­ened pro­vi­sions for ef­fec­tive and early en­force­ment and su­per­vi­sory in­ter­ven­tion The new laws will place Malaysia's fi­nan­cial sec­tor, en­com­pass­ing the bank­ing sys­tem, the insurance/taka­ful sec­tor, the fi­nan­cial mar­kets and pay­ment sys­tems and other fi­nan­cial in­ter­me­di­aries, on a plat­form for ad­vanc­ing for­ward as a sound, re­spon­si­ble and pro­gres­sive fi­nan­cial sys­tem. This en­ables the fi­nan­cial sys­tem to meet the new de­mands for fi­nanc­ing as­so­ci­ated with Malaysia's eco­nomic trans­for­ma­tion pro­gramme both dur­ing and be­yond the next decade, the chang­ing de­mo­graph­ics of our pop­u­la­tion, and the in­creas­ing in­te­gra­tion of the Malaysian econ­omy with the re­gion and the world.

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