Malaysia Financial System

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FIN324: Banking Operations & Documentation CH# 1: The Financial System

The Structure of Malaysian Financial System

The Malaysian Financial System


Financial Institutions:Institutions:Banking System Non-Bank Financial Intermediaries Non-



The Financial Markets (4 types)

1

The Structure of Malaysian Financial System (1) FINANCIAL INSTITUTIONS Banking Systems [monetary inst] Bank Negara Malaysia Banking Institutions a. Comm. Bks (incl. Fin Cos & Insurance and Takaful) and Islamic Bks b. Merchant Bks [non-$tary inst] [nonOthers a. Discount Houses [non-$tary inst] [nonb. Rep. Office of Foreign Bks c. Offshore Banks in Labuan IOFC d. Credit Guarantee Corporation [non-$tary inst] [nonNon-Bank Financial Intermediaries NonProvident and Pension Funds Development Financial Institution Savings Institutions a. National Savings Bank b. Co-operative Societies CoOthers a. Unit Trusts b. Pilgrims Fund Board c. Housing Credit Institutions d. Cagamas Bhd. e. Leasing Cos. f. Factoring Cos. g. Venture Capital Cos.

Structure of the Malaysian Financial System (2) FINANCIAL MARKETS Money & Foreign Exchange Markets Money Market Foreign Exchange Market Capital Markets Equity Market Bond Market a. Public Debt Securities b. Private Debt Securities Derivative Markets Commodity Futures Bursa Malaysia (KLSE) CI Futures KLIBOR Futures Offshore Market Labuan International Offshore Financial Center (IOFC)

The Banking System


The Monetary Institutions:-principal Institutions:liabilities = $ Central Bank = BNM Commercial Banks



The Non-Monetary Institutions:NonInstitutions:principal liabilities = near$ closely linked to $tary inst Merchant Banks,Discount House,CGC

2

The NBFIs


The largest group – provident, pension & insurance funds
- mobilize members’ resources in the form of members’ provident & pension contributions & insurance premium to the retirement & ins. schemes. schemes.



The largest source of non-inflationary nonlong term financing for the public sector.

The NBFIs (cont.)




Provident & pensions funds: non-profit nondevote resource for the benefit of the members & their beneficiaries. Insurance Cos: profit-making – offer profitprotection against loss of property, income or life for a fee. fee.

The Financial Markets






Comprise the money & FOREX mkts, the capital mkt & the commodity futures mkt. Later was complemented by the financial futures & options mkts. Most of banking inst operate in the money & forex mkts and the capital mkt.

3

The Banking System is controlled & supervised by BNM
Bank Negara Malaysia

Comm Banks

Finance Cos

Merchant Banks

Discount Hse

Money & Forex Mkt

CGC

Financial Supervision
  

Govt supervision of fin inst by regulators To uphold regulations To maintain stability of financial markets

Aims of Supervision
   

To minimize financial loss To enforce applicable laws To prosecute cases of market misconduct To license providers of financial services

4

BNM also supervise… supervise…
   

Labuan IOFC Money & Foreign Exchange Malaysian Govt Securities Private Debt Securities

Securities Commission supervise:

-

Financial Futures & Options Exchanges
KL Futures Mkt KL Options & Financial Futures Exchange


-

Stock Exchanges
Bursa Malaysia (then KLSE) Bumiputra Stock Exchange



Private Debt Securities

Others:


Registrar of Companies Commodities Trading Commission
- Commodity Futures: KL Commodity Exchange

- Stock Exchanges


5

Bank Negara Malaysia (BNM)

History… History…
Bank Negara was established on January 26, 1959 to: 1. issue currency, 2. act as banker to the Government, and 3. influence the country’s credit situation. country’ Since its inception there has been seven governors. Historical event – attack to devalue the pound sterling in 1992.

CB’s Objectives – s 4 of the CBO CB’








To issue currency & keep reserves...
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