BANK AND THE BUSINESS

OF
BANKING IN MALAYSIA
From Latin word “Banco.”The Italian called it banca and the
French banque. These three words refer to a “bench” or money
changer’s table situated in the busy business street of a city or
seaport. The bankers provided money changing services for the
traders and travelers to exchange foreign coins for local money
or discounting commercial notes for the merchant as well as
lending money to the borrowers.
 Definition of Banking Business
FSA 2013:
The business of accepting various kinds of deposits, collecting
and paying various kinds of bills of exchange (cheques, drafts,
notes, etc.), providing various types of financing, providing the
financial advisory services and providing any other business that
the government may allow from time to time
Who is the banker?
FSA 2013:
Banker – the banks and their staff or agents who are involved in
the provision of banking business.
 GFMA 2023 INTERNATIONAL BUSINESS

Who is the customer?

FSA 2013:
A bank’s customer is one who uses or participates, has used or
participated or may be intending to use or participate, any
financial service or product offered by the banks.
 Banking Industry in Malaysia
Banking sector in Malaysia consist of Commercial banks, Islamic banks
and Investment banks.
The FSA 2013 and IFSA 2013 lay down certain requirements on banking
sector some of which are as follows:
a) Structure – FHC
• Banks must take in the form of Public Limited Companies.
• banks are allowed to offer various financial services under FHC
• FHC can only own one commercial bank, and it cannot own non-
financial companies.
b) Capital
• All banks were required to have a minimum capital of 8% of their Risk-
Weighted Risky Assets.
• -This capital is suppose to be inform of Tier I (50%) and Tier II (50%)
c) Board of Directors
-Guideline on Corporate Governance specified certain requirements for
anybody to qualify as a member of bank’s Board of Director some of which
are as follows:
i. The directors must be qualified, honest, professional and competent.
ii. The directors must have ‘clean’ records
iii. No individual director or a small group of individual directors
should dominate decision-making of the bank.
iv. The appointment of directors must be approved by BNM.

d) Management
➢ It is important that banks be led by highly qualified, professional and
competent management teams.
➢ The BNM’s Guideline on Corporate Governance, together with the FSA
2013 and IFSA 2013 gave the guidance which banks must follow in
appointing the CEOs and the top management team.
The Evolution in Banking
Industry

BRICK &
ELECTRONIC INTERNET
MORTAR
 Competition in Banking
Prior to1970s – little competition
1980s – stiff competition
1990s - stiffer competition from

❖ Liberalization & Globalization

2000s – fierce competition

❖ New Washington-made laws

❖ Basel III, IV, V????
❖ Data Protection Act
❖ AMLAT & FA
❖ US-Sponsored TPPA
Bank & Malaysian Economy
Banks are the backbone of a country’s economy for the
following reasons:

Data As at 31 July 2016 RM (million) %

Gross Domestic Product (GDP) 540,139 100

Total Liabilities of Banking 1,110,340.4 205.6

System
I. Mobilize funds

I. Mobilize funds
Banks facilitate domestic and international trades. Banks provide various
on-balance sheet and off-balance sheet facilities to support domestic
and international trades.

Banks provide Payment and Settlement System

Domestic and international traders pay for their purchases using
(or receive money for their sales in the forms of) banks’ cheques, drafts,
Telegraphic Transfer, and various forms of electronic and internet fund
transfers provided by the banking system to keep the economy working.

Foreign exchange services

Malaysian exporters who are paid in foreign currencies can
conveniently convert the currencies into ringgit Malaysia at any bank in
Malaysia. Malaysian importers too can convert ringgit into foreign
currencies at Malaysian banks to pay for their import bills.
Act as fiscal agents to government
-Establishment of Bank Pertanian Malaysian Bhd.
-Establishment of EXIM-Bank
-Allocation of Fund to priority sector

Government uses bank to manage economy

➢ Interest rate
➢ Money supply