1. Intro to Fin System-lirz

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INTRODUCTION TO MALAYSIAN

FINANCIAL SYSTEM

1

Outline:

The structure of Malaysian

Financial System Malaysian Banking System

Monetary vs Non-monetary

institutions

Non-banks fin intermediaries

Malaysian financial market


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2

MALAYSIANFINANCIAL SYSTEM

BANKING SYSTEM

NON-BANK

FINANCIALINTERMEDIARIES

FINANCIAL MARKETS


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Banking Financial

Intermediaries

The monetary institutions

Comprising BNM and the

commercial banks (nowincluding bank companies).

The banking system is the

largest components of the

financial system,accounting for about 67%

of the total assets of the

financial system.

Non-Banking Financial

Intermediaries

Carry out financing activities

but their resources are not

directly obtained from the

savers as debt.

Instead, these institutions

mobilize the public savings for

rendering other financial

services.

All such institutions are financialintermediaries and when they

lend, they are known as (NBIs)

Eg. Factoring companies,

Insurance Companies, Cagamas

Berhad

Financial Market

A market for the exchange

of capital credit, including

the money markets and thecapital market.

Eg. Labuan International

Offshore Financial Centre,

Stock Exchange,Commodity Future

Exchange.

Malaysian financial system can be categorized into 3 broad sectors:


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BANK NEGARAMALAYSIA

COMMERCIALBANKS

CREDIT GUARANTEECORPORATION (CGC)

INVESTMENTBANKS

FOREIGN BANKSREPRESENTATIVES

OFFSHORE BANKS


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The commercial banks are the largest and most significant providers of funds in thebanking system.

There are currently 24 commercial banks (excluding Islamic banks) of which 13 are locallyincorporated foreign banks.

Required to be licensed under Section 2 6(4) of BAFIA 1989

Offer both paper based and electronic fund transfer

FUNCTIONS:

Facilities for savings through current, saving and fixed etc

Facilities to effect payments on behalf of its customers

Loans and credit facilities

Financing the government through the purchase of gov. securities and treasury bills

A wide variety of other banking services such FOREX transaction and internet banking

Commercial banks are also authorized to deal in foreign exchange and are the only financialinstitutions allowed to provide current account facilities.


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Offshore Banks

Offshore banking can only be carried on in Labuan by an offshore company or a foreign

offshore company incorporated or registered for that sole and exclusive purpose by an

office, branch or subsidiary of a licensed Malaysian bank- Commercial Banks

To apply for an offshore banking license, an application needs to be made to the Labuan

Offshore Financial Service Authority (LOFSA) providing a guarantee and minimum capital

funds of RM10Million.

Islamic Banking

Commercial BanksBIMB, Bank Muamalat

Introduce in 1983 with the enforcement of the Islamic Banking Act 1983 which

empowers BNM to supervise and regulate Islamic Banks

Conduct business strictly in line with Syariah Principles

Serves both muslim and non-muslims customers


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Finance Companies

Second most important group of banking institutions in Malaysia

Functions: Accept Deposits + Provide a range of credit facilities

Other Financial Institutions Merchant Banks- Basically involved in providing wholesale finance to corporate customer.

Provides financial service such as corporate advisory services (listing of public companies, the

underwriting of new issues of shares and project finance to the customer)

Discount HouseSpecialize in short term money market operations.

Eg. They receive funds mainly from the banks and corporate sector and invest such funds

mainly in Government Securities and T-bills. Banks rely on DH to meet their short-term

funding requirements.

Money BrokersInvolved in brokerage activities in the money and foreign exchange market.


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Refers to the institutions thatare supervised by various

government departments

and agencies except

insurance companies are

supervised by BNM.Provident and Pension Funds

Housing Credit Institutions

Unit Trust

Development and Finance Institutions (DFIs)

Saving Institutions

Insurance Companies

Special Investments Agencies


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Money Market

Short-term instruments i.e. T-Bills, MGS

Capital Market

Long-term instruments i.e. Stocks, Bonds

Derivatives Market

Future/option instruments derive from underlying

securities i.e. KLIBOR future, KLCI future

Foreign Exchange Market

Trade of foreign currency i.e. Spot & Forward contract


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1. THE Malaysian Financial System can be divided into three

areas. Name the areas and explain on each area.

2. What does it means by Monetary and Non-monetary

institutions?

Documents

1. Intro to Fin System-lirz