Mdm Chuah Evolution Msian Banking Industry 130411 ABM PDF

8/3/2019 Mdm Chuah Evolution Msian Banking Industry 130411 ABM PDF

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Evolution of the Malaysian Commercial

Banking Industry

Presentation by The Association of Banks in Malaysia

for the

Financial Sector Talent Enrichment Programme (FSTEP)

Prominent Leaders Lectures onFinancial Service Industry

Wednesday, 13 April 2011


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Table of Contents

1. Broad classification of financial institutions2. Commercial Banking Business3. Going back to history4. Bank Negara Malaysias Financial Sector Masterplan

5. Transformation of the financial landscape - Mergers6. Strengthening the Commercial Banking Industry7. Building Blocks for Commercial Banking Business8. Financial Institutions Statistical System (FISS)9. Some Key Financial Data on the Industry

10. Customer centricity11. Background of The Association of Banks12. ABMs Organization Chart13. 2011 Key Initiatives External Perspective


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Broad classification of financial institutions

A commercial bank (or business bank) provides transactional and savingsaccounts and accepts time deposits.

Islamic banking refers to a system of banking or banking activity that isconsistent with the principles of Islamic law (Shariah) and its practical applicationthrough the development of Islamic economics.

An investment bank is a financial institution that assists individuals,corporations and governments in raising capital by underwriting and/or acting asthe client's agent in the issuance of securities. An investment bank may alsoassist companies involved in mergers and acquisitions, and provide ancillaryservices such as market making, trading of derivatives, fixed income instruments,foreign exchange, commodities and equity securities.


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Commercial Banking Business

Commercial banking business has evolved toencompass corporate banking, retail banking, and in

particular, trade finance and global markets. Cardsbusiness is also a key component of commercialbanking business.

On 31 March 1998, 39 finance companies were

merged into their respective core banks resulting inhire purchase business being now undertaken bycommercial banks.


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Going back to history

Institutionalized Banking in Malaysia - 150 years and still goingstrong

Malaysia has a legacy of international trade dating back to the 15thcentury i.e. when the Melaka Kingdom traded with China, India andEurope.

The roots of commercial banking in Malaysia can be traced back to asearly as the 1860s with the burgeoning British merchant communitiesin Penang and Singapore; the Straits Settlement (Penang, Singapore,Melaka) was established in 1867.

Penang became a springboard for banks Mercantile Bank (later asubsidiary of Hong Kong Bank and now HSBC) set up shop in the1860s, Chartered Bank (Now Standard Chartered) in 1875.

There were even banks set up by the Dutch and French communitiesin Penang in the late 1880s and the 1890s.


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Going back to history (cont.)

The History of the Banking Industry in Malaysia.Courtesy of the following contributors:-

(please refer to ABMs website: http://www.abm.org.my)

From HSBC: Its Malaysian Story book of HSBC BankMalaysia Berhad, published by Editions Didier Millet.

From the historical archives of Malayan Banking Berhad. From the historical archives of Standard Chartered Bank

Malaysia Berhad.


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Bank Negara Malaysias Financial Sector

Masterplan

The 1st Financial Sector Masterplan (FSMP) was launchedon 1 March 2001 by Bank Negara Malaysia (BNM). Itoutlined the future direction of the Malaysian financialstructure for the following decade (10 years).

FSMPs main objectives were to develop a more resilient,competitive and dynamic financial system with bestpractices that will contribute positively to the growth andstability of the economy notwithstanding the economiccycle.

It aimed to initiate the evolution of a core group ofdomestic financial institutions that are technologicallyadvanced and ready to face the challenges of globalizationand financial liberalization.


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Bank Negara Malaysias Financial Sector

Masterplan (cont.)

Some of the recommendations relating to the bankingsector:-

to develop industry-wide benchmarks to drive performanceimprovement in domestic banking institutions (DBIs)

to set-up board committees to further improve corporategovernance

to encourage strategic alliances

to encourage development of new delivery channels

to require management to emphasize on development of ICT

to deregulate pricing and rules of association on rates, feesand charges gradually

to facilitate the development of a conducive tax regime


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Bank Negaras Financial Sector Masterplan

(cont.)

Some of the recommendations relating to the bankingsector (cont.):-

to continue implementing risk-based supervision with morefocused supervisory attention on weak institutions

to refine calculation of risk weightings for the purpose ofcapital adequacy calculations

to increase product-specific and institutional transparencyand move towards full disclosure

to develop comprehensive framework for consolidated

supervision of financial conglomerates

to require provision of advisory services on financial planningand management to SMIs and small borrowers.


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Transformation of the financial landscape -Mergers

Banks have always been encouraged to merge in order to achieve economies ofscale and higher level of efficiency plus the need to maintain a high level of capital.

In July 1997, the Asian financial crisis started in Thailand with the collapse of theThai Baht. The crisis spread to most of South East Asia and Japan which sawslumping currencies and devalued stock markets and asset prices.

Measures were then taken to move the Ringgit from a free float to a fixed rateregime. Since the financial crisis, restructuring efforts were undertaken on thebanking sector to put them on a stronger footing to withstand further pressures andcontribute towards macro economic stability.

The merger programme for domestic banking institutions was initiated in 1999.

As at 31 December 2000, the merger programme was successfully implemented,with 50 out of 54 domestic banking institutions consolidated into 10 banking groupsand 94% of the total assets of the domestic banking sector rationalised andconsolidated.


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Line up after Final Round of Mergers

Original Anchor Banking Group Merged with

Malayan Banking Berhad Group

Malayan Banking Berhad

Mayban Finance Berhad

Aseambankers Malaysia Berhad

PhileoAllied Bank (Malaysia) Berhad

The Pacific Bank Berhad

Sime Finance Berhad

Kewangan Bersatu Berhad

Affin Bank Berhad Group

Perwira Affin Bank Bhd

Asia Commercial Finance Bhd

Perwira Affin Merchant Bank Bhd

BSN Finance Bhd

BSN Commercial Bank (Malaysia) Bhd

BSN Merchant Bankers Bhd

Alliance Bank Berhad Group

Multi-Purpose Bank Bhd

International Bank Malaysia Bhd

Sabah Bank Bhd

Bumiputra Merchant Bankers Bhd

Amanah Merchant Bank Bhd

Bolton Finance Bhd

Sabah Finance Bhd

Arab-Malaysian Bank Bhd Group

Arab-Malaysian Bank Bhd

Arab-Malaysian Finance Bhd

Arab-Malaysian Merchant Bank Bhd

MBf Finance Berhad

Bumiputra-Commerce Bank Bhd Group

Bumiputra-Commerce Bank Bhd

Bumiputra-Commerce Finance Bhd

Commerce International Merchant Bankers Bhd


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Line-up (cont.)

Original Anchor Banking Group Merged with

EON Bank Berhad Group

EON Bank Bhd

EON Finance Bhd

City Finance Bhd

Perkasa Finance Bhd

Malaysian International Merchant Bankers Bhd

Oriental Bank Bhd

Hong Leong Bank Berhad Group

Hong Leong Bank Berhad

Hong Leong Finance Bhd

Wah Tat Bank Bhd

Credit Corporation (Malaysia) Bhd

Public Bank Berhad Group

Public Bank Berhad

Public Finance Bhd

Hock Hua Bank Bhd

Sime Merchant Bankers Bhd

Advance Finance Bhd

RHB Bank Bhd Group

RHB Bank Bhd

RHB Sakura Merchant Bankers Bhd

Delta Finance Bhd

Interfinance Bhd

Southern Bank Bhd Group

Southern Bank Bhd

(later merged with Bumiputra-Commerce Bank

Bhd to become CIMB Bank Berhad)

Ban Hin Lee Bank Bhd

Cempaka Finance BhdPerdana Finance Bhd

United Merchant Finance Bhd

Perdana Merchant Bank Bhd


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Consequent Changes

Following the mergers, membership stood at 10 domestic banksand 12 locally incorporated international banks.

On 16 December 2000, Bank of China commenced operations inMalaysia. Membership increased to 23 comprising 10 domesticbanks and 13 locally incorporated international banks.

In 2006, following the merger of Bumiputra-Commerce BankBerhad with Southern Bank Berhad to form CIMB Bank Berhad,membership reduced to 22 banks comprising 9 domestic banksand 13 locally incorporated international banks.

In 2010, Industrial and Commercial Bank of China (Malaysia) Bhdjoined ABM and became its 23rd member.


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Consequent Changes (cont.)

Meanwhile, the domestic banks concentrated on organicgrowth to become strong players in the Malaysian bankingarena with some expanding their reach into internationalmarkets.

Todate, 6 domestic banks have established presence indifferent countries within the Asian region

AmBank, CIMB Bank, Hong Leong Bank, Maybank,Public Bank and RHB Bank.


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New Licenses

On 27 April 2009, BNM announced another phase of liberalization ofthe financial services sector with foreign banks being allowed tooperate in Malaysia under new licenses. Following the announcement,on 17 June 2010, pursuant to the Banking and Financial Institutions Act1989, 5 new commercial bank licenses were offered to the followingbanking institutions:-

1. BNP Paribas SA, France;2. Mizuho Corporate Bank, Japan;3. National Bank of Abu Dhabi, United Arab Emirates;4. PT Bank Mandiri (Persero) Tbk, Indonesia; and

5. Sumitomo Mitsui Banking Corporation, Japan (started operationson 11 April 2011).

Joint venture between Malaysia-India:-Bank of Baroda, Indian Overseas Bank, Andhra Bank


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New Licenses (cont.)

The presence of these foreign financial institutions areexpected to:-

- add to the diversity of the financial services industry

- support the new areas of growth including greentechnology

- facilitate the transformation of the Malaysian economytowards achieving high value-added and high incomeeconomy status

- further enhance Malaysias international linkagesthrough facilitating international trade and investmentflows between Malaysia and other parts of the world.


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Strengthening the commercial banking

industry

To safeguard against financial and operational risks thatbanks face, risk and capital management were adoptedto ensure that banks hold capital reserves appropriate tothe risks they are exposed to through their lending andinvestment practices.

Basel I and II uses a three-pillars concept

1. minimum capital requirement (addressingrisks credit risk, operational risk andmarket risk);

2. supervisory review; and

3. market discipline.


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Strengthening the commercial bankingindustry (cont.)

Basel III is a new global regulatory standard on bankcapital adequacy and liquidity agreed by the membersof the Basel Committee on Banking Supervision. Bankswill have to increase their core tier-one capital ratio to

4.5% by 2015. In addition, they will have to carry afurther counter-cyclical capital conservation buffer of2.5% by 2019.

Generally the rules would not impact Malaysian banks

negatively as the banking system in the country waswell capitalized. Proper risk management andsurveillance systems have been put in place at thebanks.


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Building Blocks for Commercial BankingBusiness

CAMEL = Capital, Asset Quality, Management, Earnings and Liquidity

Capital Utilization of capital is banks priority. Inefficiencies have to beremoved quickly. Capital utilized by non-core businesses or bybusinesses which do not generate earnings ought to be halted

Asset Quality Improve asset quality by entering into areas where risk ismore aligned to the banks appetite

Management Focus on better operational and cost efficiency. Re-engineer processes, rebuild human resources and improve on the banksinfrastructure

Earnings Concentrate on growing the banks asset/loan base with theavailable capital freed up. Coupled with initiatives to bring cost to incomeratio down, asset/loan growth will translate into profits for the bank

Liquidity Manage liquidity better by narrowing the cap between loansand deposits and a healthier loans to deposits ratio.


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Reporting requirement - FinancialInstitutions Statistical System (FISS)

Banks are required to maintain sufficient cash flows tocope with events of unusually heavy withdrawals.

BNMs Liquidity Framework sets out to:-

create awareness among banks of their fundingstructure and their ability to handle short to medium-term liquidity problems; and

provide banks with a better means of assessing thepresent and future liquidity positions.


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Financial Institutions Statistical System(FISS) (cont.)

Banks are required to submit to BNM via the Financial InstitutionsStatistical System (FISS) the following information:

Maturity profile of all balance sheet items and off-balancesheet items denominated in Ringgit Malaysia (RM) and foreign

currency, reported according to maturity in which have beenadjusted for behavioural pattern prevailing at the reportingdate

Maturity profile of all balance sheet items and off-balancesheet items denominated in RM and foreign currency reported

according to pure contractual maturity (no behaviouraladjustment)

Supplementary information on funding structure

Stock of liquefiable assets.


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Some Key Financial Data

Commercial banks

As at February 2011:

Risk-weighted capital ratio (RWCR) remained strong at

14.3%

Net non-performing loans (NPLs) remained stable at

2.3% of net loans

Pre-tax profit of RM5.7 billion (as at 4th Quarter 2010)

* As per BNMs Monthly Statistical Bulletin February 2011


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Some Key Financial Data (cont.)

Total Assets of Commercial Banks

* As per ABMs 2009 Annual Report and BNMs Monthly Statistical Bulletin January 2011

Year (RM billion)

2005 885.9

2006 1025.3

2007 1145.3

2008 1275.1

2009 1361.3

As atDecember

20101482.9


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Total Deposits of Commercial Banks

* As per ABMs 2009 Annual Report and BNMs Monthly Statistical Bulletin January 2011

Year (RMbillion)

Total Deposits

FD DD SD

2005 432.3 66% 20% 14%

2006 489.3 68% 19% 13%

2007 518.4 64% 22% 14%

2008 557.4 64% 22% 14%

2009 586.5 63% 23% 14%

As atDecember

2010623.3 62% 24% 14%


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Total Loans by sector as at December 2010

* Extracted from BNMs Monthly Statistical Bulletin January 2011

54.1% - Households (Housing loans,Hire Purchase loans, PersonalFinancing, Credit Cards)

9.9% - Manufacturing (includingAgro-based)

8.2% - Wholesale & Retail Trade,and Hotels & Restaurants

7.5% - Finance, Insurance &

Business services

4.7% - Real Estate

4.5% - Construction

3.4% - Education, Health and others

2.6% - Transport, Storage &Communications

2.2% - Primary Agriculture

1.3% - Other Sector

1.3% - Electricity, Gas & WaterSupply

0.3% - Mining and quarrying

2.240.30

9.91

1.29

8.23

4.45

4.69

2.59

7.51

3.36

1.32

Primary Agriculture

Mining and Quarrying

Manufacturing (including Agro-based)

Electricity, Gas and Water Supply

Wholesale & Retail Trade, and Hotels &Restaurants

Construction

Real Estate

Transport, Storage and Communications

Finance, Insurance and Business Activities

Education, Health and others

Household Sector

Other Sector

54.10%Total loans as at end2010 is RM716,878.9

million


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Growth of Branches and Self Service Terminals of Commercial Banks from2005 December 2010

The significant growthin Self-ServiceTerminals compared tobank branchesindicates a growing inpreference amongstMalaysian customers touse these alternative

channels for bankingtransactions, given theflexibility of time andplace afforded by thesechannels.

* As per ABMs survey and BNMs

Monthly Statistical Bulletin January 2011

YearNo of BankBranches

Self-Service Terminals (SSTs)

ATMs Other SSTs

2005 1918 4646 3424

2006 1950 4972 3925

2007 1993 6147 4985

2008 2016 6927 6067

2009 2010 7901 6725December

20102026 8600 7624


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Reaching out to customers

Banks have transformed their businesses to becomemore consumer orientated. This includes creating two-way communication avenues between the consumerand the bank through:-

increase in the number of bank branches in the country;

establishing of contact of call centres; and

investing in technology to provide online banking servicesvia websites and mobile phones.


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Consumers can contact (cont.):-ABMConnect

eABMConnect

The Association of Banksin Malaysia

34th Floor, UBN Tower,

10, Jalan P Ramlee

50250 Kuala Lumpur

Tel : 1-300-88-9980

Fax : +603-20788004

Website :www.abm.org.my

BNMTELELINK

Corporate CommunicationsDepartment

Bank Negara Malaysia

Jalan Dato Onn

50480 Kuala Lumpur

Tel : 1-300-88-5465

Fax : +603-21741515

Email :[email protected]

Website : www.bnm.gov.my

List of Banks Dedicated Lines for

Customer Services

1. Affin Bank Bhd : 1-800-88-38832. Alliance Bank Malaysia Bhd: 03-5516 9988

3. AmBank (M) Bhd : 1-300-80-8888

4. Bangkok Bank Bhd : 03-2173 7200*

5. Bank of America Malaysia Bhd: 03-2032 1133*

6. Bank of China (Malaysia) Bhd: 03-2162 6633*

7. Bank of Tokyo-Mitsubishi UFJ: 03-2034 8000*

8. CIMB Bank Bhd: 1-300-88-0900

9. Citibank Bhd: 03-2383 0000

10. Deutsche Bank (Malaysia) Bhd: 03-2053 6788*

11. EON Bank Bhd: 03-2616 1133

12. Hong Leong Bank Bhd: 03-7626 8899

13. HSBC Bank (Malaysia) Bhd: 1-300-88-1388

14. Industrial and Commercial Bank of China

(Malaysia) Berhad: 03-23808688*

15. J P Morgan Chase Bank Bhd: 03-2270 4111*

16. Maybank: 1-300-88-6688

17. OCBC Bank (Malaysia) Bhd: 1-300-88-5000

18. Public Bank Bhd: 1-800-88-3318

19. RHB Bank Bhd: 1-800-88-4663

20. Standard Chartered Bank: 1-300-88-8888

Malaysia Bhd

21. The Bank of Nova Scotia Bhd: 03-2141 0766*

22. The Royal Bank of Scotland Bhd: 03-2160 9888*

23. United Overseas Bank : 03-2612 8121

(Malaysia) Bhd
mailto:[email protected]://www.bnm.gov.my/http://www.bnm.gov.my/mailto:[email protected]


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Background of The Association of Banks

History The Association of Banks in Malaysia was formed in November1973.

Objectives of the Association can be summarized five-fold as

follows:- Establishing and promoting a sound banking system in Malaysia incooperation with Bank Negara Malaysia

Formulating and reviewing banking rules, operations and policies Improving consumer awareness and knowledge of banking products

and services Developing human capital for the banking industry Collaborating with other authorities, government ministries, privatesector groups and relevant organizations


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Background of The Association of Banks(cont.)

Our Members

Currently, there are a total of 23 commercial

banks, comprising 9 domestic banks and 14locally incorporated international banks.

Commercial banks constitute an importantgroup of financial institutions in Malaysia.


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Membership

Maybank(Chairman Bank)

Affin Bank Berhad

Alliance BankMalaysia Berhad

AmBank (M) Berhad

CIMB Bank Berhad

EON Bank Berhad

Hong Leong Bank

Berhad

Public Bank Berhad

RHB Bank Berhad


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Membership

Bangkok Bank Berhad

Bank of AmericaMalaysia Berhad

Bank of China

(Malaysia) Berhad

Bank of Tokyo-MitsubishiUFJ (Malaysia) Berhad

Citibank Berhad

Deutsche Bank(Malaysia) Berhad

HSBC Bank MalaysiaBhd

Industrial and Commercial Bankof China (Malaysia) Bhd

J.P. Morgan ChaseBank Berhad

OCBC Bank (Malaysia) Bhd

Standard Chartered BankMalaysia Berhad

The Bank of Nova Scotia Bhd

The Royal Bank of Scotland Bhd

United Overseas Bank(Malaysia) Bhd


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Structure

Council

Committee on

Banking Legislations, Policies,

Rules, Regulations &Interpretation

Committee on

Development of Capital &

Money Markets

Committee on

Finance

Fraud Risk

Committee

Committee on

Budget

Recommendations

Committee on

Consumer & Market

Conduct

Executive Director


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Rules,Regulations &Interpretation

Compliance& Oversight

Rules &Compliance

Operations& Refinement

PrudentialPolicy

FinancialMarket

Development

Consumer& MarketConduct

Finance & Admin

Corporate

Communications &Public Relations

FinancialIntelligence &

Research

Public RelationsCorporate

Communications

AdminHuman

ResourceAccounting &

TreasuryInternational

Desk

BankingLegislation

Strategy &Initiatives

Executive Director

ABMs Organisation Chart

Council


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CONSUMERS & OTHER RELEVANTEXTERNAL PARTIES

Engagement

A larger and dedicated team to handle complaints and

enquiries

Regular meet the consumers associations sessions

Road show and dialogues

Be accessible use of media (print, radio and TV) as

conduit

Reinforce ABMConnectas the conduit for public

engagement

Reinforce ABM website as a key communication tool

Build a positive and responsive image with external parties

Education

Joint educational programmes and meet the consumers

sessions with the various consumers associations

Play a strong supportive role to major consumer/SME

education programmes to be launched by BNM

Communication Updates on current issues via the ABM website,

issuance of press releases, public service

announcements, press ads, etc.Enhancing Banking Efficiency and Customer Services

Commence work on, and roll out other phases the SME

PARTNER initiatives

Collaborate with BNM on new micro-financing promotional

and educational initiativesCollaboration with PEMUDAH and BNM as well as other

relevant sectors on initiatives to enhance efficiency and

customer services

REGULATOR

Engagement

Participation and involvement

Continue relationship building with all

key regulatory authoritiesLiaison and spokesperson for member

banks

Present industrys view point on various

issues

Enhance internal capacity to harvest

industry comments and feedback as well

as data

MEMBERS

Engagement

Improved lines of communication

Leverage on state level sub-committees

Greater involvement of members

Handling of complaints

ABM to intermediate Ensure there is prompt and meaningful

response

Proper closure of cases

Improved services offering

Clear and transparent guidelines

Review and update of existing rules and

regulations

Best practices Introduction of a Code of Best

Practices

Benchmarking- Commence survey and standard setting

- Establish minimum standard levels

Reinforce common objective to be more

consumer centric

Compliance

Incentivization and Awards

Industry awards for excellence

A B M35

Specific focal points for 2011

2011 Key Initiatives External Perspective


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Questions and

Answers


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Thank you

Terima kasih

Documents

Mdm Chuah Evolution Msian Banking Industry 130411 ABM PDF