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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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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?