Reforms in Malaysian Financial Sector

The liberalisation of financial sector in Malaysia aims to strengthen economic interlinkages with other economies and enhancing the role of the financial sector as a key enabler and catalyst of economic growth. These liberalisation measures are consistent with the objectives committed under the Financial Sector Master Plan (FSMP) issued in 2001 to develop a resilient, diversified and efficient financial sector. More than 90% of the FSMP initiatives have been completed or are being implemented on an ongoing basis.

The financial services sector has progressed beyond its role as a facilitator of growth, to become a growth sector in its own right, generating value-added business, attracting investments and creating employment. Over the years, the financial sector contribution to GDP has increased from 9.2% in 2000 to 11% in 2008. In the last three years, the finance and insurance sector has expanded by 8.8% per annum, outpacing the growth in real GDP. The growth of the Islamic banking and takaful sector has also averaged about 20% in the last five years.

The liberalisation package encompasses measures on the conventional and Islamic finance sector as follows:
i.    Up to two new Islamic banking licences will be offered in 2009 to foreign players to establish new Islamic banks with paid-up capital of at least USD1 billion to enhance global interlinkages, leverage on global developments in Islamic finance and reinforce Malaysia's position as an international Islamic financial hub;
ii.    Up to two new commercial banking licences will be offered in 2009 to foreign players that will bring in specialised expertise to address gaps in the financial sector and spur the development of targeted economic sectors;
iii.    Up to three new commercial banking licences will be offered in 2011 to world-class banks that can offer significant value propositions to Malaysia ;
iv.    Up to two new family takaful licences will be granted in 2009 to players that can offer significant value proposition to Malaysia to spur the development of the takaful industry and reinforce Malaysia's position as an international Islamic financial hub.

The Prime Minister said foreign investors could now own up to 70 per cent of local Islamic and investment banks, as well as insurers. Previously, their ownership was capped at 49 per cent. For more information please visit http://www.bnm.gov.my/index.php?ch=8&pg=14&ac=1817