Chapter 6:

Tertiary Sector
Banking Industry
Introductions
Bank Negara Malaysia (BNM), the country's central bank, oversees and regulates the Malaysian banking
industry. BNM formulates monetary policies, ensures financial stability, promotes consumer protection, and
supervises the banking institutions to maintain the integrity and soundness of the financial system.
 CONTRIBUTION OF
MALAYSIAN BANKING
INDUSTRIES
CONTRIBUTION OF MALAYSIAN BANKING INDUSTRIES

The Malaysian banking industry plays a key role in providing financial services to households

• In 2022, households accounted for 66.7% of total disposable income in Malaysia.

• The banking industry provides households with a range of financial services, including savings accounts, loans, and insurance.
• These services help households to manage their finances, save for the future, and purchase goods and services.

The BNM Blueprint 2022 recognizes the importance of household consumption to the Malaysian
economy. The blueprint sets out initiatives to support household consumption, including:
• Encouraging banks to provide more affordable financial products and services: The blueprint aims to encourage banks to
provide more affordable financial products and services, by providing them with incentives and support.
• Promoting financial literacy: The blueprint aims to promote financial literacy, by providing information and resources to
households.
• Expanding access to financial services: The blueprint aims to expand access to financial services, by providing financial
services to underserved households.

The Malaysian banking industry is committed to helping households to improve their financial well-being to
increase household consumption and to stimulate the Malaysian economy.
 CONTRIBUTION OF MALAYSIAN BANKING INDUSTRIES

The Malaysian banking industry has a long history of supporting SMEs.

• In 2022, SMEs accounted for 63.4% of total employment in Malaysia, and they contributed 33.8% of GDP.
• The banking industry has played a key role in supporting the growth of SMEs, by providing them with access to finance, business advice, and support.

The BNM Blueprint 2022 recognizes the importance of SMEs to the Malaysian economy. The blueprint sets out initiatives to
support the development of SMEs, including:
• Providing access to finance: The blueprint aims to increase the availability of finance for SMEs, by providing guarantees and other risk-sharing arrangements.
• Providing business advice and support: The blueprint aims to provide SMEs with access to business advice and support, through the development of a network
of SME-focused financial institutions and business development agencies.
• Promoting entrepreneurship: The blueprint aims to promote entrepreneurship, by providing information and resources to aspiring entrepreneurs.

Here are some specific examples of how Malaysian banks are helping SMEs:
• Bank Negara Malaysia (BNM) has established the Credit Guarantee Corporation Malaysia Berhad (CGC) to provide guarantees to banks on loans made to SMEs.
This helps to reduce the risk for banks, making it more likely that they will lend to SMEs.
• SME Bank Malaysia Berhad: SME Bank is a government-owned bank that specializes in providing financial services to SMEs. SME Bank offers a range of products
and services tailored to the needs of SMEs, including loans, guarantees, and business advice.
• The SME Masterplan 2016-2020: The SME Masterplan is a government initiative that aims to promote the development of SMEs in Malaysia. The Masterplan
includes a number of measures to support SMEs, such as providing access to finance, training, and business advice.

The Malaysian banking industry is committed to helping SMEs grow and thrive and to create a more
conducive environment for SMEs to succeed.
CONTRIBUTION OF MALAYSIAN BANKING INDUSTRIES
3. Global Centre of Islamic finance.

One of the key thrusts of the FSB 2022-2026 is to "Advance value-based finance through Islamic finance leadership." This
includes the following objectives:
• Sharpen Malaysia's proposition as an international gateway for Islamic finance.
• Develop a vibrant Islamic financial market, in particular the ringgit Islamic financial market.
• Promote Islamic finance as a sustainable and inclusive finance.
• Position Malaysia as a global hub for Islamic finance research and development.
• Strengthen the regulatory and supervisory framework for Islamic finance.

The FSB 2022-2026 is a comprehensive and ambitious plan to position Malaysia as a leading global center for Islamic finance.
Specific examples of the initiatives that are being taken to achieve the objectives of the FSB 2022-2026 are:
• The Malaysian government has established the International Islamic Financial Centre (MIFC) to promote Malaysia as a global center for Islamic finance. The MIFC
provides a range of services to support the development of Islamic finance, including regulatory and supervisory support, market development, and capacity
building.
• Bank Negara Malaysia (BNM) has developed a number of initiatives to promote Islamic finance, including the Islamic Financial Services Industry Masterplan (IFSI
Masterplan). The IFSI Masterplan provides a roadmap for the development of the Islamic financial industry in Malaysia over the next five years.
• Malaysian financial institutions are developing new Islamic financial products and services to meet the needs of businesses and consumers. For example, Bank
Islam Malaysia Berhad has launched an Islamic wealth management product called "BIMB Wealth Islamic."
• • Malaysia is hosting a number of international Islamic finance events to promote the country as a global center for Islamic finance. For example, Malaysia
hosted the World Islamic Economic Forum (WIEF) in 2022
The FSB 2022-2026 is a significant
milestone in the development of
Islamic finance in Malaysia. If the
plan is successful, Malaysia will
be well-positioned to become a
leading global center for Islamic
finance.
 CONTRIBUTION OF MALAYSIAN BANKING INDUSTRIES
4. Contribute to the technological advancement in financial sector .
Technological Improvement:
• Malaysian banks have been
actively embracing
technology to enhance
their operations and
customer services. T
• Implementing digital
banking solutions, adopting
innovative payment
methods, and incorporating
advanced security
measures to protect
customer data.
Online Migration:
• There has been a
remarkable shift towards
online banking and financial
services in Malaysia. Banks
have been expanding their
digital platforms, allowing
customers to perform
various transactions and
access a wide range of
products and services
remotely through web
portals and mobile
applications.
• e.g. MAE from Maybank,
CIMB Clicks.
Investment in Technology:
• The Malaysian banking
industry recognizes the
importance of investing in
technology to remain
competitive.
• Banks are allocating
substantial resources
towards technological
infrastructure, such as
upgrading their IT systems,
implementing artificial
intelligence (AI) and
machine learning (ML)
algorithms, and exploring
the potential of blockchain
technology.
Collaboration with
Technology Companies:
• Malaysian banks are
actively collaborating with
technology companies,
including fintech startups
and established tech firms.
• The partnership aim to
leverage the expertise of
both sectors, fostering
innovation and enabling
banks to offer cutting-edge
solutions to their
customers.
• Collaborations can range
from developing new digital
payment methods to
implementing advanced
analytics for risk
management and fraud
detection.
Contribution to FinTech
Development:
• The Malaysian banking
industry is important for
the growth and
development of the
financial technology
(FinTech) sector.
• Banks integrating fintech
solutions into their
operations and supporting
the growth of local fintech
startups through various
initiatives.
• This includes providing
access to their
infrastructure, mentoring
programs, and funding
opportunities, which
contribute to making
financial services more
accessible and affordable
for businesses and
consumers.
Overall, the Malaysian banking
industry's commitment to
technological advancement is
evident through its investments,
collaborations, and contributions
to the FinTech ecosystem. These
efforts are aimed at improving
efficiency, expanding service
offerings, and delivering a
seamless and convenient banking
experience to customers in
Malaysia.
 An evolution of Banking
Industry in Malaysia from
1997 to 2023(current)
 An evolution of Banking Industry in Malaysia
from 1997 to 2023(current)
late 1990’s
Financial crisis
• The Asian financial crisis in 1997 had a significant impact on
Malaysia's banking industry, leading to the collapse of several
financial institutions and necessitating government interventions
• The government introduced measures to stabilize the banking
sector, including mergers and consolidation of banks,
recapitalization, and stricter regulatory frameworks.
2010s Early 2000
Technological Advancements and Digital Consolidation and Mergers
Transformation • In the early 2000s, the Malaysian banking industry witnessed a
• Rapid advancements in technology, particularly in the field of wave of consolidation and mergers to strengthen the sector.
digital banking and financial technology (fintech), transformed the Several large-scale mergers took place, resulting in the formation
banking landscape. of larger and more robust financial institutions.
• Banks embraced digital channels, offering online and mobile • For example, Maybank acquired Bumiputra-Commerce Bank
banking services, allowing customers to perform transactions and (BCB), creating Malaysia's largest banking group.
access banking services remotely.

Liberalization and Islamic Banking (mid

• In the early 2000s, Malaysia embarked on a process of liberalization
to promote competition and enhance efficiency in the banking
sector.
• Islamic banking gained prominence, with Malaysia positioning itself
as a global hub for Islamic finance. Islamic banks were established,
and existing banks introduced Islamic banking products and
services.
Regulatory Reforms and Risk Management
• The Bank Negara Malaysia (BNM), the country's central bank,
implemented regulatory reforms to strengthen the banking industry
and ensure financial stability.
• Measures included enhanced risk management frameworks, capital
adequacy requirements, and the implementation of Basel II and
Basel III international standards.

2000 2010s
 An evolution of Banking Industry in Malaysia
from 1997 to 2023(current)
Financial Inclusion and Microfinance (2015)

Open Banking and Digital transformation

Collaboration with Fintech (2015 - 2020)
Recognizing the potential of Malaysia embraced the
fintech in driving innovation concept of open banking,
Initiatives were undertaken to
and expanding access to which allows customers to
improve financial inclusion,
financial services, banks in securely share their financial
particularly for underserved
Malaysia started collaborating data with third-party
segments of the population.
with fintech startups. providers.

(2019)
Microfinance institutions and
This collaboration resulted in The adoption of open banking
programs were established to
the development of innovative facilitated the development of
provide access to financial
products and services, such as new services and enhanced
services for small businesses
mobile payment solutions, customer experience through
and individuals in rural and
peer-to-peer lending collaboration between banks,
low-income areas.
platforms, and robo-advisory fintech companies, and other
services. service providers.

The COVID-19 pandemic in 2020 - Looking ahead, the

and beyond accelerated the banking industry in Malaysia is

Future Outlook and Continued Emphasis on

digital transformation in the expected to continue its digital

Technology and Innovation (2021-2023)

transformation journey, leveraging

Sustainable Finance (2019 – Present)

banking industry.

Covid-19 Pandemic (2020 – 2021)

emerging technologies such as
The banking industry in Malaysia Banks intensified their efforts to artificial intelligence, blockchain, and
showed increased focus on provide contactless services, data analytics.
sustainable finance and digital payment solutions, and - Enhanced cybersecurity
environmental, social, and remote customer support to measures, regulatory frameworks,
governance (ESG) principles. adapt to the changing needs and and consumer protection will be
preferences of customers. crucial to maintain trust and security
Banks began integrating ESG in digital banking.
considerations into their lending
and investment practices, - The industry will likely see
increased collaboration between
promoting green financing, and banks, fintech firms, and non-
supporting sustainable financial institutions to create
development initiatives. innovative and inclusive financial
solutions.
FINANCIAL
SECTOR
BLUEPRINT
(2022-2026)
FINANCIAL SECTOR
BLUEPRINT (2022-2026)

•Financial services should ultimately

improve lives and livelihoods – helping
individuals or businesses grow their wealth,
make payments, own a home, grow their
enterprise, manage financial risks and
adverse events, create high quality jobs,
and other economic outcomes.
•Malaysia’s financial sector development
has made good progress over the years.
FINANCIAL SECTOR
BLUEPRINT (2022-2026)
Strategic Thrust 1 : Fund Malaysia’s
economic transformation
• A thriving and resilient financial system
is crucial as Malaysia transforms into a
high-income, high value-added
economy, while focusing on providing
continued support to a sustainable
recovery
• The financing sector must evolve to
support the innovation-led economic
growth with highly productive and
internationally competitive firms to
advance three strategies of:
FINANCIAL SECTOR
BLUEPRINT (2022-
2026)
Strategic Thrust 2 : Enhance
financial capability and
access, and effective usage of
financial services towards
greater financial inclusion

Since 2011, a variety of

measures have been
implemented to advance
financial inclusion, thereby
expanding access to and
provision of financial services
(see Diagram).
FINANCIAL SECTOR BLUEPRINT (2022-2026)
Strategic Thrust 3: Futureproof key digital infrastructures
• A digital economy is built upon a combination of technological infrastructures in diagram.
• Payment and settlement systems enable day-to-day economic activities of households and businesses.
• As more transactions move to the digital sphere, so does data – and the vast potential and risks that come with it
FINANCIAL SECTOR
BLUEPRINT (2022-2026)
Strategic Thrust 4: Position the
financial system to facilitate an
orderly transition to a greener
economy

• Climate-related and environmental risks –

such as reskilling, the application of new
technology, infrastructure upgrades, and
the preservation of natural ecosystems –
remain underfunded
• Diagram 2: Position the financial system
to facilitate an orderly transition to a
greener economy support mechanisms to
mobilize mainstream finance in
supporting the country’s transition to a
greener economy.
FINANCIAL SECTOR
BLUEPRINT (2022-2026)
Strategic Thrust 5 :
Advance value-based finance
through Islamic finance leadership

• Over the years, a wide range of initiatives

have been advanced – including
providing the overall enabling legal and
regulatory environment, rolling out
structural reforms to align strategies,
addressing market frictions and
incentives, as well as building long-term
capacity
• The country has contributed to the
development of global infrastructures to
promote Islamic finance development,
such as the setting up of the Islamic
Financial Services Board (IFSB) and the
International Islamic Liquidity
Management Corporation (IILM), which
are both headquartered in Malaysia.
[MyFW2022]
Financial Sector
Blueprint 2022-
2026
 Conclusion
In conclusion, the Malaysian
banking industry exhibits
stability, diversification,
technological advancement,
and a commitment to inclusive
and sustainable finance. These
factors contribute to its overall
strength and position as a key
driver of economic growth in
the country.
The banking industry in
Malaysia plays a vital role in
supporting economic growth
by providing financial
intermediation, facilitating
trade and investment
activities, promoting savings
and investments, and
contributing to overall
financial stability
Q&A
 Q&A
What are the key challenges
faced by the Malaysian banking
industry today?
What types of financial
institutions are present in
Malaysia's banking sector?

What is the role of Bank Negara

Malaysia in regulating the
banking sector?
THANK YOU

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