The overview of FinancingSystem in Malaysia The evolution of Malaysia’s sector after independence. In the beginning, the monetary authority in the federation of Malaya was the Board of Commissioners of currency, Malaya and British Borneo. On January 24, 1959, central Bank of Malaysia was officially opened The prime objectives of the bank have been to maintain a strong ringgit, promote financial stability and foster growth of a sound financial structure
During 1960s, the attention of our financial sector through Bank Negara was focused on building up the financial infrastructure. It witnessed the development of strong domestic commercial banks and widespread branching of banking services
Financial system in Malaysiaincludes two types: 1) The financial institution Financial institutions consist of the institution where the main liability, generally is money as follows: - Bank Negara Malaysia, which is the sole authority that issued currency notes and coins country. - Commercial banks and Islamic banks operate authorized current account.
2) Non-financial institutions Non-financial institutions include institutions, where the liabilities, generally related to finance. It is closely linked with financial institutions. Because it is a deposit-taking institution, it is subject to the supervision and control continues to Bank Negara Malaysia.
Non-Bank Financial Institutions is general can be divided into five groups of institutions as follows : The Development of Financial Institutions Savings Institutions Savings and Pension Funds Insurance Companies, including offshore insurance Other Institutions such as building societies, trusts properties, leasing companies, investment agencies specific and specialized financial institutions such as Cagamas and Credit Guarantee Corporation.
Islamic banking The introduction of Islamic Banking in 1983 One distinctive feature of the feature of the Malaysian financial system is the presence and promotion of Islamic banking, which has become an increasingly important component of the financial structure. Malaysia is the pioneer of the dual banking system, where Islamic banking operates in parallel with conventional banking. Malaysia is also the only country that has an Islamic interbank money market
Development of Financial Markets Conducive environment for greater financial inclusion Create a diverse range of financial service providers that thrives and competes Enhance distribution channels to ensure widespread access to financial services Ensure a minimum level of banking products and services are provided at reasonable costs Improve financial literacy, advisory, awareness and consumer education Strengthen the supporting financial infrastructure and enabling environment
ISSUES AND FUTURECHALLENGES IN FINANCIALSYSTEM
ISSUES Financial Crisis Weakened banking system Reduced credit availability Economic slow down Economic Shocks From Greater Market Volatility Interest/Exchange rates Asset prices Liquidity Structural Transformations Financial conglomeration Larger and more complex financial institutions New business models
Globalization Breakdown of geographical barriers Increased cross-border flows & linkages More Contestable Markets Dismantling of traditional boundaries between intermediaries Emergence of structured products Increasing importance of pooled funds (pensions, life insurance, mutual funds, investment trusts) as channel of savings Advances In Financial Engineering Securitization Trojan Attack. Man-in-the-Middle Attack
BLACK MONEY SCAM IN MALAYSIAN BANKSBlack money Scam in malaysian banks.- black money scam, sometimes also known as the "wash wash scam", isa scam where con artists attempt to fraudulently obtain money from avictim by persuading him or her that piles of banknote-sized paper in atrunk or a safe is really money which has been dyed black or another color(e.g. to avoid detection by customs). The victim is persuaded to pay forchemicals to wash the "money" with a promise that he will share in theproceeds.The black money scam is a variation of what is known as advance feefraud- Black money is not a unique phenomenon. It is observed all over theworld, sometimes in equivalent local language such as le travail aunoir, schwarzarbeit or svarta sektor, and sometimes by different namessuch as: underground money or economy, grey, cash, dual, covert, hidden,illegal, informal, irregular, marginal, parallel, moonlight, second, shadow,bootleg, subterranean, twilight, under-the-table, unobserved, unofficial,unrecorded, or unreported
Electronic Banking Issues Next, even if the infrastructure were ready, the obvious question would be are the potential customers large enough to ensure a critical mass for the economic viability of providing the electronic banking services. If the critical mass criteria, is not fulfilled then the banks may not be able to profitably use these delivery channels. In the case of ATM’s there is no doubt about the critical mass because almost every adult who has a bank account would have an ATM card and ATM‘s are available in every town, in every state in Malaysia. As far as telebanking is concerned, the existing four million fixed line telephone subscribers would imply that there is an adequate critical mass for telebanking services.
FUTURE CHALLENGES 1. Lack of scale While the industry has gone through a phase of consolidation, some segments like investment banking and brokerage remain fragmented. Even in the commercial banking sector where consolidation has been most pronounced, many or our banks are still significantly smaller than regional powerhouses. On the capital markets side, Malaysia lacks the critical mass to attract significant levels of investment.
2. Lack of liquidity and diversity in capital markets. From the Asian financial crises, Malaysia’s capital market has lost some of their vibrancy. Malaysia’s liquidity ranking in Asia has dropped. There also limited diversity in the market is in terms of investors, in terms of products or in terms of currency.
3. Low levels of financial literacy. The level of personal financial literacy today is low. With growing consumerism as well as changing customer expectations, there is a need to reinforce greater financial literacy to help the rakyat to better manage their personal finances in line with our move to a high-income economy.
4. Competition from other regional financial centers’. developed their reputations as being open and pro-business to find established financial centers’ that enjoy greater scale, visibility and liquidity, such as Singapore and Hong Kong
Future Technology Developments Facing Uncertainty Modern technology will continue to be the key drivers influencing the future development and competition in financial services in the new millennium. Information and communication technology (ICT) is changing all aspects of banking is unprecedented. It led to radical changes in the operation and structure of the financial markets, and in the roles and relationships among service providers, intermediaries and investors, and regulators
Increasingly global financial institutions and specialized The new competitive environment driven by the revolution in communication technology has become an important way to gain competitive advantage through economies of scale and access to global appearance. Appearance is also driven by the increase in demand for international investment and financial solutions among customers wealthy customers
CONCLUSION The changing economic and business environment as well as rapid technological advances over the last decade has had significant impact on the development of the financial system, domestically and globally. In fact, they have redefined the rules of the game and changed the playing field. The Malaysian financial system has to continue to evolve in tandem with changing world trends and conditions, to be more dynamic in meeting the changes and the challenges these bring along