Introduction on Banking Product and services

1. P I F 1 0 1 3 I S L A M I C B A N K I N G P R O D U C T A N D
S E R V I C E S
CHAPTER 1: HISTORY AND
DEVELOPMENT OF BANKING
SYSTEM IN MALAYSIA

2. CHAPTER OVERVIEW
• 1.1. Introduction
• 1.2. Development of banking & banks in Malaysia
• 1.3. Responsibilities, role and economic importance of
banks
• 1.4. The structure of financial system in Malaysia
• 1.5. The definition and the types of bank
• 1.6. Central Bank of Malaysia
• 1.5.1 The role of BNM
• 1.5.2 Objective, function and organization of BNM
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3. 1.1 INTRODUCTION
The Banking & Financial Services industry
serves an important role in the global
economy. By facilitating the movement of
money from people or organizations with
surplus capital to people or organizations
wanting capital, financial intermediaries
help power innovation and growth,
creating jobs, building infrastructure and
funding new ideas.
Individuals tend to borrow more early in
life (to pay for college and buy homes, for
example) but invest more later in life (to
build wealth and save for retirement).
Financial intermediaries offer a service to
help an individuals or firm to save or
borrow money.
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4. 1.2. DEVELOPMENT OF BANKING &
BANKS IN MALAYSIA
YEAR MILESTONE
Straits Settlements – The beginning
1867 ‘Straits Settlements’ were established by standalone British colony in
Penang , Singapore & Malacca. The growth of port facilities, Mercantile
Bank started its operation. Later , this bank became the subsidiary of
the Hong Kong Bank and now HSBC.
1875 Chartered Bank that later became Standard Chartered was established.
1884 Hong Kong Bank was established.
Natural Resources, Fuel, Commerce & Banking
1908 the growth of local and foreign bank due to the rise of Chinese
immigrant population, commercial activities, mining activities and rubber
plantation. (location Penang, Perak & Selangor)
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5. CONT’
Banking Halls – A look back in time
Early 1930s ‘strong room’ ( the name for bank at that time) to keep the money
Late 1930s strong room expand to ‘banking halls’ in Peninsular Malaysia. Banking
Halls were a place where bank officers and customers interacted.
1940s Post World War II, increase the numbers of customers included
businessmen, merchant and housewives.
1950s banking halls expand in Sabah and Sarawak
The Era of Computer
1960s Computerization of banking service began in Malaysia due to rapid
advancement in technology and automation.
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6. CONT’
Technology Advances
1980s rapid technological advances in all aspects of banking from basic
services to money market.
The First Automated Teller Machine (ATM)
1981 first ATM in Malaysia was launched in Malaysia by Maybank at it’s
Ampang Park branch.
Bringing Banking to customers
1970s introduce mobile banking (buses) in rural area of Malaysia
Paradigm Shift
21st
century
the evolution in local banking practices and the growth of internet and
mobile banking in Malaysia
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7. 1.3. RESPONSIBILITIES, ROLE AND
ECONOMIC IMPORTANCE OF BANKS
Responsibilities of banks
Provides account services to customers by
receiving deposits and loan payments;
cashing checks
issuing savings withdrawal
recording night and mail deposits
selling cashier's checks
traveler's checks, and series e bonds
answering questions in person or on
telephone
referring to other bank services
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8. Role and economic
importance of
banks
Banks collect
the savings of
the individuals
and lend them
out to
business-
people and
manufacturers.
the banks play
an important
role in the
creation of new
capital (or
capital
formation) in a
country and
thus help the
growth
process.
banks play an
important part
as supplier of
money
The banking
system
facilitates
internal and
international
trade
banks act as
advisers,
counsellors
and agents of
business and
industrial
organisations
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9. 1.4. THE STRUCTURE OF FINANCIAL
SYSTEM IN MALAYSIA
• The Malaysian financial system is structured into two major categories, Financial Institutions and
Financial Market. The Financial Institutions comprise Banking System and Non-bank Financial
Intermediaries. The Financial Market in Malaysia comprises four major markets namely: Money &
Foreign Exchange Market, Capital Market, Derivatives Market, and Offshore Market.
Financial system in
Malaysia
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10. 1.5. THE DEFINITION AND THE TYPES OF
BANK
Definition of bank:
• A bank is a financial institution licensed to receive
deposits and make loans. Banks may also provide
financial services, such as wealth management,
currency exchange, and safe deposit boxes.
• In most countries, banks are regulated by the national
government or central bank.
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11. Conventional Banking
• Conventional banking
is the conduct of
banking as per the
laws and regulations
that govern banking in
a country. In Malaysia,
conventional banking is
supervised by the
Central Bank of
Malaysia, Bank Negara
Malaysia by the
powers vested in it
through the Central
Bank of Malaysia Act
2009.
• Conventional banks in
Malaysia are required
to comply with the
provisions under the
Financial Services Act,
2013. Currently there
are 26 commercial
banks in Malaysia who
offer retail banking
services.
Islamic Banking
• Islamic banking refers
to a system of banking
that complies with
Islamic law also known
as Shariah law. In
Malaysia, Islamic
banks are supervised
by Bank Negara
Malaysia and have to
comply with the
provisions given in the
Islamic Financial
Services Act, 2013.
• Currently, in Malaysia,
there are 16 Islamic
and 1 international
Islamic banks. And, a
number of other banks
operate through
Islamic banking
“windows”.
Investment Banking
• Unlike commercial
banks which focus on
providing retail credit
and loan facilities,
investment or
merchant banks
provide more
sophisticated and
complex banking
facilities like raising
capital by way of
syndication, corporate
financial advisory
services, management
of investment
portfolios, listing of
public companies,
underwriting of new
issues of shares,
mergers and
acquisitions and the
restructuring of
companies, especially
those under Section
176 of the Companies
Act, 1965.
• 11 investment banks
currently operate in
Malaysia. Investment
banks are supervised
both by Bank Negara
and the Securities
Commission.
Offshore Banking
• Malaysia also offers
offshore / international
investment, banking
and financial services
through the offshore
financial hub, the
Labuan International
Business and Finance
Centre (IBFC) which
comes under the
purview and
supervision of the
Labuan Financial
Services Authority
(Labuan FSA; formerly
known as Labuan
Offshore Financial
Services Authority —
LOFSA).
Types of Bank:
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12. 1.6. CENTRAL BANK OF MALAYSIA
• Bank Negara Malaysia (the Central Bank of Malaysia), is a statutory
body which started operations on 26 January 1959. Bank Negara
Malaysia is governed by the Central Bank of Malaysia Act 2009.
• The establishment of BNM in 1959 can be fundamentally attributed to
the recognition then for the need for deliberate management of the
money and credit situation in the country.
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13. 1.6.1 The role of BNM
Monetary stability
Financial stability
Financial market
Financial development
Financial inclusion
Payment system
Foreign exchange
administration
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14. 1.5.2 Objective, function and organization of BNM
Objective of BNM:
To issue currency and keep reserves while
safeguarding the value of the currency.
To act as a banker and financial adviser or
agent to the government.
To promote monetary stability and a sound
financial structure.
To influence the credit situation to the
advantage of the country.
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15. Function of Bank Negara Malaysia
prudent conduct of monetary policy, in order to low and stable
inflation for decades
preserving the purchasing power of the ringgit
responsible for bringing about financial system stability and fostering
a sound and progressive financial sector.
development of financial system infrastructure with major emphasis
placed on building the nation's efficient
secured payment systems as well as the necessary institutions
(including Securities Commission, KLSE, now known as Bursa
Malaysia and Credit Guarantee Corporation)
promotes financial inclusion, which has led to improved access to
financial services for all economic sectors and segments of society,
As banker and adviser to the Government, playing an active role in
advising on macroeconomic policies and managing the public debt.
sole authority in issuing currency as well as managing the country's
international reserves. 15

16. Organizational structure of BNM
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The Governor is the Chief Executive Officer of the Bank and is assisted
by two Deputy Governors and eight Assistant Governors.
Most of the 36 departments/units in the Bank are organised into eight
divisions, where each Assistant Governor being responsible for one.
For a better understanding of the structure, please refer to the Bank's
organisation chart below or refer to BNM website

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18. The End
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