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Bank Negara announced yesterday measures for further liberalisation of the financial
Increase in foreign equity limits. The foreign equity limit for investment banks,
Islamic banks, insurance companies and takaful operators has been raised from 49%
to 70%. It is envisaged that these institutions’ business potential and growth prospects
will be enhanced by the international expertise and global networks of foreign
shareholders. However, the cap on foreign shareholdings in domestic commercial
banks remains at 30%.
New banking and Takaful licences up for grabs. New licences will be issued to
strong and world-class players in the following categories:
• In 2009, up to two new Islamic banking licences will be issued to foreign players to
establish new Islamic banks with paid-up capital of at least US$1bn.
• In 2009, up to two new commercial banking licences will be issued to foreign
players that will bring in specialised expertise.
• In 2011, up to three new commercial banking licences will be dished out to worldclass
banks that can offer significant value propositions to Malaysia.
• In 2009, up to two new family takaful licences will be made available.
Greater operational flexibility for foreign banks. Locally-incorporated foreign
commercial banks can establish up to 10 microfinance branches with immediate
effect. Further branches will be considered based on the effectiveness of these
branches in servicing microenterprises. Foreign banks will also be allowed to establish
up to four new branches in 2010 based on the distribution ratio of 1 branch in market
centres, 2 in semi-urban areas and 1 in non-urban areas.
Locally-incorporated foreign insurance companies and takaful operators are now
allowed to set up branches nationwide without restriction. The restriction against these
companies entering into bancassurance/bankatakaful arrangements with banking
institutions has been lifted.
Other liberalisation. Banks, insurance companies and takaful operators now have
greater flexibility to employ specialist expatriates with expertise to continue the
development of Malaysia’s financial system. Offshore financial institutions that meet
the predetermined criteria will be given the flexibility to have a physical presence
onshore – from 2010 for banking institutions and from 2011 for insurance companies.
Liberalisation well expected. The further liberalisation of the financial sector is within
our and market expectations as it is in line with the objectives laid out in the Financial
Sector Master Plan (FSMP) issued in 2001. Furthermore, the government has alluded
to announcements on this matter this week.
Upping foreign equity limits for Islamic and investment banks... However, it is a
surprise to us that Bank Negara has increased the foreign equity limits for Islamic and
investment banks from 49% to 70% as this means that foreigners will control these
entities. It appears that the authorities view the relaxation as necessary to attract more
foreign players into the Malaysian market to help develop these segments.
…but not for commercial banks. We are also surprised that the government did not
increase the 30% foreign equity limit for domestic commercial banks, which is
something the market had been looking forward to. An increase in the equity limit for