The Central Bank of Malaysia Act 2009 (CBMA 2009): - Established the Central Bank of Malaysia (BNM) and provided for its objectives, functions, and governance. - Created a Shariah Advisory Council (SAC) to serve as the authority on Islamic law for Islamic financial business. - Gave BNM various powers related to promoting financial stability and developing Malaysia as an international Islamic financial center. - Stipulated that the SAC's rulings on Islamic law are binding on Islamic financial institutions and courts referring questions to the SAC.

1. CENTRAL BANK OF
MALAYSIA ACT 2009
PREPARED BY :
NORLINA BINTI ZOLHAN
2014907313
IFE780 ISLAMIC FINANCIAL REGULATORY FRAMEWORK AND GOVERNANCE

2. • Date of Royal Assent 19 August 2009
• Date of Publication in the Gazzete 3 September 2009
• The CBMA consists of 100 sections divided into 15 parts
Objectives:
i. The Act provides greater clarity on the mandates of the Bank and vest with the Bank the necessary
powers and instruments to achieve the mandates.
ii. The Act also provides for a more robust governance framework that enhances greater accountability
and transparency.
iii. The Act provides for BNM’s role to develop and promote Malaysia as an international Islamic financial
centre.
INTRODUCTION
2

3. PART I PRELIMINARY
PART II THE BANK. ITS OBJECTS AND FUNCTIONS
PART III FINANCIAL PROVISIONS
PART IV GOVERNANCE OF THE BANK
PART V MONETARY FUNCTIONS AND OPERATION OF THE BANK
PART VI FINANCIAL STABILITY AND POWERS OF THE BANK
CHAPTER 1 : Powers for promoting financial stability
CHAPTER 2 : Money Market and foreign exchange market
CHAPTER 3 : Financial services and other functions
PART VII ISLAMIC FINANCIAL BUSINESS
CHAPTER 1 : Shariah Advisory Council
CHAPTER 2 : Powers of the Bank
PART VIII CURRENCY
PART IX FOREIGN RESERVE
PART X RELATION WITH GOVERNMENT
PART XI OTHER POWERS OF THE BANK
PART XII INTERNATIONAL MATTERS
PART XIII OFFICERS AND EMPLOYEES
PART XIV GENERAL
PART XV REPEAL. SAVING AND TRANSITIONAL
ARRANGEMENT OF SECTIONS
3

4. Section 5(1) laid down the principle objects of the Bank shall be to promote monetary stability
and financial stability conducive to the sustainable growth of the Malaysian economy.
Section 5(2) the primary function of the Bank are as follows:
a) To formulate and conduct monetary policy in Malaysia
b) To issue currency in Malaysia
c) To regulate and supervise financial institutions which are subject to the laws enforced by
the Bank
d) To provide oversight over money and foreign exchange markets
e) To exercise oversight over payment systems
f) To promote a sound, progressive and inclusive financial system
g) To hold and manage the foreign reserves of Malaysia
h) To promote an exchange rate regime consistent with the fundamentals of the economy
i) To act as financial adviser, banker and financial agent of the Government
ROLES OF BANK NEGARA MALAYSIA
4

5. PART IV – GOVERNANCE OF THE BANK
Section 14
(1)There shall be a Board of Directors of the Bank
(3) The Board shall consists of the following members
a) the Governor
b) Not more than three Deputy Governor; and
c) Not less than five but not more than eight directors appointed under subsection
16(1)
Section 15(1) The Governer shall be appointed by the Yand di-Pertuan Agong and the
Deputy Governer by the Minister
Section 16(1) The directors referred to in paragraph 14(3)© shall be appointed by the
YDPA on the advice of the Minister
Section 27 of CBMA 2009 provides:
“The financial system in Malaysia shall consists of the
conventional financial system and the Islamic financial system”
5

6. CENTRAL BANK ACT 1958
CBMA 2003 (AMENDMENT)
CBMA 2009
6

7. CBMA 2009 (ACT 701)
The most significant provision is Part VII under the heading “Islamic
Financial business” which can be divided into 2 chapters:
• Chapter 1 : Shariah Advisory Council (Section 51 – 58)
• Chapter 2 : Powers of the Bank (Section 59 – 60)
Part VII directly provides for the Islamic financial business which is
defined under Section 2 as “any financial business in ringgit or other
currency which is subject to the laws enforced by the Bank and consistent
with the Shariah”
7

8. CENTRAL OF BANKING ACT 2009 (CBA)
Pre 2003 cases – Attitude of the Civil Courts
• No any provision under CBMA regarding
operation of IBF
Pre 2009 cases – The Central Bank of Malaysia
Act 1958 (Act 509)
• Any proceeding relating to IBF, the court or
arbitrator may refer to SAC for its ruling.
Development
8

9. Establishment of SAC
Section 51 : SAC shall be the authority for the ascertainment of Islamic
law for the purposes of Islamic financial business and SAC may determine
its own procedures.
This section authorized BNM to establish SAC which shall be the
authority to supervise:
• Islamic banking business
• Takaful business
• Islamic financial business
• Islamic development financial business
• Any other business which is based on Shariah principles under
regulation and supervision of BNM
9

10. Function of SAC
The functions of the SAC are listed under Section 52 and it includes the following:
a) To ascertain the Islamic law on any financial matters and issues a ruling
upon reference made to it in accordance with this Part
b) To advise the Bank on any Shariah issues relating to Islamic financial
business, the activities or transactions of the Bank
c) To provide advice to any Islamic financial institution or any other person
as may be provided under written law in force in Malaysia and
d) Such other functions as may be determined by the bank.
Section 53: The appointment of SAC members is at par with the civil
court
10

11. RULINGS OF SAC
Section 55: BNM should obtain advice from the SAC in ALL MATTERS relating to the
Islamic financial business
Section 55(1): “The BNM shall consult the Shariah Advisory Council on any matter
• relating to Islamic financial business
• or the purpose of carrying out its functions or conducting its business or affairs
under this Act or any written law in accordance with the Shariah.
Section 55(2): “Any Islamic financial institution in respect of its Islamic financial
business may:
• refer for a ruling
• seek the advice of the SAC on the operations of its business in order to
ascertain that it does not involve any element which is inconsistent with the
Shariah
11

12. REFERENCES TO RULINGS OF SAC
• CBA also provide allocation of reference to the SAC for Shariah rulings in court
proceeding or arbitration tribunal
• Section 56(1) state that if question arises concerning a Shariah matter, the court or
the arbitrators as the case may be shall:
(a) take into consideration any published rulings of the SharīʿahAdvisory Council;
or
(b) (b) refer such question to the SharīʿahAdvisory Council for its ruling
• CBA also gives authority to the SAC to make rulings in any court proceedings and
arbitration process for disputes on issues involving Islamic banking and financial
institutions
12

13. EFFECT OF RULINGS
• Section 57 : “Any ruling made by the Shariah Advisory Council pursuant to a
reference made under this Part shall be binding on the Islamic financial institutions
under section 55 and the court or arbitrator making a reference under section 56”
• Section 58 provides that “where the ruling given by a Shariah body or committee
constituted in Malaysia by an Islamic financial institution is different from the
ruling given by the SAC, the ruling of the SAC shall prevail”
 In case of contradict of opinion or ruling between Shariah body/ Committee of
Islamic Financial Institution and SAC of BNM in Shariah matters, the ruling given by
the SAC shall prevail.
 This section gives recognition to the SAC of BNM as the highest references
authority.
 The SAC will be referred to by the courts or any arbitration tribunal
13

14. THANK YOU….
14