science

1. The banking system, comprising commercial banks, investment banks, and Islamic banks, is the
primarymobiliserof fundsandthe mainsource of financing to support economic activities in Malaysia.
The non-bank financial intermediaries, comprising development financial institutions, provident and
pension funds insurance companies, and takaful operators, complement the banking institutions in
mobilizing savings and meeting the financial needs of the economy.
The Central Bank
Bank Negara Malaysia (the Bank), the Central Bank, is the apex of the monetary and banking
structure of the country.Its main objectives as defined in the Central Bank of Malaysia Act 1958 are to:
• Issue currency and keep the reserves safeguarding the value of the currency;
• Act as a banker and financial adviser to the Government;
• Promote monetary stability and a sound financial structure;
• Promote the reliable, efficient and smooth operation of national payment and settlement
systems and to ensure that the national payment and settlement systems policy is directed to the
advantage of Malaysia; and
• Influence the credit situation to the advantage of Malaysia.
To meet its objectives, the Bank is vested with legal powers under various laws to regulate and
supervise the banking institutions and other non-bank financial intermediaries. The Bank also
administers the country's foreign exchange control regulations and act as the lender last resort to the
banking system.

2. Financial Institutions
The following table provides and overview of the number of financial institutions as at end-
September 2008:
Financial Institution Total Malaysian
Controlled
Institutions
Foreign-
Controlled
Institutions
Commercial Banks 22 9 13
Investment Banks/ Merchant Banks 15 15 -
Islamic Banks* 15 10 5
International Islamic Banks 1 - 1
Insurers 41 25 16
Islamic Insurers (takaful operators) 8 8 -
International Takaful Operators) 1 - 1
Reinsurers 7 3 4
Islamic reinsurers (retakaful
operators)
3 1 2
Development financial institutions 13 13 -
*Includes one foreign Islamic bank that commenced operations in October 2008

3. Banks, including Islamic banks, operate through a network of more than 2,200 branches across
the country. Six Malaysian banking groups have presence in 18 countries through branches,
representative offices,subsidiaries and joint ventures. There are also 21 foreign banks which maintain
representative offices in Malaysia. They do not conduct normal banking business but provide liaison
services and facilitate information exchange between business interests in Malaysia and their
counterparts.
The introductionof the frameworkforinvestmentbanksin2005 providedforthe development of
full-fledgedinvestmentbanksthroughconsolidationandrationalizationbetweenmerchantbanks, stock
broking companies and discount houses. Investment banking activities mainly include capital raising
activities such as underwriting, loans syndication and corporate financing, management advisory
services,arrangingforthe issue andlistingof shares,aswell as investment portfolio management. The
developmentof investmentbankswill enhance the capacityof financial institutionsinMalaysiatobetter
serve itscorporate customersthrougha widerrange of financial and advisory activities on par with the
services provided by international investment banks.
Malaysia also has a comprehensive Islamic banking system. Presently, Malaysia has fifteen full-
fledgedIslamicbanks,three of whichare fromthe Middle East, providing a broad spectrum of financial
productsand servicesbasedonShariahprinciples. Atthe same time, there are five conventional banks
three of which are major foreign banks, offering Islamic banking products and services via the Islamic
banking window set up.
The entryof the three foreignIslamicbanksenhancesthe competition and stimulates innovation
amongthe Islamicbankingplayers,andatthe same time complementsthe Malaysianplayersin tapping
into strategic growth areas such as investment banking and wealth management. In addition, these
institutions also have plans to make Malaysia as their financial hub for this region.
In terms of product offering, more than 60 Islamic financial products and services are made
available in the market. The emergence of new innovative products and financial instruments that
incorporate globally acceptedShariahprinciplessuchas commodity murabahah deposits, Islamic profit
rate swap,musyarakahmutanaqisahhome financingandsukukmusyarakahinthe industryhave further
elevated the domestic Islamic financial sector to the next stage of advancement.

4. Malaysia has several development financial institutions (DFIs) that were set up with specific
objectivestodevelopandpromote strategiceconomicsectors,including the manufacturing and export
sectors, small and medium enterprises (SMEs), as well as the agriculture, infrastructure and maritime
sectors. These DFIs complement the banking institutions by providing an array of financial and non-
financial services to support development of the strategic sectors. These include the provision of
mediumtolong-termloans,equitycapital,guaranteesforloansanda range of supplementary financial
and businessadvisoryservices.‘BankPerusahaanKecil & Sederhana Malaysia Berhad' or the SME Bank,
whichwasestablishedinOctober2005, offersfinancialproductssuchas term loans and working capital
includingstart-upsandSMEsin newgrowthareas,particularlytothose inprofessional services, export-
orientedactivitiesandfranchisebusinesses.BankPertanianMalaysiahas recently been corporatised to
Bank Pertanian Malaysia Berhad (Agrobank) in order to strengthen its role to be more effective in
meetingthe needsof the entire value chainof agricultural activities,includingthe agro-basedindustries.
Malaysia as an International Islamic Financial Centre
Malaysia's continuous efforts in strengthening the Islamic financial system domestically and
internationally have gained acceptance and recognition by the international financial fraternity. An
important initiative that has been introduced is to enhance the position of Malaysia as a leading
international Islamic financial hub.
On August2006, the MalaysianGovernmentlaunchedthe MalaysiaInternationalFinancial Centre
(MIFC) initiatives.The MIFCinitiative isacollaborativeeffortformed by Malaysia's financial and market
regulators together with top officials from relevant Government agencies and participants from the
banking, takaful and capital market sectors. The establishment of the MIFC as one of the key
intermediation linkages in the global market place, has an important role in accelerating the process
bridgingandstrengtheningthe relationshipbetweeninternational Islamicfinancial marketsandthereby
expandthe investmentand trade relations between the Middle East , West Asia and North Africa with
East Asia. Situatedcentrallyinthe Asiantime zone,Malaysiapresentsitself asameetingplace forthose
with surplus funds and those who seek to raise funds from any part of the world.