Malaysian Central Bank Prepares For Future Growth

The proposed Financial Services Act will be brought to Parliament in March 2012, Bank Negara Malaysia (BNM) Governor Tan Sri Dr Zeti Akthar Aziz stated. The Financial Service ACT FSA would improve the bank’s ability to manage outside risk from financial activities that occur outside of the banking system. The FSA would provide powers for faster intervention, when the Central Bank is needed to assist with economic and debt crisis, such as happening currently in the Europe. These economic and financial problems outside of Malaysia have direct consequences on the Malaysian economy and the central bank needs to be able to adjust and assist the local economy and banking framework in a timely manner.

Enhanced intermediation during the past 10 years has benefitted access to financing, particularly for small and medium businesses, and has also improved, both in volume and efficiency. The launch of the Financial Sector Blueprint 2011-2020 by Prime Minister Datuk Seri Najib Tun Razak allows for long range planning and growth.

By leveraging on the distribution networks of commercial banks, enhanced product and risk management capabilities, access to financing by this sector has increased at an annual rate of almost 20 per cent in the past years.

The blueprint for the financial system was expected to expand from the current 4.3 times to six times of the country’s gross domestic product (GDP) by 2020. The financial sector contribution to nominal GDP was projected to rise from 8.6 per cent to between 10 and 12 per cent in 2020.
Most of the total financing in 2020 would be raised via financial markets while Islamic finance would continue to increase in prominence, growing at a faster pace to account for 40 per cent of total financing. A national consumer credit law and improved arrangements for combating financial crime were also included in the recommendations in the blueprint.

The FSA would also ensure cross-border financial linkages do not increase or circumvent risks across borders. The central bank would intensify its coordination with other regional and international supervisory authorities. The coordination would focus on achieving more consistent regulatory and supervisory standards, timely information exchange and effective supervisory colleges.

This ACT would allow the financial system and the central bank to help prepare Malaysia for future growth and development and to insure its solid future as an emerging nation.