CHAPTER 1

THE STRUCTURE OF MALAYSIAN FINANCIAL SYSTEM

Learning Outcomes:

At the end of the lesson, students should be able to:

• Identify the components of the Malaysian Financal System.
• Distinguish the Malaysian Banking System, the Non Bank
Financial Intermediaries and the Financial markets.

Surianor Kamaralzaman@ UiTM Shah Alam 1

 THE STRUCTURE OF MALAYSIAN
FINANCIAL SYSTEM

• The Malaysian Financial System can be

divided into three; the banking system, the
non-bank financial intermediaries and the
financial markets.

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 These can be elaborated further by using a chart:

The Malaysian
Financial system

Financial Financial
Institutions Markets

Banking Non-bank Financial

System Intermediaries

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 THE MALAYSIAN BANKING SYSTEM
The Malaysian Banking System consists of:

• Central Bank (Bank Negara Malaysia- BNM)

• Banking Institutions- Commercial banks, Islamic banks and

Investment Banks.

• Other banking institutions- the representatives offices of

foreign banks and the offshore banks in the Labuan IBFC.

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The Banking System in Malaysia is under the control and supervision of the Bank Negara Malaysia.
It is can be shown in the chart below:
THE MALAYSIAN BANKING SYSTEM
The Malaysian Banking System

BANK NEGARA MALAYSIA

Commercial Banks Islamic Bank Investment Banks

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 Examples
• http://www.bnm.gov.my/index.php?ch=li&cat=banking&type=CB&fund=0&cu=0
• No. Name Ownership 1 Affin Bank BerhadL 2 Alliance Bank Malaysia BerhadL 3 AmBank (M)
BerhadL 4 Bangkok Bank BerhadF 5 Bank of America Malaysia BerhadF 6 Bank of China
(Malaysia) BerhadF 7 Bank of Tokyo-Mitsubishi UFJ (Malaysia) BerhadF 8 BNP Paribas
Malaysia BerhadF 9 CIMB Bank BerhadL 10 Citibank BerhadF 11 Deutsche Bank (Malaysia)
BerhadF 12 Hong Leong Bank BerhadL 13 HSBC Bank Malaysia BerhadF 14 India International
Bank (Malaysia) BerhadF 15 Industrial and Commercial Bank of China (Malaysia) BerhadF 16
J.P. Morgan Chase Bank BerhadF 17 Malayan Banking BerhadL 18 Mizuho Corporate Bank
(Malaysia) BerhadF 19 National Bank of Abu Dhabi Malaysia BerhadF 20 OCBC Bank
(Malaysia) BerhadF 21 Public Bank BerhadL 22 RHB Bank BerhadL 23 Standard Chartered
Bank Malaysia BerhadF 24 Sumitomo Mitsui Banking Corporation Malaysia BerhadF 25 The
Bank of Nova Scotia BerhadF 26 The Royal Bank of Scotland BerhadF 27 United Overseas
Bank (Malaysia) Bhd.F (8 LOCAL BANKS_(19 Foreign banks)
• Investment Banks No. Name Ownership 1 Affin Investment Bank BerhadL 2 Alliance
Investment Bank BerhadL 3 AmInvestment Bank BerhadL 4 CIMB Investment Bank BerhadL 5
ECM Libra Investment Bank BerhadL 6 Hong Leong Investment Bank BerhadL 7 HwangDBS
Investment Bank BerhadL 8 KAF Investment Bank BerhadL 9 Kenanga Investment Bank
BerhadL 10 Maybank Investment Bank BerhadL 11 MIDF Amanah Investment Bank BerhadL
12 MIMB Investment Bank BerhadL 13 OSK Investment Bank BerhadL 14 Public Investment
Bank BerhadL 15 RHB Investment Bank BerhadL

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 Examples of Islamic Banks
• Affin Islamic Bank Berhad(L)
• Al Rajhi Banking & Investment Corporation (Malaysia) Berhad(F)
• Alliance Islamic Bank Berhad(L)
• Alliance Islamic Bank Berhad(L)
• AmIslamic Bank Berhad(L)
• Asian Finance Bank Berhad(F)
• Bank Islam Malaysia Berhad(L)
• Bank Muamalat Malaysia Berhad(L)
• CIMB Islamic Bank Berhad(L)
• Hong Leong Islamic Bank Berhad(L)
• HSBC Amanah Malaysia Berhad(F)
• Kuwait Finance House (Malaysia) Berhad(F)
• Maybank Islamic Berhad(L)
• OCBC Al-Amin Bank Berhad(F)
• Public Islamic Bank Berhad(L)
• RHB Islamic Bank Berhad(L)
• Standard Chartered Saadiq Berhad(F)

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 Monetary Financial Institutions Vs. Non Monetary Financial
Institutions
Monetary Financial Institution
• Monetary financial institution is a bank (or institution) which
operates deposit facilities for their customer.
• Examples of monetary financial institutions are BNM, Commercial
banks, Islamic banks, and Savings Institutions.

Non-Monetary Financial Institution

• Non-monetary institution is a bank (or institution) which does not
operate deposits facilities for their customer.
• Examples of non-monetary institutions are Investment Banks,
Credit Guarantee Corporation and Insurance Companies.

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THE NON-BANK FINANCIAL INTERMEDIARIES(NBFIs)

• The Non-Bank Financial Intermediaries comprise five groups of

Institutions:

insurance Companies (including takaful)

the development finance institutions
savings institutions
Provident and Pension Funds
other non bank financial intermediaries.

• The-Non Bank Financial Intermediaries mentioned above are

supervised by various Government departments and agencies.

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 NON BANK FINANCIAL INTERMEDIARIES

Government Departments and Agencies

Other
Financial
Development
Intermediaries
Finance
Institutions
Insurance
Companies
Savings Provident
Institution and Pension
Funds

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 FINANCIAL MARKETS

Financial Markets in Malaysia are:

Money Market
• Is a market for channelling of short term funds with maturities
typically not exceeding 12 months.
• It provides a ready source of funds for market participants facing
temporary shortfalls in funding.
• Also providing short term investment outlets for those with
temporary surplus funds.
• Operations in the money market comprise two broad categories:
i) the short term borrowing and lending; and ii) the purchase and
sale of short term securities (namely bankers acceptance,
negotiable instruments of deposit, treasury bills, cagamas
notes,etc)

Foreign Exchange market

• Is a market for trading foreign currencies against the ringgit or
against other foreign currencies.
• The foreign exchange market can be categorized into spot; forward
and swap markets.
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 FINANCIAL MARKETS

Capital Market
• Capital market is a market for raising long term funds and comprise
of equity and bond markets.
• Equity market provides the avenue for corporation to raise funds by
issuing common and preferred stocks.
• Bond market is a market which allows both the private and public
sectors to raise funds, by issuing private and government debt
securities (bonds).
Derivatives Markets: Forward, Futures and Options
• Is a market for trading instruments whose values depend on the
price of their underlying assets, liabilities or index.
• The main use of derivatives is to hedge against price volatility of the
underlying assets, liabilities or index.
Offshore Market-Labuan International Business and Financial
Centre (Labuan IBFC)
• Is aimed at enhancing the attractiveness of Malaysia as a regional
financial centre, as well as to promote the economic development of
Labuan and its vicinity.
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 FINANCIAL
MARKETS

Money Foreign Capital Derivatives Offshore

Market Exchange Market Market Market
Market

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