Malaysia - Banking SystemsMalaysia - Banking
The structure of the Malaysian financial system has evolved to become less fragmented through consolidation and rationalization. The evolution started when the government took measures to strengthen Malaysia's banking system following the regional financial crisis in mid-1997. The country’s central bank, Bank Negara Malaysia (BNM), directed the merger of Malaysia's local banking institutions into ten anchor banks, which was completed in 2002. The government encouraged further mergers among the local banking institutions to ensure competitiveness with international banks. Presently, there are eight local banks in the country. BNM licenses and regulates businesses such as commercial banking, investment banking, Islamic banking and money brokering.
Malaysia initiated Islamic banking in August 2006 with the creation of the Malaysian International Islamic Financial Centre (MIFC) initiative and has the aspiration to be an Islamic banking leader. At that time, the government encouraged local banks to enter the Islamic finance market. Concurrently, it allowed foreign Islamic banks to operate in Malaysia. As of June 2017, there are eighteen Islamic local and foreign banks operating in Malaysia. Foreign banks with operations in Malaysia are allowed 100 percent equity participation. Islamic banking is based on Sharia law that disallows the payment of interest in favor of profit-sharing.
In 2017, The Malaysian economy recorded 5.9 percent GDP growth. The International Reserves of BNM was at US$108.5 billion by the end of May 31, 2018. The international reserve is able to sustain 7.6 months of retained imports and 1.1 times short-term external debt. Following the discovery of previously off-the-books debts and liabilities, as of Q2, 2018, Malaysia’s external debt had been revised up to about RM879,768 million/US$219.9 billion or 79.5 percent of Malaysia GDP. The previous government had incorrectly reported a debt-to-GDP ration of approximately 52percent.
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