Malaysia Regulator Lays Out 10-Year Strategic Blueprint

Developing a more comprehensive regulatory framework for the financial services sector will be one focus for Malaysia's blueprint strategy in the next 10 years, according to Bank Negara Malaysia, the country's central bank and financial services regulator.

"Focus will be accorded towards enhancing capital and liquidity standards of financial institutions in line with international standards as well as raising their governance and risk management standards," said Bank Negara in its blueprint report. There will be greater cross-border collaboration with other supervisory authorities as the financial sector evolves to be more regionally and internationally connected, the bank said.

Malaysia will continue to enhance its position as an international Islamic financial center with more diverse development of financial instruments and operations. In strengthening the legal and Shariah (Islam-compliant) frameworks, Bank Negara said "a single legislated body to be the apex authority on Shariah matters in Islamic finance will be established."

Insurance and takaful companies are encouraged to promote "high-quality and innovative" retail financial products and services as consumers become more "varied and sophisticated" with rising affluence, according to Bank Negara. More comprehensive and sophisticated wealth management product offerings will be promoted.

"To spur greater innovation and raise the level of financial services quality, greater competition will be encouraged through the progressive liberalization of delivery channels and a more facilitative regulatory environment," said Bank Negara.

Building up domestic foreign exchange and money markets and ensuring sound risk management and corporate governance practices will be a priority as well. Foreign exchange administration rules "will be progressively liberalized to further raise efficiency in financial market transactions," said Bank Negara.

The regulator also aims to boost the private pension sector for retirement and long-term care protection. "Institutional capacities will need to be enhanced to offer the range of medical and health insurance products and services, including long-term care and other forms of disability insurance, as well as products to encourage individual savings for long-term medical care," said Bank Negara.

Malaysia is transforming into a high value-added and high-income economy. Bank Negara said the financial sector aims to be "more competitive, dynamic, inclusive, diversified and integrated with the ability to offer world-class financial services." The contribution of the financial services sector to the country's gross domestic product is expected to grow from 8.6% to between 10% and 12% by 2020.

In general, Bank Negara said "Malaysian financial institutions today are well-capitalized with strong buffers, improved risk management and corporate governance and greater regional presence."

(By Iris Lai, Hong Kong bureau manager: Iris.Lai@ambest.com)