Malaysia has introduced a new single legislative framework for the conventional and Islamic financial services (FS) sectors. The Malaysian Financial Services Act 2013 (FSA) and Islamic Financial Services Act 2013 (IFSA) came into effect earlier this week more than seven months after they were first approved by Parliament.
A statement issued by the country’s central bank and regulator, Bank Negara Malaysia (BNM), read: “The new laws will place Malaysia's financial sector, encompassing the banking system; the insurance/’takaful’ sector; the financial markets and payment systems; and other financial intermediaries on a [single] platform for advancing toward a sound, responsible and progressive financial system.”
The FSA and the IFSA consolidate rules governing the conduct and supervision of financial institutions (FIs) in Malaysia. BNM said it is important for the regulatory systems to “be adequately equipped to respond effectively to new and emerging risks,” in order to keep the economy and financial system from being disrupted.
The new acts represent a consolidation of the Banking and Financial Institutions Act 1989, Islamic Banking Act 1983, Insurance Act 1996, Takaful Act 1984, Payment Systems Act 2003 and Exchange Control Act 1953. Among the features of the new legislation is a focus on ‘Shariah’ compliance and governance in the Islamic financial sector. The IFSA provides a comprehensive legal framework that is fully consistent with Shariah in all aspects of regulation and supervision, from licensing to the winding up of an institution, said BNM.
Another feature of the legislation is greater clarity and transparency in the implementation and administration of the law due to clearly defined regulatory objectives and accountability of BNM in pursuing its principle objective of safeguarding financial stability. There are also claimed transparent triggers for the exercise of BNM’s powers and functions under the law, and transparent assessment criteria for authorising FIs to carry on regulated financial business, and for shareholder suitability.