Bank Negara Malaysia (BNM) will ensure that banking regulatory and supervisory frameworks continue to respond to emerging issues in a timely manner and promote a financial system that is resilient to future shocks.
The central bank said it will also make sure the frameworks set high standards of professionalism and fair conduct for financial service providers, including safeguarding consumers’ interest against unfair or unethical practices, particularly in the case of vulnerable segments.
The frameworks must also preserve the integrity and safety of the financial system, it said.
“This includes introducing new process improvements to ensure timely and effective enforcement actions and continued collaborations with other law enforcement agencies to combat illegal activities,” BNM said in its Annual Report 2022 released today.
These efforts are in anticipation of rapid changes in the financial landscape in the coming years.
“(The changes) will be driven by forces of change such as digitisation of financial services, climate change and demographic changes in Malaysia. These changes will inevitably bring new regulatory challenges,” it said.
On financial stability priorities in 2022, BNM said the regulatory and supervisory priorities were focused on managing a smooth exit from exceptional policy measures during the Covid-19 pandemic, while maintaining support for individuals and businesses recovering from it.
BNM also addressed emerging risks associated with climate change and cyber threats; further strengthened risk management, disclosure and governance practices of financial institutions’ and promoted fair treatment of consumers.
It said that as Malaysia fully transitioned to Covid-19 endemicity last year, economic activity recovered at a strong pace, with domestic growth expanding by 8.7 per cent.
“However, this growth remained uneven across sectors, with certain economic segments continuing to struggle,” it noted.
Apart from this, new challenges arose from global developments, it said.
“These included elevated commodity prices, rising global inflation and strained supply chains. Aggressive tightening of monetary policy in developed economies further weakened most currencies against the US dollar, including the ringgit. Taken together, these events have resulted in increased cost pressures for firms and households,” it said.
Further, BNM said, Malaysians were affected by more frequent climate-related events such as flash floods, and continued to be targets for financial scams and frauds.
Commenting on Covid-19 relief measures introduced during pandemic, BNM said the support measures introduced throughout the pandemic have helped prevent permanent scarring of affected borrowers.
As at December 2022, the delinquency and impairment ratios among borrowers who exited the earlier broad-based repayment assistance programmes remained low at 1.4 per cent and 1.8 per cent, respectively, signalling improvements in their debt servicing ability.
BNM also revealed that it employed a range of supervisory and enforcement actions to promote sound compliance, governance and risk management practices among financial institutions.
“This is important to protect the interest of consumers and preserve the integrity of our financial system. The types of actions taken against financial institutions depend on the severity of breaches,” it said.
BNM took 123 supervisory and enforcement actions against financial institutions last year, of which majority of the actions taken were against low-severity breaches.
“During the year, we issued seven cease and desist orders against illegal money services business (MSB) operators and opened five investigation papers.
“This resulted in the bank (BNM) imposing a total compound of RM50 million against these entities for illegal deposit-taking and the laundering of proceeds from illegal activities,” it said.
Additionally, the central bank also secured court convictions against four companies and one individual for illegal MSB, illegal deposit-taking, contravention of banking secrecy requirements and money laundering, whereby these convictions resulted in fines totalling RM141.4 million and jail terms for the offenders.
On the market conduct front, BNM took active steps to safeguard consumers’ interests. Prompt actions were taken to cease unfair industry practices and to ensure fair redress by errant financial institutions to affected consumers.
Arising from these, it secured restitutions amounting to over RM39.6 million for half a million financial consumers.
Quelling Financial Scams
BNM is determined to make cyber resilience and combating financial scams among its top priorities and to achieve this, the central bank will enforce measures such as requiring all banks in Malaysia to remove clickable hyperlinks in SMS and email communications.
Financial institutions will also be required to implement other safeguards such as restricting customers to one mobile device for the authentication of online banking transactions, strengthening processes for enrolling new mobile devices and changing “trusted devices”.
The central bank said it will focus on responding to emerging issues in a timely manner adding that banks still have ways to go with promptly disseminating accurate information during a cyber crisis.
“In 2022, BNM conducted its first industry-wide cyber drill exercise, BNM RE4CT. With over 270 participants from 35 financial institutions, the drill looked to test readiness in responding to cyber threats”, its annual report said.
Last year, BNM issued seven cease-and-desist orders against illegal money services business (MSB) operators and opened five investigation papers.
This resulted in BNM imposing a total compound of RM50 million against these entities for illegal deposit-taking and the laundering of proceeds from illegal activities.
Additionally, the central bank also secured court convictions against four companies and one individual for illegal MSB, illegal deposit-taking, contravention of banking secrecy requirements and money laundering.
These convictions resulted in fines totalling RM141.4 million and jail terms for the offenders.
On the market conduct front, BNM secured restitutions amounting to RM39.6 million for half a million financial consumers by taking actions to cease unfair industry practices.
