Malaysia to issue up to 5 digital banking licences

Bank Negara Malaysia is preparing for the arrival of digital banks, planning to issue up to five licenses for applicants that eligible to set up a digital bank to conduct regular or Islamic banking business in Malaysia.

Image via bnm.gov

The Exposure Draft on Licensing Framework is a regulatory guideline for virtual banking operations in Malaysia issued by Negara Bank Malaysia (BNM). In February 2020, the regulator invited written feedback on the draft bill, with more details on the eligibility and admission criteria to be provided at that time.

BNM applied the Exposure Draft on Licensing Framework to enable the application of innovative technology in the financial sector, issued to digital banks as part of a series of measures.

BNM said in a statement, the draft exposure outlines the licensing proposal framework for digital banks to provide banking services and products to address market gaps in non-segment supervised and unattended.

Such digital banks are expected to promote responsible use and provide meaningful access to affordable and affordable financial solutions to financial consumers.

Applicants will be allowed to provide traditional or Islamic banking products. BNM said digital banks would be required to comply with the requirements under the Islamic Financial Services Act 2013 (IFSA) or the Financial Services Act 2013 (FSA). The requirements include, among other standards, prudential standards, business conduct and consumer protection, as well as anti-money laundering and terrorist financing.

Digital banks will begin to operate in limited form with a minimum payment of RM 100 million and will be subject to a total margin of RM 2 billion. Individual deposits will also be limited to certain limits that will be determined by the central bank at a later stage.

With innovative business models and strong digital capabilities, these players can cater to underserved market segments. They will also provide incentives for existing banks to improve their digital services.

In the platform stage mentioned above, Licensed digital banks said they would be subject to a simpler legal requirement regarding capital adequacy, liquidity, stress testing and disclosure requirements.

Without setting up a branch, only web banks can offer a variety of services, including e-wallets, as well as traditional products such as card issuance and payment services through an application or website.

BNM said it has invited written feedback on the draft exposure, which should be submitted by February 28.

“The bank will evaluate all feedback received and aims to finalize the policy document by the first half of 2020. Applications for license will be opened when the policy document is published.”

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