LIBERALISATION OF THE FINANCIAL SECTOR
Further to the announcement I made last week on the liberalisation of the services sector, I am pleased to announce today the liberalisation plan for the financial services sector. The financial services sector is an integral component of the economy, and has increased its share in GDP from 9.2% in 2000 to 11% in 2008. Over the recent three years, the finance and insurance sector has expanded by 8.8% per annum, outpacing the growth in real GDP of about 6%. More than 140,000 workers are employed by banking institutions and insurance companies in Malaysia.
- Moving forward, the financial sector is expected to have a greater role in facilitating and catalyzing economic growth as Malaysiatransitions towards achieving a developed economy status by year 2020. The financial sector is expected to support the demands of a growing economy and drive the transformation of the economy into the next phase of development; provide world-class, high value-added financial products and services at competitive prices; and accelerate the growth of new economic sectors including other activities in the services sectors.
- In positioning the financial sector to meet these objectives, the liberalisation measures announced today aims to:
- Enhance Malaysia’s linkages with international economies and promote greater economic regional integration;
- Provide greater access to consumers to a wider range of world class financial products and services;
- Further strengthen Malaysia’s competitive position in Islamic finance to become an international Islamic financial hub; and
- Promote Malaysiaas a leading global shared services and outsourcing centre.
- These liberalisation measures which will be implemented over the period 2009 to 2012 are in line with the Government’s initiative to promote structural change within the economy and diversify sources of growth to further drive economic expansion.
- The thrust of the liberalisation package for the financial sector encompasses the following:
- Issuance of new licences to strong and world-class players in the following categories:-
o In 2009, up to two new Islamic banking licences to foreign players to establish new Islamic banks with paid-up capital of at least USD1 billion;
o In 2009, up to two new commercial banking licences to foreign players that will bring in specialized expertise;
o In 2011, up to three new commercial banking licences to world class banks that can offer significant value propositions to Malaysia; and
o In 2009, up to two new family takaful licences.
Priority will be accorded to players who have the capacity to contribute in areas where there are gaps in our financial system and in which there are new areas of growth in the financial system, as well as that which will reinforce Malaysia’s position as an international Islamic financial hub;
- Flexibility will be accorded for an increase in the foreign equity limits from 49% to 70% of investment banks, Islamic banks, insurance companies and takaful operators. Such alliances will strengthen business potential and enhance growth prospects of financial institutions through the international expertise and global networks of foreign shareholders. The foreign equity limit for domestic commercial banks will remain at the current 30%;
- Enhance operational flexibilities to foreign institutions that operate in Malaysiato improve outreach of financial products and services, with greater flexibility to increase branches so as to achieve greater financial inclusion and insurance penetration in the country. Locally incorporated foreign commercial banks will be allowed to establish 4 new full-fledged branches with effect in 2010 and 10 microfinance branches with effect from this year;
- Greater flexibility will be accorded to Labuanoffshore players. With effect from 1 June 2009, Labuan Holding Companies incorporated under the Offshore Companies Act 1990 will be given flexibility to establish an operational and management office in Kuala Lumpur to enhance their operating and business efficiency. This initiative will allow Labuan Holding Companies to conduct their business more effectively and efficiently;
- To provide a more flexible operating business environment, offshore banking institutions licensed by the Labuan Offshore Financial Services Authority (LOFSA) that meet the predetermined criteria will be accorded flexibility to have a physical presence onshore from 2010. Similarly, offshore insurance companies licensed by the Labuan Offshore Financial Services Authority (LOFSA) that meet the predetermined criteria will be accorded flexibility to have a physical presence onshore from 2011. This flexibility will be complemented by a strengthened regulatory and supervisory framework that govern these players.
- Greater flexibility will also be accorded for employment of expatriates in specialist areas that can contribute to the development of the financial sector.
- The liberalisation of the financial services sector aims to ensure that maximum benefits will accrue to Malaysia. In enhancing our international linkages and in taking the financial sector to a new level of performance, it will contribute to our overall economy.
- Further details on these measures will be provided by Bank Negara Malaysia.
Dato’ Sri Mohd Najib
27 April 2009