PETALING JAYA: In a move to kickstart the innovative application of technology in the financial sector, Bank Negara Malaysia has issued the Exposure Draft on Licensing Framework for Digital Banks.
The Exposure Draft outlines the proposed framework for the licensing of digital banks, that will offer banking products and services to address market gaps in the underserved and unserved segments.
In a press release yesterday, the central bank said up to five licences may be issued to qualified applicants to establish digital banks in Malaysia, to conduct either conventional or Islamic banking business.
These digital banks are expected to provide access to and promote responsible usage of suitable and affordable financial solutions to financial consumers.
“Taking into account that such digital banks have not operated in a full financial and economic cycle, the Bank has adopted a balanced approach to enable admission of digital banks with strong value propositions whilst safeguarding the integrity and stability of the financial system as well as depositors’ interests.
“To achieve these outcomes, an asset threshold of not more than RM2bil in the initial three to five years of operations will be applied.
“This functions as a ‘foundational phase’ for the licensees to demonstrate their viability and sound operations, and for the Bank to observe performance and attendant risks, ” said Bank Negara in the statement.
Digital banks will be required to maintain minimum capital funds unimpaired by losses of RM100mil during the foundational phase, and RM300mil thereafter.
Digital banks will also be required to comply with the requirements under the Financial Services Act 2013 (FSA) or Islamic Financial Services Act 2013 (IFSA).
This includes relevant requirements such as standards on prudential, business conduct and consumer protection, as well as anti-money laundering and terrorism financing.
During the foundational phase, licensed digital banks will be subjected to a more simplified regulatory requirement relating to capital adequacy, liquidity, stress testing and public disclosure requirements.
The Exposure Draft is issued together with the Application Procedures for New Licences under FSA and IFSA, and Application Procedures for Acquisition of Interest in Shares and to be a Financial Holding Company, to provide clarity on procedures and criteria involved in the application process to be licensed under the FSA and IFSA.
In addition, Bank Negara invites written feedback on the Exposure Draft, including areas to be clarified or elaborated further or alternative proposals that the Bank should consider.
The written feedback should be supported with clear rationale and accompanying evidence or illustrations to facilitate the Bank’s assessment.
The Bank will assess all feedback received and aims to finalise the Policy Document by the first half of 2020. Applications for licence will be open upon issuance of the Policy Document.
All feedback on the Exposure Draft should be submitted by February 28,2020 to email@example.com.