Malaysia is taking new steps to enhance the growing popularity of virtual banks and the benefits they can offer to customers. The country’s central bank, Bank Negara Malaysia (BNM), will issue up to five licenses to digital banks in Malaysia.
BNM is currently working on releasing the “Exposure Draft on Licensing Framework for Digital Banks”, or the virtual-bank operation guidelines in Malaysia.
Details on eligibility and admission criteria will be released in February 2020, when BNM will close the deadline for written feedback on the regulation draft. All interested parties must submit their feedback to the central bank by February.
According to press, all applicants will be given the opportunity to offer either Islamic banking services and products or traditional banking services. Applicants will be required to comply with either the Islamic Financial Services Act 2013 or the Financial Services Act 2013, depending on what they choose to offer.
These digital banks will begin their operations in a special restricted form that will have a minimum paid-in capital fo RM 100 million, subject to a total deposit cap of RM 2 billion. The central bank of Malaysia will also determine the limits of the deposits per individual at a later stage.
These new players will significantly improve the digital banking needs in the country and will perhaps allow traditional banks to improve their currently existing digital offerings.
However, the ultimate goal is to set up the licenses according to the applicants’ quality and their offerings. The progress of the new system is not pre-determined and should depend entirely on what the applicants have to offer.
Instead of BNM granting full “authority” to digital banks, the regulator will implement the process in several stages that also come with restrictions on deposits and product offerings. The goal is to ensure that the approved candidates manage risk appropriately and can handle the work.
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