Bank Negara Malaysia looking to welcome digital banks into the market

Bank Negara Malaysia has updated its licensing framework for digital banks and is planning on issuing up to five new licenses to qualified applicants.  

The Exposure Draft outlines the new framework for the licensing of digital banks to offer banking products and services in the country. Digital banks, as per the new framework, must offer ‘meaningful access to and promote responsible usage of suitable and affordable financial solutions to financial consumers.’

Bank Negara is taking a balanced approach to encouraging digital banks but safeguarding the integrity and stability of the country’s financial ecosystem.

For the first three to five years of operation there will be an asset threshold of no more than RM 2 billion ($487m). This will serve as a foundational phase to assess the viability and sound operations of the digital bank.

These digital banks will be expected to comply with the Financial Services Act 2013 or Islamic Financial Services Act 2013 as well as regulations surrounding anti-money laundering, terrorism financial and consumer protection.

During the foundational phase, digital banks will be subject to simplified regulatory requirements on capital adequacy, liquidity, stress testing and public disclosure.

Furthermore, digital banks will need to maintain a minimum capital funds unimpaired by losses of RM 100m ($24m) during the foundational phase and RE 300m ($73m) afterwards.

The Central Bank has invited feedback on its draft and proposals. All feedback needs to be submitted by 28 February 2020.

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