Bank Negara releases policy document on digital banks

According to Crowdfund Insider, the Malaysian central bank’s new document on the licensing framework for all-digital banks has been published after completing a 6-month public consultation.

Bank Negara officials stated on December 31, 2020, that the licensing framework for digital-only banks will support the application of the latest technologies to enhance the financial wellbeing of individuals and companies while also promoting sustainable growth.

This includes expanding access to and encouraging responsible usage of appropriate financial products and services to the financially unserved and underserved population segments.

The framework offers a balanced approach to enable the entry of digital banking challengers with meaningful value propositions while ensuring the stability of the nation’s financial ecosystem, and also safeguarding depositors’ interests.

In order to achieve these goals or outcomes, a simplified set of regulatory guidelines will be applied to local neo-banks during the initial stage of their operations, commensurate with an asset threshold of up to RM 3 billion (appr. USD 745.8 million) for 3 to 5 years.

The digital banking platforms will have to adhere to the requirements outlined under the nation’s Financial Services Act 2013 (FSA) or Islamic Financial Services Act 2013 (IFSA). This reportedly includes set standards on prudential, Shariah, business conduct and consumer protection, along with anti-money laundering (AML) and terrorism financing regulations.

During the initial phases, Bank Negara will be requiring all-digital banks to follow a simplified regulatory framework that covers capital adequacy, liquidity, stress testing, Shariah governance and public disclosure guidelines.

Companies interested in launching neobanks or offering Islamic digital banking services must submit their applications to Bank Negara by June 30, 2021.