Transcript Slide 1

Promoting Fair Market Practices and
Ensuring Equitable Treatment for
Consumers –
[The Malaysian Perspective]
Basic Central Banking Course
May 2006
‹#›
Background – Malaysia (Selected Info)
Commercial
Banks: [23]
Merchant Banks:
[10]
Banking system is
the largest
component in
financial system:
Population:
25.6
million
• Accounting for
51% of assets
of financial
system
Insurance
companies: [42]
Others: Foreign
rep. offices,
discount houses,
money brokers,
DFIs, other nonbank financial
institutions.
• Mobilising 78%
of total
deposits of
financial
system
98% of Malaysians
have savings
account
Insurance
penetration rate at
37.9%
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3 Pillars of the Central Bank
3 pillars of central banking
Monetary
Stability
Financial
Stability
Efficient
Payment
System
Social & Developmental Role

BNM is responsible for

Implementing monetary policy

Ensuring soundness and stability of the banking system

Ensuring efficient and stable functioning of the payment system

Lender of last resort

Managing the international reserves
** no explicit mandate on consumer protection
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Financial Stability & Consumer Protection
Financial Stability
(safe, sound and stable financial system)
efficient, effective and robust
financial institutions, strong
prudential regulations and
supervision, and efficient and
reliable infrastructure (more
market driven environment)
Active
consumerism &
Consumer
Protection
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Regulator’s Dilemma
Balancing
consumer
expectations &
prudential
requirements
Manage liberalisation
and deregulation
process while
ensuring orderly
market conditions
Untapped
potential in the
insurance sector
High dependency
on the banking
system
Regulator’s
Dilemma
Explicit vs.
implicit mandate,
should there be
separation of
powers?
Migration to epayment vs. state
of consumer
readiness
Meeting Shariah
requirements for
Islamic financial
products and
services
Pressure from a
wide variety of
stakeholders
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Roadmap for the Financial Sector
Phase 1
Phase 2
Phase 3
Building domestic
capacity
Increase domestic
competition
Increase the pace for
integration with the
international market
(deregulated and liberalised market)
Effective
consumer
protection & fair
market practices
Preconditions to greater deregulation and
liberalisation
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Challenges Facing Consumers
Information
asymmetries
and
information
overload
Fair and
competitive
financial
sector
Low financial
literacy/
financial
skills
At the same time
consumer has the
responsibility for their
own financial wellbeing:
Redress
mechanism
Level of
transparency
to understand
T&C of products
and services
purchased
know their
rights and
responsibilities
Restructuring
of fees and
charges
exercise their
rights when
necessary
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7
Approach to Enhance Consumer Protection & Fair Market
Practices
Allows for best deal
enhances efficiency
 Consumer
education
 Information on
products and
services must be
accurate, easy to
understand and
accessible
Open,
competitive
& fair
financial
system
promotes innovation
Approach
Good
Information
Speedy
Redress
Avenue to
seek help
Avenue to seek
redress
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Consumer Protection Framework
Access to
Financial
Products and
Services
(access to basic
banking services,
access to financing)
Enhancing
Financial
Literacy
(consumer education
programme, school
adoption programme)
Depositors
Protection
Avenue to seek
help & redress
(Malaysia Deposit
Insurance Corporation)
(Complaint Unit @ FIs
& BNM, FMB, CCDM)
Proper
Disclosure
(transparency &
disclosure requirement
for banking & insurance
products)
Fair Market
Practices
(anti trust, debt
collection, repossession
inequitable contract,
role of intermediaries,
market abuse)
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Enhancing Financial Literacy:
Consumer Education Programme
A more dynamic financial system requires financially savvy consumers who

Are able to make informed decision (choosing products and services that
suit their financial needs)

Knows their rights and responsibilities
http://www.bankinginfo.com.my/
http://www.insuranceinfo.com.my/
one-stop information centre about “money and banking” as well as on “insurance and
takaful”
The objective is to make Malaysians more aware of their rights and responsibilities with
regard to banking/insurance products and services.
Booklets are also available at FIs’ branches
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Snapshots of BankingInfo & InsuranceInfo Websites
bankinginfo
insuranceinfo
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Enhancing Financial Literacy:
Financial Planning & Savings Outreach Programme
Increasingly complex
financial products &
services
Requires solid grasp
of money matters
School Adoption
programme - since
1997 (partnership
with the Education
Ministry)
Develop fin capability
from early age
BNM does:
Road shows
Educate & inculcate smart
fin mgmt habits among
target groups
7000+ schools adopted by BIs
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Snapshot of duitsaku (pocket money) website
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Access to Financial Products and Services
Objective:

To ensure that banking customers can enjoy a
minimum level of banking services at
reasonable costs
Initiatives:

All banking institutions (BIs) required to offer a
basic savings account (BSA) and a basic
current account (BCA) to all Malaysians that
will provide a minimum level of services (e.g.
deposit, withdrawals, fund transfer, etc) and
transactions at minimal costs.

Measures introduced to ensure charges
imposed on products offered to individuals
and SMEs are appropriate and reasonable.

Floor rates on time deposits

Ensuring public access to branch network
nationwide.
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Product Transparency and Disclosure (PTD)
Insurance
Objectives:
 To
give
consumers the
information
they need
about a product
and its charges
so that they can
make informed
decisions; and
 To
ensure that
the information
is presented in
a clear and
timely manner.
Introduced PTD policies on:

claims settlement practices

the sale of general insurance products

Proper Advice Practices for Life Insurance business with
primary purpose of ensuring intermediary obtains
sufficient info about a prospective policy owner before
rendering advice.

Medical and Health insurance business

15 days cooling off period for Life products
Banking
Disclosure requirements on fees & charges, as well as on
changes to T&C have been introduced.
Disclosure requirement on credit card
Concept paper on PTD covering:

Form, timing & items of disclosure as well as disclosure
requirement in advertisement
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Product Transparency and Disclosure (PTD)
Comparative Tables
Objectives:

To provide end-users
with up-to-date
information on specific
banking products and
services that will allow
them to do “comparison
shopping” by reducing
cost of information
search.
Scope:

6 retail products have
been identified for this
purpose. There are:

Savings account

Current account

Fixed deposit account

Credit card facility

Hire-purchase
facility

Housing loan facility
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Product Transparency and Disclosure (PTD)
Loan
Products*
Deposit
Rates
Interactive
with
filtering
capability!
* to be
published in
Dec 2005
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Redress Mechanisms
Complaint
Unit @ FIs &
BNM
Avenue to seek
redress and help
SME Special
Units at BIs &
BNM – assist
viable SMEs on
financing issues
Small Debt
Resolution
Scheme
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Deposit Insurance
Mandate; to provide:
• insurance against loss of part or all
deposits
• Incentives for sound risk management
• promote & contribute to the stability of
the financial system
Members: Commercial
banks, finance
companies, Islamic
banks
An independent statutory body called
Perbadanan Insurans Deposit
Malaysia (PIDM) was established on 15
August 2005
Eligible deposits will be covered up to
the prescribed limit of RM60,000 per
depositor, per member institution.
Covers 90%
depositors, 30%
deposits
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Benchmarking… a tool to improve performance
What has been done…
Financial and operating statistics

To drive banking institutions to understand their relative performance

Position compared to industry

Trends observed

Service quality indicators (turnaround & waiting time, handling of
complaints, ATM services)

Performance gap with industry and foreign banks
Customer needs and satisfaction surveys

To understand the level of customers satisfaction with products and
services offered, and service quality provided by financial institutions
e.g efficiency, products, communication

To identify the critical success factors affecting quality of service
Requirement for BIs to be rated – at bank or holding level
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Future Landscape
Active consumerism,
more financially savvy
consumers,
Financial
Institutions
Consumers
Lessening of environment shaper
and driver role (less regulatory
intervention) as we move towards a
more deregulated and liberalised
environment.
Well being, fair treatment
and satisfaction of
consumers embedded
within business
strategies
BNM
• Once, enabling environment is in
place (effective consumer protection
infrastructure and fair market
practices)
• Greater reliance on market discipline
& self regulation
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The End
Q&A
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