Transcript MCF 304: Bank Management Lecture 1.1 Structure of Financial Systems in Malaysia Structure of Financial Systems in Malaysia • Financial System (FS) acts as a mechanism to.

MCF 304: Bank Management
Lecture 1.1
Structure of Financial Systems
in Malaysia
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Structure of Financial
Systems in Malaysia
•
Financial System (FS) acts as a mechanism
to transfer excess fund from to those who
need them
• The Malaysian FS structure can be divided
into three parts;
i. Banking system
ii. Non-bank financial intermediaries
iii. Financial markets
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Banking System
•
Bank Negara
Malaysia
•
Banking Institutions
i. Commercial banks
ii. Finance companies
iii. Merchant banks
iv. Islamic banks
• Discount Houses
• Representative office of
foreign banks
• Labuan off-shore banks
3
Non-Bank Financial
Intermediaries
•
Employee Provident
Fund & Pension Fund
• Insurance & Takaful
companies
• Development
Financial Institutions
(FI)
i. SME Bank
ii. Agro Bank
•
i.
Savings Institutions
Bank Simpanan
Nasional
ii. Co-operatives
associations
iii. Unit Trusts
iv. Lembaga Urusan
Tabung Haji
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Financial Markets
•
Money Market &
Foreign Exchange
Market
• Capital Market
i. Equity market
ii. Bond market
•
Derivatives Market /
Off Shore Market
i. Labuan Off Shore
ii. Foreign Finance
Authority
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Banking System
• Financial intermediaries linking financial
institutions and individuals with excess fund
and financial institutions and individuals with
shortage fund
• The Central Bank (BNM) regulates and control
the banking system
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Banking System
Central Bank
Commercial Banks
& Finance Companies
Merchant Banks &
Discount Houses
Offshore Banks &
Representative Office
of Foreign Banks
Islamic Banks
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Central Bank
(Bank Negara Malaysia)
•
i.
Main Objectives
Supply currency, acts as custodian of banks reserves
& controller of the currency value
ii. Government’s banker and financial adviser
iii. Ensure financial stability & strong financial
structure
iv. Commercial bank’s banker
v. Control & influence the country’s credit situation to
ensure a stable economic growth rate
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Central Bank
•
i.
ii.
iii.
iv.
v.
vi.
vii.
Control & influence the country’s credit situation to
ensure a stable economic growth rate
Statutory reserves requirement
Minimum liquidity requirement
Open market operation
Discount operations
Interest rate control
Credit control & lending guidelines
Moral persuasion
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Commercial Banks
• Accepting deposits for current, deposits,
savings and other similar accounts
• Making payments to collect cheques written or
paid by customers
• Other businesses as permitted by the Cental
Bank / MOF
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Role & Importance
of Commercial Banks
•
•
•
•
•
Creating money
Providing payment mechanism
Collect savings
Providing credits
Financing international trades
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Example;
Creating Money
• Bank X gives A an overdraft of 200 to
purchase a radio. A paid the vendor
• Vendor bank in the 200 in Bank B
• Bank B keep 20% as reserves and lend the
balance
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Example;
Creating Money
Radio vendors deposit = 200
Furniture vendor deposit = 200 x
(80/100) = 160
Spare parts vendor deposits = 200 x
(80/100)2 = 128
And so on ……
P = original value of deposits
r = bank’s reserve ratio
Total Deposits =
P[1/r]
= 200 x
[(1/20)/100]
= 1000
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Finance Companies
• Accepting deposits for deposits accounts and
other similar accounts
• Provide lending, leasing, hire-purchase
• Other business as permitted by central bank /
MOF
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Merchant Bank
• Accepting deposits for deposits accounts and
other similar accounts
• Provide consultancy and advisory services
related to corporate and investment matters
• Create / manage investment for other parties
• Other business as permitted by central bank /
MOF
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Other Banking System
• Islamic Banks
- commercial banks operating under the islamic laws
which forbidden the element of usury
• Discount Houses
- financial intermediaries dealing specifically with
short term investors and borrowers
• Labuan Offshore Banks
- commercials banks which operates in financial
offshore centers and permitted to operates in any
currencies except of local currencies
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Non-Banking
Financial Intermediary System
• Matching the parties with excess and shortage
of funds
• Non-banking financial intermediary system is
under the direct control of various government
department and agencies
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Non-Banking
Financial Intermediary System
Non-Bank Financial
Intermediaries
Institutions of
Development Finance
Savings Institutions
Provident &
Pension Funds
Insurance Companies
Other Non-Bank
Financial Institutions
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Institutions of
Development Finance
• Specific purpose of providing medium and
long term capital, as well as mobilizing
savings, economic activities and expertise with
an aim to promote investment in the industrial
and agricultural sectors
• The role of institutions of development finance
complement the services offered by
commercial banks and financial companies
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Non-Banking
Financial Intermediary System
Savings Institutions
- Institutions which
promote and mobilize
savings of the middle
and lower income group
- Depends mostly on
network of branches to
collect huge amount of
savings
• Co-operatives
- A society that aims to
improve its members
interest through cooperatives principles
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Non-Banking
Financial Intermediary System
Provident & Pension Fund
- Collect fund from
workers and providing
them with funds for
retirement
Insurance Companies
- Funds collected as
insurance premiums
from policy holders for
protection against
calamities
- Two types of insurance
business; (i) Life, & (ii)
General
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Non-Banking
Financial Intermediary System
•
•
•
•
Unit Trust Companies
Housing Credit Institutions
Leasing & Factoring Companies
Venture Capital Companies
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Financial Markets:
Money Market
•
Trading ground between banks and those with short
term money
•
Trading of short term financial instruments quoted
in RM
•
The operations of money market consist of three
categories;
i. Placement of time & fixed deposits
ii. Commercial financing
iii. Buying & selling of money market financial papers
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Money Market
Financial Instruments
- Treasury Bills
- Government Investment
Certificates
- Bankers Acceptance
- (Floating Rate) /
Negotiable Certificates
of Deposits
Money Markets
- Primary Market:
depositing in FI’s
- Secondary Market: FI’s
trade deposits among
themselves
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Financial Markets
Foreign Exchange Market
- Trading of short term
financial instruments
quoted in foreign
currencies
- Two types of markets;
(i) spot exchange market
and (ii) forward market
Capital Market
- Trading of shares /
securities
- Two types of markets;
(i) primary markets, and
(ii) secondary markets
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Thank You!
Izdihar Baharin @ Md Daud
Post Graduate Centre
HP: 006019-5170817
Email: [email protected]
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