Bank Negara Annual Report 2022 Explores Digital Financial Services and More

Bank Negara's annual report for 2022 offers a detailed look at the state of Malaysia's financial sector. The report highlights the growing importance of digital financial services.

The report notes that digital payments increased significantly, with a 20% rise in transactions. This shift towards digital payments is expected to continue as more Malaysians adopt mobile banking and e-wallets.

Bank Negara's regulatory efforts are aimed at promoting a stable and secure digital financial ecosystem. The report outlines the bank's initiatives to strengthen cybersecurity and prevent financial crimes.

Bank Negara Malaysia (BNM) has taken a whole-of-nation approach to combat financial fraud and scams, which is one of its key priorities.

The central bank conducted the first industry-wide cyber drill exercise, BNM RE4CT, in 2022 with over 270 participants from 35 financial institutions to test their responses against cyber threats.

Financial institutions were found to be well-versed with their internal incident response and business continuity plans, but there's still room for improvement in communication with the public and media during a cyber crisis.

BNM has enforced 5 additional key measures for immediate implementation to combat scams.

The National Scam Response Centre (NSRC) was set up as a joint effort between the National Anti-Financial Crime Centre, Polis Diraja Malaysia, Malaysian Communications and Multimedia Commission, financial industry, and telecommunications industry.

The NSRC aims for a seamless information flow and stakeholder coordination to trace, hold, and recover stolen funds, and ultimately arrest, charge, and convict criminals.

Bank Negara Malaysia has also launched the National Scam Awareness Campaign in collaboration with the Association of Banks in Malaysia, Association of Islamic Banking and Financial Institutions Malaysia, and Association of Development Finance Institutions Malaysia.

Digital financial services are on the rise in Malaysia, with the central bank, BNM, facilitating the entry of new digital-first players into the financial sector.

Five digital bank licenses were granted in April 2022 to companies like Axiata's Boost Holdings and RHB Bank, and Grab's GXS Bank and Kuok Brothers. These digital banks are currently undergoing operational readiness checks and may begin operations by the second quarter of 2024.

Four of these digital banks are led by women, a notable milestone in the industry. Raja Teh Maimunah Raja Abdul Aziz, CEO of AEON Consortium's ACS Digital Berhad, is one of the leaders.

The central bank is also laying down the groundwork for new digital insurers and takaful operators (DITOs) to enter Malaysia's financial landscape. An exposure draft on the licensing and regulatory framework for DITOs was issued in November 2022.

BNM aims to finalise the policy document and start accepting applications for up to five DITO licenses this year. This will introduce licensing requirements for DITOs during their initial stage of operations.

The regulator is also studying the opportunities and risks that artificial intelligence (AI) and machine learning (ML) may pose to the Malaysian financial system.

Bank Negara Malaysia (BNM) is pushing the boundaries of financial innovation, and it's exciting to see the progress being made. BNM has granted five digital bank licenses to new players, including Axiata's Boost Holdings and RHB Bank, Grab's GXS Bank and Kuok Brothers, Sea Limited and YTL Digital Capital, KAF Investment Bank, MoneyMatch, Carsome and Jirnexu, and AEON Financial Service and AEON Credit Service.

These digital banks are currently undergoing operational readiness checks, with the possibility of beginning operations by the second quarter of 2024. They're already appointing management and board members, setting up key policies and control procedures, and finalizing their digital infrastructure.

Women are leading four of these digital banks, a testament to the growing presence of women in leadership roles in the financial sector. Raja Teh Maimunah Raja Abdul Aziz, Pei Si Lai, Fozia Amanulla, and Rafiza Ghazali are making waves in the industry.

BNM is also laying the groundwork for new digital insurers and takaful operators (DITOs) to enter the market. They've issued an exposure draft on licensing and regulatory frameworks for DITOs, which will introduce simplified requirements for these new players.

The central bank aims to finalize the policy document and start accepting applications for up to five DITO licenses this year. This will help accelerate innovation in the financial sector.

BNM is turning its focus to accelerating innovation through its Financial Technology Regulatory Sandbox. They're introducing two key enhancements: accelerating the turnaround time for innovations with strong risk management capabilities, and simplifying the eligibility assessment for the sandbox.

The regulator is also studying the opportunities and risks posed by artificial intelligence (AI) and machine learning (ML) in the financial system. They'll continue to monitor these developments to inform their regulatory and supervisory approach.

Bank Negara has made significant efforts to strengthen the financial sector's climate resilience over the past four years.

The regulator has established a framework for classifying assets based on alignment to climate outcomes, which has accelerated the transition towards a greener economy.

Financial institutions are now considering climate change in their operations, risk management, and business decisions, influencing how they form strategies and manage risks.

A large number of financial institutions have started actively engaging their customers on climate risks and transition plans, taking a more comprehensive approach.

Regulatory and supervisory expectations on managing climate risks have been set, and climate-related disclosure requirements have been established to meet critical data needs.

This infrastructure has been put in place to support the financial sector's transition to a greener economy, with many institutions now considering climate change in their day-to-day operations.

Malaysian banks are indeed resilient, thanks to their robust financial health.

The liquidity coverage ratio (LCR) of banks has seen a significant increase from 125% in 2015 to 154% in 2022.

Having an LCR above 100% is considered safe for banks, which is reassuring for account holders.

This means Malaysian banks have ample funds to absorb potential losses, giving you peace of mind about your money's safety in the bank.

You can rest assured that your deposits are secure, thanks to the banks' strong financial position.