Malaysia Plans Digital Banking License Launch
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Malaysia becomes the latest to capitalize on the rising trend of digital banking with plans to issue up to five licenses.
Malaysia’s central bank will issue the new licenses under a proposed framework that will be finalized in the first half of 2020 which will cater to online banks offering both conventional and sharia-compliant services.
Such digital banks are expected to offer meaningful access to and promote responsible usage of suitable and affordable financial solutions to financial consumers, according to a report citing a statement from Bank Negara Malaysia (BNM).
According to a draft proposal, the Internet-based lenders could help close the gap in Malaysia’s underserved customers and unbanked individuals. The new digital lenders will also have access to the country’s shared ATM network.
Preference will be given to license recipients where the controlling equity interest in the proposed licensed digital bank resides with Malaysians, the draft added. Other requirements include demonstrable viability for the first three to five years of operations with an asset threshold of no more than 2 billion Malaysian ringgit ($490 million) during the period.
Questions & Answers
Q.What is the primary objective of introducing these digital banking licenses in Malaysia?
What is the primary objective of introducing these digital banking licenses in Malaysia?
The new digital banks are expected to improve access to financial solutions for consumers and promote their responsible use. They aim to help serve Malaysia's underserved customers and individuals who currently lack banking services.
Q.What specific types of banking services will these new digital banks be allowed to offer?
What specific types of banking services will these new digital banks be allowed to offer?
The online banks will offer both conventional banking services and those that comply with Sharia law. This approach ensures a broad range of financial products are available to the Malaysian population.
Q.Are there any specific conditions regarding ownership for the companies applying for these licenses?
Are there any specific conditions regarding ownership for the companies applying for these licenses?
Yes, preference will be given to applicants where the majority equity interest in the proposed digital bank is held by Malaysian entities. This aims to ensure local control over these new financial institutions.
Q.What financial limitations will new digital banks face during their initial operating period?
What financial limitations will new digital banks face during their initial operating period?
During their first three to five years of operation, new digital banks must not exceed an asset threshold of 2 billion Malaysian ringgit, which is approximately $490 million. This ensures a controlled growth phase.