14 Jan 2020
MALAYSIA: Draft Licensing Framework for Digital Banks Issued
Bank Negara Malaysia (BNM), the country’s central bank, has issued a draft proposal relating to the issue of digital banking licences – the Exposure Draft on Licensing Framework for Digital Banks. Once the proposal is finalised later this year, up to five digital banking licences – extending across both the conventional and Islamic financial services sectors – are to be issued in line with a government commitment to deploy internet-based products for the benefit of the country’s many unbanked citizens.
Would-be overseas investors should note, however, that the BNM has stated: "Preference will be accorded to an application where the controlling equity interest in the proposed licensed digital bank resides with Malaysians." Among other criteria, successful licensees will also have to demonstrate their viability to maintain services over the first three to five years of operations by demonstrating minimum assets of RM2 billion (US$489.28 million). Furthermore, they will be required to maintain minimum capital funds – losses not withstanding – of RM100 million (US$24.46 million) during their initial trading phase and of RM300 million (US$73.39 million) subsequently.
In addition, such banks will be required to comply with either the Financial Services Act 2013 or the Islamic Financial Services Act 2013, including the clauses relating to prudent business conduct, consumer protection, anti-money laundering and safeguards against the financing of terrorism. While they will not be permitted to establish physical branches, it is envisaged that such entities will be allowed to access the country’s existing ATM network.