Podcast
Questions and Answers
What is the main role of financial institutions in the real economy?
What is the main role of financial institutions in the real economy?
Which component of the Malaysian financial system reallocates funds from savers to borrowers?
Which component of the Malaysian financial system reallocates funds from savers to borrowers?
What is one of the key outputs of the financial system in Malaysia?
What is one of the key outputs of the financial system in Malaysia?
Who are the savers and users that constitute the financial system in Malaysia?
Who are the savers and users that constitute the financial system in Malaysia?
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In what way do financial institutions maintain financial stability within an economy?
In what way do financial institutions maintain financial stability within an economy?
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Which two major components make up the financial system in Malaysia?
Which two major components make up the financial system in Malaysia?
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What is one of the crucial roles of financial institutions operating within an economy?
What is one of the crucial roles of financial institutions operating within an economy?
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How do financial markets play a role in the reallocation of funds in the economy?
How do financial markets play a role in the reallocation of funds in the economy?
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What is the role of the capital market system in raising long-term finance?
What is the role of the capital market system in raising long-term finance?
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How does the primary market in the capital market system differ from commercial banks?
How does the primary market in the capital market system differ from commercial banks?
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What is the main risk faced by investors in the capital market system?
What is the main risk faced by investors in the capital market system?
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Why is the existence of a secondary market important for investors?
Why is the existence of a secondary market important for investors?
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Which entity in the capital market system provides professional support and advice for transactions?
Which entity in the capital market system provides professional support and advice for transactions?
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What is the primary difference in acquiring funds between companies using commercial banks and those using the capital market system?
What is the primary difference in acquiring funds between companies using commercial banks and those using the capital market system?
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Which market is considered 'illiquid' without a platform for trading investments?
Which market is considered 'illiquid' without a platform for trading investments?
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What is the key role of the Securities Commission in relation to the capital market system?
What is the key role of the Securities Commission in relation to the capital market system?
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What are some key banking services provided by commercial banks in Malaysia?
What are some key banking services provided by commercial banks in Malaysia?
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What is 'banking business' defined as under FSA 2013?
What is 'banking business' defined as under FSA 2013?
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Which financial services were mergers of finance companies and banks in the late 1990s primarily responsible for commercial banks offering?
Which financial services were mergers of finance companies and banks in the late 1990s primarily responsible for commercial banks offering?
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What does 'investment banking business' include as per FSA 2013?
What does 'investment banking business' include as per FSA 2013?
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Which of the following is NOT mentioned as a key banking service provided by commercial banks in Malaysia in the text?
Which of the following is NOT mentioned as a key banking service provided by commercial banks in Malaysia in the text?
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Under FSA 2013, what is one of the activities that commercial banks are NOT licensed to undertake?
Under FSA 2013, what is one of the activities that commercial banks are NOT licensed to undertake?
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'Banking business' under FSA 2013 includes which of the following activities?
'Banking business' under FSA 2013 includes which of the following activities?
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'Investment banking business' under FSA 2013 does NOT involve which of the following?
'Investment banking business' under FSA 2013 does NOT involve which of the following?
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What is the main function of the capital market system?
What is the main function of the capital market system?
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Which financial market system mobilises short-term funds?
Which financial market system mobilises short-term funds?
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What is the significance of liquidity in the capital market system?
What is the significance of liquidity in the capital market system?
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In the equity market, what are securities issued and traded known as?
In the equity market, what are securities issued and traded known as?
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What distinguishes the debt securities market from the equity market?
What distinguishes the debt securities market from the equity market?
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Which activity in the capital market enables investors to buy or sell their securities?
Which activity in the capital market enables investors to buy or sell their securities?
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What is a common way for businesses to raise equity funding in the capital market system?
What is a common way for businesses to raise equity funding in the capital market system?
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Which market enables the trading of securities that have a specific maturity date for repayment?
Which market enables the trading of securities that have a specific maturity date for repayment?
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What do retail investors purchase in a unit trust scheme?
What do retail investors purchase in a unit trust scheme?
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Where does the fund manager place the funds collected from a unit trust scheme?
Where does the fund manager place the funds collected from a unit trust scheme?
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What are Exchange-Traded Funds (ETFs) known as?
What are Exchange-Traded Funds (ETFs) known as?
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Who receives the returns from investments in a unit trust scheme?
Who receives the returns from investments in a unit trust scheme?
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How can investors withdraw from a unit trust scheme if it is listed on a securities exchange?
How can investors withdraw from a unit trust scheme if it is listed on a securities exchange?
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What role do various institutions play in Malaysia's financial system?
What role do various institutions play in Malaysia's financial system?
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What do credit officers need to be aware of according to the text?
What do credit officers need to be aware of according to the text?
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What aspect of financial services does the FSA 2013 focus on in terms of authorised persons?
What aspect of financial services does the FSA 2013 focus on in terms of authorised persons?
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According to the FSA 2013, which of the following is prohibited unless licensed under the Act?
According to the FSA 2013, which of the following is prohibited unless licensed under the Act?
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What does the FSA 2013 specify regarding the ownership of licensed businesses?
What does the FSA 2013 specify regarding the ownership of licensed businesses?
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In the context of FSA 2013, what falls under BNM's powers of investigation and supervision?
In the context of FSA 2013, what falls under BNM's powers of investigation and supervision?
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What is one of the key functions that banking executives involved in credit activities should understand according to the FSA 2013?
What is one of the key functions that banking executives involved in credit activities should understand according to the FSA 2013?
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Which area of operation does the FSA 2013 NOT cover?
Which area of operation does the FSA 2013 NOT cover?
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What type of business conduct does the FSA 2013 explicitly prohibit?
What type of business conduct does the FSA 2013 explicitly prohibit?
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Which power does BNM have under the FSA 2013 concerning prudential matters?
Which power does BNM have under the FSA 2013 concerning prudential matters?
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What action, despite being necessary to manage impaired loans, provides a false picture of the institution’s risk profile?
What action, despite being necessary to manage impaired loans, provides a false picture of the institution’s risk profile?
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Which guideline must be read alongside the Guideline on Classification and Impairment for Financing/Loans?
Which guideline must be read alongside the Guideline on Classification and Impairment for Financing/Loans?
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Which of the following alterations to loan terms can provide a false depiction of an institution’s capital position?
Which of the following alterations to loan terms can provide a false depiction of an institution’s capital position?
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What is the primary purpose of ensuring proper loan classification according to the text?
What is the primary purpose of ensuring proper loan classification according to the text?
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Which practice, despite being important to manage impaired loans, might provide a false capital position?
Which practice, despite being important to manage impaired loans, might provide a false capital position?
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What is the purpose of altering repayment terms for non-performing loans?
What is the purpose of altering repayment terms for non-performing loans?
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Which action, despite its necessity for managing impaired loans, may contribute to inaccuracies in reserves?
Which action, despite its necessity for managing impaired loans, may contribute to inaccuracies in reserves?
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What is vital to ensuring an accurate account of an institution's portfolios according to the text?
What is vital to ensuring an accurate account of an institution's portfolios according to the text?
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What does the Civil Law Act 1956 as at 1 April 1972 state about the law administered for commercial matters in Malaysia?
What does the Civil Law Act 1956 as at 1 April 1972 state about the law administered for commercial matters in Malaysia?
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According to the Bills of Exchange Act 1949 (BEA) as at 29 April 1978, what is a cheque considered as?
According to the Bills of Exchange Act 1949 (BEA) as at 29 April 1978, what is a cheque considered as?
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What does The National Land Code 1965 in Malaysia primarily focus on?
What does The National Land Code 1965 in Malaysia primarily focus on?
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What type of order does the Bills of Exchange Act 1949 define a bill of exchange as?
What type of order does the Bills of Exchange Act 1949 define a bill of exchange as?
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Why are the provisions of the Bills of Exchange Act important according to the text?
Why are the provisions of the Bills of Exchange Act important according to the text?
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What is a key aspect covered in the Civil Law Act 1956 as at 1 April 1972 concerning Malaysia's legal system?
What is a key aspect covered in the Civil Law Act 1956 as at 1 April 1972 concerning Malaysia's legal system?
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What is an important consideration from the Bills of Exchange Act 1949 mentioned in the text related to banking?
What is an important consideration from the Bills of Exchange Act 1949 mentioned in the text related to banking?
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How does The National Land Code 1965 in Malaysia contribute to the legal framework regarding land?
How does The National Land Code 1965 in Malaysia contribute to the legal framework regarding land?
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What does the term 'exposure' refer to, as per the BNM Guideline on the Single Counterparty Exposure Limit (BNM/RH/GL 001-38)?
What does the term 'exposure' refer to, as per the BNM Guideline on the Single Counterparty Exposure Limit (BNM/RH/GL 001-38)?
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What is the criteria for a 'large exposure' under the BNM Guideline on the Single Counterparty Exposure Limit?
What is the criteria for a 'large exposure' under the BNM Guideline on the Single Counterparty Exposure Limit?
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What constitutes 'exposure' under the BNM Guideline?
What constitutes 'exposure' under the BNM Guideline?
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In the context of the BNM Guideline, what does 'large exposure' signify?
In the context of the BNM Guideline, what does 'large exposure' signify?
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What type of liabilities are included in the definition of 'exposure' as per the BNM Guideline?
What type of liabilities are included in the definition of 'exposure' as per the BNM Guideline?
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What is the significance of specifying 'connected', 'counterparty', and 'exposure' under the BNM provision?
What is the significance of specifying 'connected', 'counterparty', and 'exposure' under the BNM provision?
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What does 'large exposure' entail under the BNM Guideline?
What does 'large exposure' entail under the BNM Guideline?
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What does Section 47(1) of the FSA 2013 allow BNM to specify standards for, regarding related party transactions?
What does Section 47(1) of the FSA 2013 allow BNM to specify standards for, regarding related party transactions?
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Who is involved in 'related party transactions' as defined by Section 47(3) of the FSA 2013?
Who is involved in 'related party transactions' as defined by Section 47(3) of the FSA 2013?
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What type of transactions are considered 'related party transactions' under the FSA 2013?
What type of transactions are considered 'related party transactions' under the FSA 2013?
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Under what conditions may BNM specify standards related to related party transactions?
Under what conditions may BNM specify standards related to related party transactions?
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What is the primary purpose of BNM specifying standards related to related party transactions?
What is the primary purpose of BNM specifying standards related to related party transactions?
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Who qualifies as someone 'in a position to influence or control the institution' under the FSA 2013?
Who qualifies as someone 'in a position to influence or control the institution' under the FSA 2013?
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'Related party transactions' may involve which types of individuals according to S.47(3)?
'Related party transactions' may involve which types of individuals according to S.47(3)?
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What is one of the key areas covered in the Financial Services Act 2013 (FSA 2013) in relation to the credit function?
What is one of the key areas covered in the Financial Services Act 2013 (FSA 2013) in relation to the credit function?
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Which regulatory body in Malaysia provides guidelines on credit and loans as mentioned in the chapter?
Which regulatory body in Malaysia provides guidelines on credit and loans as mentioned in the chapter?
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What is a primary focus of the Foreign Exchange Administration (FEA) Rules and Notices as related to credit within the banking industry?
What is a primary focus of the Foreign Exchange Administration (FEA) Rules and Notices as related to credit within the banking industry?
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What is a necessity to ensure proper loan classification within the banking industry?
What is a necessity to ensure proper loan classification within the banking industry?
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Which of the following is covered under the key provisions of the Financial Services Act 2013 (FSA 2013) affecting the credit function?
Which of the following is covered under the key provisions of the Financial Services Act 2013 (FSA 2013) affecting the credit function?
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How do Laws and Regulations impact the Malaysian Banking industry according to the learning outcomes of the chapter?
How do Laws and Regulations impact the Malaysian Banking industry according to the learning outcomes of the chapter?
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What role do Central Bank Guidelines on Credit and Loans play in the Malaysian Banking industry?
What role do Central Bank Guidelines on Credit and Loans play in the Malaysian Banking industry?
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What is one of the main purposes of ensuring an accurate account of an institution's portfolios as discussed in relation to Laws and Regulations?
What is one of the main purposes of ensuring an accurate account of an institution's portfolios as discussed in relation to Laws and Regulations?
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What is the primary reason a banking institution is required to aggregate its exposures to a single counterparty with its exposures to persons connected to the single counterparty?
What is the primary reason a banking institution is required to aggregate its exposures to a single counterparty with its exposures to persons connected to the single counterparty?
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In the context of being 'connected' to a single counterparty, what does it mean if either party has control over the other through shareholding or shared management?
In the context of being 'connected' to a single counterparty, what does it mean if either party has control over the other through shareholding or shared management?
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Under which scenario in the BNM SCEL is a relationship between counterparties considered not easily substitutable in the short term?
Under which scenario in the BNM SCEL is a relationship between counterparties considered not easily substitutable in the short term?
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Why is it important for a banking institution to identify persons connected to a single counterparty?
Why is it important for a banking institution to identify persons connected to a single counterparty?
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What criterion makes a person 'connected' to a single counterparty according to Appendix 5 of the BNM SCEL?
What criterion makes a person 'connected' to a single counterparty according to Appendix 5 of the BNM SCEL?
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In what way does 'control' over another entity, as per the BNM SCEL, impact their relationship?
In what way does 'control' over another entity, as per the BNM SCEL, impact their relationship?
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What is a key factor that determines whether a person is 'connected' to a single counterparty?
What is a key factor that determines whether a person is 'connected' to a single counterparty?
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'Connected' persons to a single counterparty may pose risk because of __________.
'Connected' persons to a single counterparty may pose risk because of __________.
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Which of the following entities is NOT considered a 'Resident' as per the text provided?
Which of the following entities is NOT considered a 'Resident' as per the text provided?
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What is the maximum limit for residents with domestic Ringgit borrowing to invest abroad per calendar year?
What is the maximum limit for residents with domestic Ringgit borrowing to invest abroad per calendar year?
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What is the primary requirement for residents without domestic Ringgit borrowing to invest abroad?
What is the primary requirement for residents without domestic Ringgit borrowing to invest abroad?
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In what circumstances are residents with domestic Ringgit borrowing allowed to invest abroad?
In what circumstances are residents with domestic Ringgit borrowing allowed to invest abroad?
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What is one of the conditions for residents to be free to undertake investment abroad?
What is one of the conditions for residents to be free to undertake investment abroad?
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What constitutes a key difference between residents who can undertake investment abroad and those restricted from doing so?
What constitutes a key difference between residents who can undertake investment abroad and those restricted from doing so?
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What is a distinguishing factor between residents who can invest abroad and those who cannot?
What is a distinguishing factor between residents who can invest abroad and those who cannot?
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'Residents without domestic Ringgit borrowing' are explicitly allowed to invest abroad for what reason?
'Residents without domestic Ringgit borrowing' are explicitly allowed to invest abroad for what reason?
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What is the main regulatory agency responsible for enforcing the Financial Services Act 2013 and the Islamic Financial Services Act 2013 in Malaysia?
What is the main regulatory agency responsible for enforcing the Financial Services Act 2013 and the Islamic Financial Services Act 2013 in Malaysia?
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What provision in the Financial Services Act 2013 allows executive decisions made under repealed Acts to continue until amended or revoked?
What provision in the Financial Services Act 2013 allows executive decisions made under repealed Acts to continue until amended or revoked?
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Which legislation may be enacted from time to time to clarify or supplement existing rules and compliance requirements in Malaysia?
Which legislation may be enacted from time to time to clarify or supplement existing rules and compliance requirements in Malaysia?
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What is the primary function of Bank Negara Malaysia (BNM) in issuing guidelines to financial institutions?
What is the primary function of Bank Negara Malaysia (BNM) in issuing guidelines to financial institutions?
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Which act serves as supporting legislation for the banking industry in Malaysia according to the text?
Which act serves as supporting legislation for the banking industry in Malaysia according to the text?
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What is the role of Bank Negara Malaysia (BNM) in relation to enforcing the Financial Services Act 2013?
What is the role of Bank Negara Malaysia (BNM) in relation to enforcing the Financial Services Act 2013?
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What component of Malaysian financial regulations provides an overview of the regulatory components of the banking industry?
What component of Malaysian financial regulations provides an overview of the regulatory components of the banking industry?
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What type of legislation is the Companies Act 2016 considered as in relation to banking regulations in Malaysia?
What type of legislation is the Companies Act 2016 considered as in relation to banking regulations in Malaysia?
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What distinguishes a private company under CA 2016?
What distinguishes a private company under CA 2016?
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In the context of company classification, what characterizes a public company?
In the context of company classification, what characterizes a public company?
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Why are unlimited companies unique compared to other company types?
Why are unlimited companies unique compared to other company types?
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What is a key feature of an unlimited company according to CA 2016?
What is a key feature of an unlimited company according to CA 2016?
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Under CA 2016, what is the distinctive characteristic of a private company?
Under CA 2016, what is the distinctive characteristic of a private company?
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Which statement accurately represents the liability of members in a company limited by guarantee?
Which statement accurately represents the liability of members in a company limited by guarantee?
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What naming requirement distinguishes an unlimited company according to Section 25(1) of CA 2016?
What naming requirement distinguishes an unlimited company according to Section 25(1) of CA 2016?
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Study Notes
Commercial Banks in Malaysia
- Commercial banks in Malaysia provide financial services such as deposit facilities, funds transfer, loans, credit facilities, and financing for the government.
- Under Section 10 of the Financial Services Act 2013 (FSA 2013), commercial banks and investment banks are licensed to undertake "banking business" and "investment banking business" respectively.
Banking Business
- Banking business is defined as:
- Accepting deposits on current accounts, deposit accounts, savings accounts, or other similar accounts.
- Paying or collecting cheques drawn by or paid by customers.
- Providing finance.
- Other business as prescribed under Section 3, FSA 2013.
Capital Market System
- The capital market system plays three main roles:
- Primary market for raising long-term finance, where companies can obtain funds directly from investors.
- Secondary market for investors to dispose or acquire investment securities.
- Providing liquidity to attract long-term funding in an economy.
Roles of Financial System
- The financial system reallocates funds from savers and depositors to borrowers.
- The financial system operates as a payment mechanism, facilitating money transfers from one party to another.
- The banking system mobilises short-term funds, while the capital market system enables the mobilisation of long-term investment funds.
Capital Market Components
- The capital market system consists of three interlinked markets:
- Equity market: where companies' share capital is raised and traded.
- Debt securities market: where securities such as bonds, loan stocks, and convertible debt instruments are issued and traded.
- Derivatives market.
Financial Services Act 2013 (FSA 2013)
- FSA 2013 covers various aspects, including:
- Authorisation and registration of authorised businesses, registered businesses, and representative offices.
- Prudential requirements, including standards on prudential matters, banking compliance requirements, and single counterparty exposure limit.
- Rules related to the ownership, control, and transfer of licensed businesses.
- Business conduct and consumer protection standards.
Single Counterparty Exposure Limit
- The single counterparty exposure limit is defined as total exposures to a single counterparty that is equal to or greater than 10% of the banking institution's total capital.
- Exposures include:
- Outstanding loans, advances, and receivables.
- Deposit placements and margins held with counterparties.
- Debt and equity securities held.
- Investments in collective investment schemes.
- Exposures arising from derivative contracts.
- Exposures under off-statement of financial position instruments.
Classification and Impairment of Financing/Loans
- The Guideline on Classification and Impairment of Financing/Loans requires institutions to classify and provide for impaired loans accurately.
- Impairment, provisioning, and write-offs need to be undertaken in accordance with the Guideline to ensure accurate accounting of portfolios.
Laws and Regulations in Malaysian Banking
- The regulations of the banking industry in Malaysia comprise:
- Direct banking laws, such as FSA 2013 and the Islamic Financial Services Act 2013 (IFSA 2013).
- Supporting legislation, such as the Companies Act 2016 (CA 2016).
- Central Bank guidelines, such as the Guideline on Classification and Impairment of Financing/Loans.
Foreign Exchange Administration Rules and Notices
-
The Foreign Exchange Administration (FEA) Rules and Notices regulate foreign exchange transactions and investments.
-
Residents are free to undertake investment in foreign currency assets and abroad, subject to certain conditions and limits.### Types of Companies
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A company can be incorporated as a company limited by shares, a company limited by guarantee, or an unlimited company.
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In a company limited by shares, a member's liability is limited to the amount unpaid on their shares.
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In a company limited by guarantee, a member's liability is limited to the amount they agreed to contribute in the event the company is wound up.
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There is no limit on the liability of a member of an unlimited company.
Unlimited Company
- The name of an unlimited company must end with the word "Sendirian" or the abbreviation "Sdn" (Section 25(1) CA 2016).
Private Company
- A private company is a company limited by shares (Section 42(1) CA 2016).
- It has not more than 50 shareholders (Section 42(1) CA 2016).
- It restricts the transfer of its shares (Section 42(2) CA 2016).
- It cannot offer its shares or debentures to the public (Section 43(1) CA 2016).
- It cannot allot shares or debentures with a view of offering them to the public (Section 43(1) CA 2016).
- Prior to CA 2016, private companies were prohibited from inviting the public to subscribe its shares or debentures (Section 15(1) CA 1965).
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Description
Learn about the key banking services provided by commercial banks in Malaysia such as deposit facilities, funds transfer facilities, loans, and credit facilities. Explore how these services have evolved since the merger of finance companies and banks in the late 1990s and early 2000s.