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Dialogue with Insurers and Takaful Operators
Bank Negara Malaysia held a dialogue with insurers and takaful operators on 9 and 10
August 2005. The chairmen, members of the Board and chief executive officers of insurers
and takaful operators attended the dialogue. Themed "Moving Towards a More
Last modified : 10 Aug 2005
Measures to Further Strengthen the Institutional Infrastructure of the Takaful Industry
Bank Negara Malaysia announces several measures to further strengthen the institutional
infrastructure of the takaful industry and accelerate the expansion of takaful business. This
move is in line with the objectives of the Financial Sector Masterplan
Last modified : 26 May 2005
The Takaful Annual Report 2004
The Takaful 2004 Annual Report provides a review on the performance and developments of
the Malaysian takaful industry and the administration of the Takaful Act 1984 by Bank Negara
Malaysia throughout the year. The takaful industry expanded further in
Last modified : 27 Apr 2005
Appointment of Members of the Shariah Advisory Council for Islamic Banking and
Takaful
Bank Negara Malaysia today announces the appointment of ten (10) members of the Shariah
Advisory Council for Islamic Banking and Takaful. The two-year term appointment which
takes effect from 1st November 2004 was made pursuant to Section 16B, Central
Last modified : 02 Nov 2004
Dialogue Session with Insurers and Takaful Operators
The Governor of Bank Negara Malaysia, together with senior officials of Bank Negara
Malaysia, met with the chief executive officers of insurance companies and takaful operators
for a dialogue at Bank Negara Malaysia on 29 October 2004. The Dialogue
Last modified : 29 Oct 2004
Memorandum of Understanding between Malaysia and the Islamic Development Bank
The Government of Malaysia and the Islamic Development Bank (IDB) today signed a
Memorandum of Understanding (MOU), witnessed by the Prime Minister of Malaysia, Dato'
Seri Abdullah Hj. Ahmad Badawi. The Governor of Bank Negara Malaysia, Tan Sri Dr. Zeti
Last modified : 30 Jun 2004
The Takaful Annual Report 2003
Bank Negara Malaysia released the Takaful 2003 Annual Report today. The Takaful 2003
Annual Report The Takaful 2003 Annual Report provides a review of the performance and
developments of the Malaysian takaful industry and the administration of the
Last modified : 22 Apr 2004
Liberalisation of the Foreign Exchange Administration Rules
In conjunction with the release of the Annual Report 2003, Bank Negara Malaysia is
announcing further liberalisation of the foreign exchange administration rules. This is part of
the Bank’s continuous effort to enhance the business environment
Last modified : 01 Apr 2004
Banking and Financial Law School 2004: "The Use and Documentation of OTC
Derivatives"
Bank Negara Malaysia, Institut Bank-Bank Malaysia (IBBM), the Malaysian Bar Council and
International Swaps and Derivatives Association (ISDA) will be organising the fourth Banking
and Financial Law School 2004. This year the topic is "The Use and
Last modified : 11 Feb 2004
Dialogue Session with Insurers and Takaful Operators
The Governor of Bank Negara Malaysia, together with senior officials of the Bank, met with
chief executive officers of insurance companies and takaful operators for a dialogue at the
Bank on 30 October 2003. The Dialogue discussed recent economic and
Last modified : 30 Oct 2003
http://www.bnm.gov.my/index.php?chn_id=8&tpl_id=118&qt=takaful
PEN: 08/05/34 (BN)
Embargo: Not for publication or broadcast before 1700 hours on Wednesday, 10 August 2005
Dialogue with Insurers and Takaful Operators
Bank Negara Malaysia held a dialogue with insurers and takaful operators on 9 and 10
August 2005. The chairmen, members of the Board and chief executive officers of insurers
and takaful operators attended the dialogue. Themed "Moving Towards a More Competitive
Market", the dialogue session provided a platform for insurers, takaful operators and Bank
Negara Malaysia to discuss strategic issues concerning the call to greater transparency in the
industry's interactions with consumers and challenges of the changing competitive landscape.
The 2005 annual dialogue session was conducted over a period of one and a half days, and
focused on the challenges of pricing deregulation, product transparency, operating cost
efficiencies and commission disclosures. Practitioners from renown global insurance
institutions were present to share their experiences in these areas. Discussions during the
dialogue centred on the challenges faced by the industry in preparing for the transition
towards a more deregulated market, readiness of the market for commission disclosure and
industry initiatives to enhance product transparency. On these issues, the dialogue supported:
the need to draw up a clear road map for moving towards a detariffed market; the need to
build up an adequate supply of actuarial resources to meet the increasing demand that will
arise for such expertise; the need for adequate safeguards to curb unhealthy practices and
maintain financial discipline in transitioning to commission disclosures and the liberalisation of
management expense controls; and new initiatives outlined to enhance consumer awareness.
The broad proposals outlined to take these issues forward will provide added impetus for
further progress by the industry towards building more competitive insurance and takaful
systems. Bank Negara Malaysia will continue to provide the enabling regulatory environment
to support an orderly evolution and to secure long-term market stability.
At the dialogue, Bank Negara Malaysia announced that it would in the near term issue
licences for financial advisers with the recent passage of the Insurance (Amendment) Bill on
Financial Advisers. The introduction of financial advisers is aimed at further diversifying the
distribution system for life insurance. Financial advisers will be positioned to offer professional
financial planning services, and a broader range of insurance products from multiple insurers
to suit increasingly diverse consumer needs. Financial advisers must be a corporate entity
with a minimum paid-up capital of RM100,000 and have in place management that fulfil
prescribed 'fit and proper' criteria in order to qualify for a licence.
Bank Negara Malaysia also informed the industry of the imminent issuance of revised
Guidelines on Medical and Health Insurance Business which aims to promote the more
equitable and consistent treatment of consumers in the provision of core benefits under
medical insurance policies. This will be achieved primarily through more clearly defined rules
governing minimum policy terms and conditions and improved disclosures to consumers at
the point of sale. The Guidelines will take effect in early 2006.
Bank Negara Malaysia
10 August 2005
PEN: 05/05/58 (BN)
Embargo: Not for publication or broadcast before 1200 hours on Thursday, 26 May 2005
Measures to Further Strengthen the Institutional
Infrastructure of the Takaful Industry
Bank Negara Malaysia announces several measures to further strengthen the institutional
infrastructure of the takaful industry and accelerate the expansion of takaful business. This
move is in line with the objectives of the Financial Sector Masterplan to create an efficient,
progressive and comprehensive Islamic financial system and reinforce takaful as one of the
key components of the Malaysian financial system. In this regard, Bank Negara Malaysia
hereby announces the following initiatives:
i. Licensing of new takaful operators; and
ii. Licensing of takaful brokers and adjusters.
Licensing of new takaful operators
Bank Negara Malaysia will issue up to four new takaful licenses to qualified applicants. The
following criteria will be adopted in assessing the merits of applicants:
i.
The applicant must be financially sound financial institutions, preferably with
experience in Islamic banking, takaful or insurance business;
ii.
Preference will be accorded to a joint-venture or consortium of financial institutions
(including insurance and banking groups, as well as development financial
institutions). For the consortium, there should be participation from an anchor bank or
insurer with a significant equity holding to steer the consortium. In addition, the jointventure or consortium should be participated by at least one banking group; and
iii.
The applicant must be able to demonstrate, through its business plans, that the
proposed takaful operator could contribute effectively to the development of the
takaful industry and hence complement the efforts taken by the Government and the
Bank in establishing Malaysia as an Islamic financial centre. The business plan
should demonstrate clear business strategy of the applicant with regard to:
o
The expected growth of the proposed takaful operator through the projected
financial condition and pro forma financial statements for the company in the
first three years.
o
An overview of each line of business to be conducted by the takaful operator
and the products and services to be offered, including the marketing strategy
to be adopted, both in short-term and long-term periods; and
o
The competency and experience of the potential management team of the
proposed takaful operator.
In the submission of application to Bank Negara Malaysia, the applicant must include the
proposed ownership structure of the proposed takaful operator, including its direct and
indirect control and major shareholders, their financial strength, the review of the past banking
and insurance business ventures as well as the source of initial capital to be invested.
The takaful licences will be issued as composite licences and the new takaful operator must
comply with the minimum paid-up capital requirement of RM100 million, which should not be
funded through borrowings. In addition, the foreign equity interest in the new takaful operator
is permitted up to 49%.
Submission of applications to Bank Negara Malaysia should be made by 31 October
2005.
Licensing of takaful brokers and adjusters
In an effort to further strengthen the regulation and supervision of takaful intermediaries and
enhance consumer protection, Bank Negara Malaysia will issue licences under the Takaful
Act 1984 to qualified applicants to conduct takaful broking and adjusting business. This move
is also aimed at increasing the level of professionalism and competence of the takaful
intermediaries.
(a) Takaful broking licence
For the takaful broking business, application is opened to qualified insurance brokers
currently licensed under the Insurance Act 1996. The insurance broker must transact at least
RM1 million takaful contributions in the previous calendar year or have combined takaful and
insurance contributions of at least RM30 million, of which takaful contributions accounts for
more than RM0.5 million of the combined amount. In addition, the insurance broker must
have a minimum paid-up share capital unimpaired by losses of RM0.6 million and
professional indemnity cover of at least RM1 million net of deductible.
Apart from the above, up to five new takaful broking licences will be issued to new players in
an effort to promote specialisation in takaful broking business. Among the licensing conditions
imposed on the new players include requirement on minimum paid-up share capital
unimpaired by losses of RM0.5 million and professional indemnity cover of at least RM0.5
million net of deductible.
The application for takaful broker licence must be made using the application forms available
at Bank Negara Malaysia's website. The application forms must reach Bank Negara
Malaysia by 1 July 2005.
(b) Takaful adjusting licence
For the takaful adjusting business, application is opened to insurance adjusters currently
licensed under the Insurance Act 1996 having a minimum paid-up share capital unimpaired
by losses of RM0.15 million. Interested applicants are required to submit to Bank Negara
Malaysia by 1 July 2005 a letter of intent to conduct takaful adjusting business.
Both takaful broking and adjusting licences are yearly renewable based on the performance
of the applicants.
Enquiries on the licensing conditions and submission of applications should be directed to:
Director
Islamic Banking & Takaful Department
Bank Negara Malaysia
Jalan Dato' Onn
P.O. Box 10922
50929 Kuala Lumpur
Telephone:
03-2698 8044 ext. 7641/8539
Fax:
03-2693 3826
E-mail:
salamran @ bnm.gov.my
nas @ bnm.gov.my
Application Forms
BNM/JPIT/BA1 - Information on Applicant Company
BNM/JPIT/BA2 - Information on Shareholders/Directors/Key Officers
PEN: 04/05/59 (BN)
Embargo: Not for publication or broadcast before 1800 hours on Wednesday, 27 April 2005
The Takaful Annual Report 2004
The Takaful 2004 Annual Report provides a review on the performance and developments of
the Malaysian takaful industry and the administration of the Takaful Act 1984 by Bank Negara
Malaysia throughout the year.
The takaful industry expanded further in year 2004 in tandem with the expansion in domestic
economic activities. The combined contributions of family and general takaful business
increased by 10.8% to RM1.1 billion with the market share of the takaful industry accounting
for 5.1% (2003: 5.4%) of the insurance sector contributions (aggregate of takaful and
insurance industry). Total assets of the takaful funds strengthened by 13.5% to reach RM5
billion, accounting for 5.6% (2003: 5.6%) share of the insurance sector. In 2004, several
positive developments in the industry continued to set the course for future growth of the
takaful sector in Malaysia. These include the implementation of mandatory takaful cover for
Islamic financing where the cost of coverage is part of the financing package. In addition, all
takaful operators have completed the capital raising exercise to a minimum of RM100 million
which is expected to improve their underwriting capacity and precipitate more product
launches.
Family Takaful
The family takaful business continued to dominate the takaful industry with 70.7% share of
total contributions. New business contributions recorded growth of 18.1% to RM603.7 million
mainly generated from mortgage takaful plans, driven by the expansion in disbursements of
mortgage financing by the Islamic financial institutions. Since its introduction in 2003, the
investment-linked takaful plans has recorded significant growth of 197.5%, showing
tremendous potential for the plan to expand further to fulfil the consumer needs for Shariah
compliant investment avenues.
Table 1: Distribution of New Business by Plan
RM million % change % share
2003 2004
2004
2003 2004
Ordinary Family 502.9 592.4
17.8
98.4 98.1
Contributions
Individual
452.8 485.0
7.1
88.6 80.3
Group
50.1 107.4
114.5
9.8 17.8
Annuity1
4.9 1.9
Investment-linked 3.2 9.4
Total
511.0 603.7
1 Excluding SATK
-62.0
197.5
18.1
1.0 0.3
0.6 1.6
100.0 100.0
Sums participated for new business grew significantly by 98.9% to RM36.5 billion while
takaful certificates issued increased by 9.6% to 290,538 certificates. Market penetration of the
family takaful business, as measured by the number of certificates in force to total population,
increased from 4.5% to 5.1%.
Growth of total income of the family takaful business in 2004 increased marginally by 6.1% to
RM1 billion, impacted by the slowdown in growth of net investment income from deposit
placements and lower yield from Islamic bonds. On the other hand, total outgo of the family
fund increased by 64.5% to RM591.2 million largely due to the high provision for nonperforming financing and diminution in value of securities. As a result, the excess of income
over outgo stood at RM437.3 million, an increase of 42.5% from the year 2003.
General Takaful
The general takaful business expanded further in 2004 with the total gross contributions
increased by 22.2% to RM492.5 million. Fire and motor sectors continued to dominate the
portfolio of general takaful business with 37.8% and 30.4% share of total gross contributions.
The marine, aviation and transit sector further expanded in 2004 with a significant growth of
115.3% in gross contributions. The overall retention ratio declined marginally to 80.7% as
compared with 81.1% in 2003 arising from the limited capacity of the takaful operators to
retain marine, aviation and transit business.
Table 2: Distribution of Gross Contributions by Sectors
RM million % change % share
2003 2004
2004
2003 2004
Marine, Aviation & Transit 35.0 75.4
115.3
8.6 15.3
Fire
167.2 186.2
11.4
41.5 37.8
Motor
120.4 149.8
24.4
29.9 30.4
Miscellaneous
80.4 81.1
0.8
20.0 16.5
All Sectors
403.0 492.5
21.1
100.0 100.0
Gross Contributions
Total gross claims paid increased by 11.5% amounting to RM116 million. 21.7% or RM25.2
million of the total gross claims paid were borne by retakaful and reinsurance companies
under the retakaful arrangement. The claims experience of the takaful industry increased to
41.2% mainly due to the increase in provision for outstanding claims for the fire sector and
higher net claims paid for the motor sector. The general takaful fund experienced lower
underwriting profit of RM68.7 million following higher underwriting expenses recorded during
the year.
Developments and Measures to Strengthen the Industry
During 2004, Bank Negara Malaysia continued the efforts to strengthen further the overall
infrastructure supporting the development of a resilient and robust takaful industry. Focus was
centred on enhancing the institutional infrastructure, regulatory and prudential framework,
Shariah and legal infrastructure, as well as consumer protection and awareness. Several
guidelines were issued by Bank Negara Malaysia to strengthen the effectiveness of the board
of directors and senior management in the overall management of a takaful operator, improve
the transparency of financial reporting and enhance product disclosure and transparency in
the marketing of takaful products. In line with the need to ensure the systemic stability and
sustainability of the takaful industry, the scope of takaful schemes were also expanded by
requiring the shareholders of takaful operators to make an outright transfer of assets into the
takaful risk funds so as to rectify any deficit in the funds. These measures were
complemented with the continous efforts to strengthen the consumer protection infrastructure
and enhance financial literacy to increase public confidence in the takaful industry. The efforts
included the launching of the Financial Mediation Bureau to lend support for efficient dispute
resolution process involving the financial products and services provided by the financial
institutions under the supervision of Bank Negara Malaysia. The Bank and the takaful industry
also organised the inaugural Malaysia International Halal Showcase and the annual Islamic
Banking and Takaful Expo.
The Shariah and legal framework was further strengthened with the issuance of Guidelines on
the Governance of Shariah Committee for the Islamic Financial Institutions. The Guidelines
were issued to streamline the functions and duties of the Shariah Committee of takaful
operators as well as to enlarge and reinforce the role of the Shariah Advisory Council on
Islamic Banking and Takaful (SAC) to ensure better Shariah governance in the takaful
industry. This followed the amendments made in 2003 to the Central Bank of Malaysia Act
1958 and the Takaful Act 1984 which enhanced the role and functions of the SAC as the sole
authority on Shariah matters pertaining to Islamic banking and takaful. Further amendments
were also made to the Income Tax Act 1967, Real Property Gains Tax Act 1976 and Stamp
Act 1949 to exempt additional instruments and transactions executed to meet the Shariah
requirements from stamp duty and tax payment.
During the year, Bank Negara Malaysia and the takaful industry continued to actively
participate in initiatives to develop takaful at the global front. These include specific initiatives
to promote the development of takaful and retakaful among the Organisation of Islamic
Conference and Group of Eight Islamic Developing Countries.
In conjunction with the 20th anniversary of the takaful industry in Malaysia (1986 – 2005), a
special article highlighting the position of the industry after 20 years since its inception in
Malaysia is published together with the Takaful Annual Report 2004. The article presents an
account of the experience of Malaysia in developing a sound and viable takaful industry that
is sustainable.
See also:
The Takaful 2004 Annual Report (Book)
20 Years Experience of Malaysian Takaful Industry (English) PDF, 1.0MB
20 Years Experience of Malaysian Takaful Industry (Arabic) PDF, 1.2MB
Bank Negara Malaysia
27 April 2005
Takaful Annual Report 2004
All the documents here are in Portable Document File (PDF) format.
In order to read this document, you will need AdobeTM AcrobatTM ReaderTM, which is
downloadable for free from the AdobeTM Web Site. [Go there]
If you already have the software, choose any of the following:
Full book [PDF 460K]
20 Years of Takaful in Malaysia [PDF 1MB]
Mission, Letter of Transmittal [PDF 35K]
Governor's Statement [PDF 29K]
Charts [PDF 23K]
Chapter 1: The Takaful Industry Performance [PDF 162K]
Chapter 2: Policies and Developments [PDF 42K]
Appendices [PDF 129K]
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Subsidiary Legislation Made under the Takaful Act 1984 as at 31 December 2004
Takaful Operators Registered under the Takaful Act 1984 as at 31 December 2004
Syariah Supervisory Council under Section 8 of the Takaful Act 1984 as at 31
December 2004
Organisation Chart : Islamic Banking & Takaful Department and Insurance
Supervision Departments as at 31 December 2004
Circulars and Guidelines Issued to the Takaful Industry during the Year 2004
Year 2004 at a Glance
Glossary of Takaful Terms
Family Takaful Statistics [PDF 76K]
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TK 1 : Abstract of Revenue Accounts - Income and Outgo
TK 2 : Liabilities and Assets of Statutory Funds
TK 3 : New Certificates Issued, Terminations and Certificates in Force at End of Year
TK 4 : Summary of Valuation Reports
General Takaful [PDF 54K]
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TA 1 : Abstract of Revenue Accounts - Income and Outgo
TA 2 : Liabilities and Assets of Statutory Funds
TA 3 : Contributions
TA 4 : Claims
TA 5 : Underwriting Account
PEN: 11/04/54(BN)
Embargo: Not for publication or broadcast before 1715 hours on Tuesday, 2 November 2004
Appointment of Members of the Shariah Advisory Council
for Islamic Banking and Takaful
Bank Negara Malaysia today announces the appointment of ten (10) members of the Shariah
Advisory Council for Islamic Banking and Takaful. The two-year term appointment which
takes effect from 1st November 2004 was made pursuant to Section 16B, Central Bank Act
1958. The appointed members are as follows :-
1. Datuk Sheikh Ghazali Abdul Rahman – Director General, Shariah Judiciary
Department Malaysia;
2. Datuk Haji Md. Hashim Haji Yahaya – Academic Fellow, International Islamic
University Malaysia;
3. Datuk Dr. Abdul Monir Yaacob – Director General, Institute of Islamic Understanding
Malaysia (IKIM);
4. Dato' Haji Hassan Haji Ahmad – State Mufti of Penang;
5. Dato' Dr. Abdul Halim Ismail – Executive Director, BIMB Securities Sdn. Bhd.;
6. Dato' Abdul Hamid Haji Mohamad – Judge, Federal Court of Malaysia;
7. Associate Professor Dr. Mohd Daud Bakar – Deputy Rector, International Islamic
University Malaysia;
8. Associate Professor Dr. Abdul Halim Muhammad – Lecturer, National University of
Malaysia;
9. Dr. Mohd Ali Hj. Baharum – Deputy Chairman, National Co-operative Organisation of
Malaysia (ANGKASA); and
10. Dr. Mohd Parid Sheikh Ahmad – Lecturer, International Islamic University Malaysia.
The Council shall be the authority in determining the validity of Islamic banking, finance and
takaful transactions conducted by Islamic financial institutions under the purview of Bank
Negara Malaysia.
Bank Negara Malaysia
2 November 2004
© Bank Negara Malaysia, 2006. All rights reserved.
Embargo: For immediate release
Dialogue Session with Insurers and Takaful Operators
The Governor of Bank Negara Malaysia, together with senior officials of Bank Negara
Malaysia, met with the chief executive officers of insurance companies and takaful operators
for a dialogue at Bank Negara Malaysia on 29 October 2004. The Dialogue discussed recent
economic and financial developments, the performance of the domestic insurance and takaful
industries, new policy measures as well as developments and current issues concerning the
insurance and takaful sectors.
The insurance industry saw stronger growth in the first half of 2004, mainly supported by the
life sector which continued to experience strong demand by consumers for investment-linked
and endowment products offered by life insurers. Greater diversity was also achieved in the
industry, particularly in relation to the product range offered to consumers and distribution
systems. The number of submissions received by Bank Negara Malaysia from life insurers on
new products or product revisions continued to increase during the year, indicative of greater
innovation by the industry to meet the specific needs of target markets. Bancassurance also
emerged as a major distribution channel for insurance products in 2004, further expanding
and modernising the distribution system to offer consumers convenient access to
comprehensive wealth management services from banking institutions. For insurers, this
development has also contributed towards lower distribution costs and more effective
penetration of the market.
To further promote the development of bancassurance and ensure that efficiency gains are
translated into competitive bancassurance products that will benefit consumers, Bank Negara
Malaysia informed the meeting that additional measures would be introduced to provide for
more flexible bancassurance commission structures, as well as enhanced disclosures to
consumers to facilitate product comparison.
In light of the developments in the industry, life insurers were urged to strengthen their
financial risk management capabilities to support the increasing demand for attractive
investment options offered by them. This was important both to meet the long-term
obligations to policyholders, as well as to continue providing competitive returns to consumers.
The meeting also discussed the need for insurers to enhance sales practices and support
initiatives to further upgrade the competencies and professionalism of the agency force, which
were critical to enable them to adapt effectively to the changing business environment. With
more moderate growth experienced in the general insurance sector in the first half of 2004,
the need for general insurers to maintain disciplined underwriting standards was also
emphasised in order to better weather the cyclical effects of premium cycles and more volatile
investment conditions.
The meeting also reviewed the performance of the takaful industry, which similarly registered
encouraging growth in the sale of investment-linked products. Family takaful business,
however, remained highly concentrated in mortgage reducing term takaful business. In order
to achieve more sustainable growth, takaful operators were urged to further diversify the
family takaful product lines which would also serve to meet the increasingly more diverse
needs of consumers.
As part of Bank Negara Malaysia’s strategic initiatives to evolve a comprehensive and
competitive Islamic financial system, the meeting was informed that another banking group
had been granted approval in principle to conduct takaful business. Increasing opportunities
for takaful operators in Malaysia to expand abroad were also being created with the signing of
a Memorandum of Understanding (MOU) between Bank Negara Malaysia and the Islamic
Development Bank in June 2004 which set the framework for cooperation among OIC
members in key economic activities, including takaful and retakaful. Takaful operators were
encouraged to leverage on such initiatives by the Government to forge strategic partnerships
and foster closer cooperation with their counterparts in the region in order to attain greater
market access and establish themselves as global players.
In respect of developments relating to the prudential regulatory framework, the industry was
briefed on progress achieved with respect to the development of a risk-based capital
framework for the insurance industry and the proposed approach to implementation. A
consultative paper setting out further details of the framework, including its key elements and
implementation plan, is expected to be released to the industry within the year. The
framework will reinforce and build on concurrent measures being implemented by Bank
Negara Malaysia to ensure sound financial management in the industry. Such measures
include the guidelines recently issued by Bank Negara Malaysia on dynamic solvency testing
for life insurers. The guidelines require life insurers to assess on a continuing basis, the
impact on solvency margins from changing financial conditions and the actual business
experience of the individual insurers. In the same vein, guidelines to further strengthen the
adequacy of reserves by general insurers are also currently being finalised by Bank Negara
Malaysia.
Under the Consumer Education Programme, the meeting was informed that five new booklets
on insurance produced in English and Bahasa Melayu, and the Mandarin and Tamil versions
of six existing booklets, had been completed for release within the year. Progress is also
underway to enhance the InsuranceInfo website to include additional information, including
useful tips for consumers and information on complaints avenues and procedures. To provide
consumers with more convenient access to Bank Negara Malaysia on general enquiries or
complaints relating to the provision of financial services, the Bank is also in the midst of
establishing a dedicated customer service centre on its premises to serve as a central point of
contact for walk-in visitors to make enquiries on financial services regulated by the Bank, as
well as obtain general information on Bank Negara Malaysia and its various initiatives.
In the area of motor insurance, the meeting reviewed preparations being made by the industry
for the full implementation of the electronic cover note (or e-cover note) system, following the
recent launch of JPJ eINSURANS by the Minister of Transport in early October 2004. The ecover note system represents an important step forward in efforts by the industry to combat
motor insurance fraud by effectively eliminating the incidence of forged cover notes. Prior to
the full transition to the e-based system which will take place on 2 January 2005, insurers and
takaful operators will continue to issue physical cover notes together with e-cover notes
during a parallel run period which will extend until December 2004. The parallel run period will
enable insurers to establish and comprehensively test electronic linkages with Jabatan
Pengangkutan Jalan and their insurance agents. Bank Negara Malaysia is closely monitoring
preparations by the industry in this regard to ensure a smooth transition.
To complement the e-cover note system, insurers and takaful operators were also
encouraged to support the wider usage of e-payment systems for the settlement of motor
premiums which would promote transactions in a more secure and efficient environment.
To further improve the claims settlement practices among insurers, the meeting considered
measures that could be implemented to reduce the level of subjectivity currently inherent in
the claims assessment process. The proposed measures will be studied in more detail to
assess their feasibility for practical implementation, and appropriate measures would be taken
forward.
The meeting was also updated on other anti-fraud initiatives jointly undertaken by Bank
Negara Malaysia and the insurance and takaful industries. Cooperation with law enforcement
agencies and relevant trade associations was further enhanced during the year through
regular dialogue, the sharing of information systems and exchange of experiences in
combating fraud. Such initiatives are ultimately aimed at putting in place effective
mechanisms and the necessary infrastructure to support efforts to combat insurance fraud
that results in losses to the industry, which if left unchecked, could adversely impact the
premium rates borne by consumers.
Bank Negara Malaysia
29 October 2004
Memorandum of Understanding between Malaysia and the
Islamic Development Bank
The Government of Malaysia and the Islamic Development Bank (IDB) today signed a
Memorandum of Understanding (MOU), witnessed by the Prime Minister of Malaysia, Dato'
Seri Abdullah Hj. Ahmad Badawi. The Governor of Bank Negara Malaysia, Tan Sri Dr. Zeti
Akhtar Aziz signed on behalf of the Government of Malaysia while the President of IDB, Dr.
Ahmad Mohamad Ali signed for the Bank.
This MOU is part of Malaysia's initiative as the Chair of the Organisation of Islamic
Conference (OIC) to set a framework of cooperation among OIC members in key economic
activities, with the objective of enhancing opportunities for growth. The MOU seeks to
strengthen financing arrangements to promote trade, gives a new focus on financing services
trade and investment, as well as facilitates use of Information Communication Technology
(ICT) to expand intra-OIC economic activities. The MOU also promotes the development of
the Islamic financial markets. The focus is on promoting business linkages and mobilisation of
funds for cross-border investments between the financial Centers in OIC member countries.
In the area of Islamic finance, the MOU also aims at further expansion of Takaful and
Retakaful businesses within OIC countries.
The MOU also contains provisions to promote the use of insurance instruments for trade and
investments and encourage member countries to adopt Free Trade Agreements.
The MOU between the IDB and Malaysia signifies the commitment to strengthen the
economic status of OIC countries, especially the less developed countries. It also represents
Malaysia’s commitment to work towards achieving the vision of improving the economic wellbeing of the OIC membership. The common membership in IDB and OIC makes the IDB an
important platform for greater cooperation among the members for the benefit of Islamic
countries.
Jeddah, Saudi Arabia,
30 June 2004.
END
Embargo: For immediate release
The Takaful Annual Report 2003
Bank Negara Malaysia released the Takaful 2003 Annual Report today.
The Takaful 2003 Annual Report
The Takaful 2003 Annual Report provides a review of the performance and developments of
the Malaysian takaful industry and the administration of the Takaful Act 1984 by Bank Negara
Malaysia throughout the year.
The takaful industry showed improved performance for the year 2003. The combined
contributions of the family and general takaful sectors increased by 14.0% to RM1,040.0
million with the market share of the takaful industry accounting for 5.4% (2002: 5.3%) of the
insurance sector contributions (total takaful and insurance industry). Total assets of the
takaful funds strengthened by 22.1% to reach RM4,429.1 million, accounting for 5.6% (2002:
5.3%) share of the insurance sector. Several new products were launched by takaful
operators during the year in an effort to enhance the product range. In addition, existing
takaful plans were reviewed to ensure the benefits offered remain competitive. Moving
forward, the industry is in a strong position to expand further in an environment of stronger
economic performance projected for 2004.
Family Takaful
The family takaful business, which accounted for 75.2% of total contributions, remained the
major income generator for the takaful industry. New business contributions recorded an
increase of 13.0% to RM511.1 million, predominantly generated from individual mortgage
reducing term takaful driven by the expansion in disbursements of mortgage financing by the
Islamic financial institutions and the provision of Islamic house financing facility provided by
the government to the civil servants. The most encouraging growth in new business
contributions was recorded by annuity takaful plans and is expected to continue given the
demographic transition towards an ageing society. The introduction of the first investmentlinked takaful plan in 2003 generated RM3.2 million of new business contributions. For the
year 2003, new contributions registered by the new takaful operators amounted to RM38.7
million, representing 7.6% share of the new business contributions.
Table 1: Distribution of New Business by Plan
Contributions
RM million % change
% share
2002 2003
2003
2002 2003
Ordinary Family
451.3 502.9
11.4
99.8 98.4
Individual
412.2 452.8
9.8
91.2 88.6
Group
39.1 50.1
28.3
8.6
9.8
Annuity1
0.9
4.9
444.1
0.2
1.0
Investment-linked
3.2
0.6
Total
452.2 511.0
13.0
100.0 100.0
1 Excluding SATK
The sums participated for new business grew by 29.3% to RM18,330.0 million while takaful
certificates issued increased by 11.8% to 265,035 certificates. Market penetration of the
family takaful business, as measured by the number of certificates in force to total population,
increased from 3.8% to 4.5%.
The excess of income over outgo improved by 18.5% to RM609.7 million. Total income of the
family takaful business increased by 21.3% against the decline of 39.6% in 2002. The
increase was driven by the growth in business contributions, higher investment income and
profits from disposal of securities. Total outgo increased albeit at a lower rate of 26.2% (2002:
38.8%), largely due to the increase in net certificate benefits paid and the higher management
expenses incurred arising from the adjustment made to include expenses borne by the
shareholders' fund.
General Takaful
In 2003, the general takaful business continued the growth momentum with gross
contributions increased by 21.1% to RM403.0 million. Despite a 6.9% decline in the sales of
motor vehicles in 2003, the motor sector achieved a stronger growth of 17.8% to RM120.4
million. This was the result of intensive marketing efforts, which focused on securing more
business from franchise dealers and local authorities. The fire sector, which is the dominant
sector commanding 41.5% of total gross contributions, posted a lower growth rate of 11.8%
(2002: 28.9%) as a result of the more stringent underwriting policies implemented during the
year. The highest growth was recorded in marine, aviation and transit sector due to increased
participation in coinsurance arrangement coupled with hardening of contribution rates. The
percentage of total gross contributions from marine, aviation and transit sector nevertheless
remained small at 8.6%. The overall net retention ratio declined to 62.4% as compared with
66.8% in 2002, due to outward cessions of large risks from the fire and marine, aviation and
transit sectors.
Table 2: Distribution of Gross Contributions by Sectors
Gross Contributions
RM million % change % share
2002 2003
2003
2002 2003
Marine, Aviation & Transit 20.9 34.9
66.8
6.3 8.6
Fire
149.5 167.2
11.8
44.9 41.5
Motor
102.2 120.4
17.8
30.8 29.9
Miscellaneous
60.0 80.5
34.1
18.0 20.0
All Sectors
332.7 403.0
21.1
100.0 100.0
The total gross claims paid in 2003 amounted to RM104.1 million. The net claims ratio fell to
37.3% from 54.4% in the previous year, partly due to the review of claims provision in motor
'others' sub-sector. For fire sector, the claims ratio declined due to the implementation of a
more stringent underwriting policy. The underwriting profit improved marginally by 2.8% to
RM74.6 million resulted from the increase in contributions and the decline in claims incurred
costs.
Developments and Measures to Strengthen the Industry
Bank Negara Malaysia embarked on several important initiatives in 2003 towards developing
an efficient and progressive takaful industry as envisaged in the Financial Sector Masterplan.
The efforts by Bank Negara Malaysia focused on enhancing the institutional capacity and
operational efficiency of the takaful industry. These include, among others, the directive to
increase the minimum paid-up capital of takaful operators to RM100 million by 31 December
2004 from the present requirement of RM35 million. Against stronger capitalization, the
takaful industry would be better able to leverage on opportunities for growth and improve their
financial resilience.
During the year, several guidelines were issued by Bank Negara Malaysia to improve the
overall efficiency in claims handling of the general sector, promote fair practices as well as
enhance product disclosure and transparency in the sale of takaful products as part of the
efforts to heighten the level of professionalism in the industry. The inclusion of takaful
operators in Knock-for-Knock agreements signified commitment on the part of the takaful
industry to bring about consistency and more efficient processing of third party claims across
the takaful and insurance industries. These were supplemented by efforts to enhance
transparency and public awareness on takaful. A second Islamic Banking and Takaful Week
and the Consumer Education Programme on insurance and takaful known as 'InsuranceInfo',
were also organised collaboratively by the Bank and the industry.
Bank Negara Malaysia also introduced several measures to further strengthen the legal and
Shariah framework governing the takaful industry. One of the developments was the
formation of the Law Review Committee assigned with the responsibility to review the existing
laws on commercial transactions to accommodate the execution of financial transactions that
are based on Shariah principles. Other progress made include the establishment of a
dedicated High Court in the Commercial Division of High Court Kuala Lumpur to adjudicate all
muamalat cases and the enhancement of role and functions of the Shariah Advisory Council
via the amendments to the Central Bank of Malaysia Act 1958 and the Takaful Act 1984.
These initiatives aim to strengthen the foundations on which the potential of the industry can
be realised.
See also: 2003 Takaful Annual Report (Book)
Bank Negara Malaysia
21 April 2004
Takaful Annual Report 2003
All the documents here are in Portable Document File (PDF) format.
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downloadable for free from the AdobeTM Web Site. [Go there]
If you already have the software, choose any of the following:
Mission, Letter of Transmittal [PDF 31K]
Governor's Statement [PDF 32K]
Chapter 1: The Takaful Industry Performance [PDF 189K]
Chapter 2: Policies and Developments [PDF 143K]
White Box Article: Takaful Operators Statistical System
Chapter 3: Administration of the Act [PDF 41K]
Appendices [PDF 96K]
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


Subsidiary Legislation Made under the Takaful Act 1984 as at 31 December 2003
Takaful Operators Registered under the Takaful Act 1984 as at 31 December 2003
Syariah Supervisory Council under Section 8 of the Takaful Act 1984
Organisation Chart : Islamic Banking & Takaful Department and Insurance
Supervision Departments
Circulars and Guidelines to the Industry during the Year 2003
Year 2003 at a Glance
Glossary of Takaful Terms
Summary of Statutory Returns [PDF 22K]
Family Takaful Statistics [PDF 46K]

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
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TK 1 : Abstract of Revenue Accounts - Income and Outgo
TK 2 : Liabilities and Assets of Statutory Funds
TK 3 : New Certificates Issued, Terminations etc., of Liabilities or Contributions and
Certificates in Force at End of Year
TK 4 : Summary of Valuation Reports
GENERAL TAKAFUL [PDF 81K]

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
TA 1 : Abstract of Revenue Accounts - Income and Outgo
TA 2 : Liabilities and Assets of Statutory Funds
TA 3 : Contributions
TA 4 : Claims
TA 5 : Underwriting Account
Dialogue Session with Insurers and Takaful Operators
The Governor of Bank Negara Malaysia, together with senior officials of the Bank, met with
chief executive officers of insurance companies and takaful operators for a dialogue at the
Bank on 30 October 2003. The Dialogue discussed recent economic and financial
developments, the performance of the insurance and takaful industries as well as specific
issues relating to developments in these two sectors. The insurers and takaful operators were
also briefed on the progress of the implementation of the Financial Sector Masterplan and
new regulatory measures.
At the Dialogue, insurers and takaful operators were informed that the Bank will revise the
investment limits on credit facilities under the admitted assets framework for insurance
companies to provide greater flexibility for insurers to diversify their portfolios in private debt
securities. This would widen the institutional investor base in line with various measures being
taken to develop a robust bond market. The meeting was also briefed on the Bank’s plans to
increase the minimum paid-up capital requirements for takaful operators to RM100 million,
aimed at strengthening the financial capacity of takaful operators to support the continued
rapid growth of the takaful business. Total assets and net contributions of the takaful sector
increased to account for 5.5% and 6% of total assets and net premiums in the insurance
industry respectively in the first half of 2003. In view of the significant progress of the takaful
industry and as part of the efforts to develop the market further, the Bank will also consider
applications from suitable applicants that have a strong financial position and expertise to
conduct takaful business.
On the progress of the implementation of the Financial Sector Masterplan, the meeting was
informed that 25 recommendations, representing about 20% of the total number of
recommendations under the Masterplan have been implemented as at end September 2003.
In the insurance sector, the launch of the consumer education programme on insurance and
takaful, or ‘InsuranceInfo’, on 29 August 2003 will serve to address the information needs of
consumers and promote greater transparency in the conduct of insurance and takaful
business. Since the launch of the programme, nearly 400,000 visitors have accessed the
‘InsuranceInfo’ website and over 1.2 million information booklets on insurance and takaful
products and services have been made available for distribution to members of the public.
A number of new and revised guidelines were also issued by the Bank during the year to
promote fair practices in insurance business, enhance product disclosure and transparency in
the sale of medical and health insurance and promote more efficient and equitable claims
settlement practices in general insurance business. To further improve the level of
professionalism in the insurance intermediation process, the entry requirements for insurance
agents were raised under a staggered implementation programme that commenced in April
2003 and best advice practices were introduced in the sale of life insurance products.
The avenues for consumers to resolve their complaints were also enhanced with the
establishment dedicated complaints units by insurers and takaful operators since June this
year. At the same time, the plan to merge the banking and insurance mediation bureaus to
enhance synergies in dealing with consumer complaints relating to banking and insurance
services is now at an advanced stage. The merged bureau will also establish regional offices
to improve access to its services. The implementation of these measures will promote greater
market discipline and further improve market conduct in the insurance and takaful industries.
“This is important as meeting consumer expectations will be a significant challenge for the
insurance and takaful industries in an environment of increasingly more sophisticated
consumers and a more differentiated and changed financial sector”, said the Governor.
The Dialogue also discussed additional remedial measures to address specific issues relating
to medical and health insurance business, including measures to address the difficulties faced
by the public in obtaining medical insurance cover, rising medical costs and the impact of
premium rate increases to policyholders. “Developing sustainable solutions is important in the
light of the changing demographic structure and increasing importance of the role of private
medical and health insurance in complementing the public health care system”, said the
Governor. The issuance of Guidelines by the Bank on product disclosure and transparency in
the sale of medical and health insurance products will contribute towards reducing mis-selling
and misrepresentations to consumers. At the industry level, initiatives being taken to promote
the sustainable growth of the business include continuing dialogues with medical service
providers to contain rising medical costs, concerted efforts by insurers to establish panels of
hospitals, and improvements in the design and pricing of medical insurance plans.
The meeting was also informed of new regulatory measures that were in the pipeline,
including the development of a risk-based capital framework for insurers, enhancements to
the ‘fit and proper’ regulations applicable to directors, chief executives and other key
functionaries of insurers, as well as revisions to the Bank’s Guidelines on audit committees of
insurers. The measures form part of ongoing initiatives to further strengthen corporate
governance in the insurance and takaful industries.
To promote trade, particularly for the benefit of smaller enterprises and among new trade
partners, the Bank announced that qualified general insurers would be allowed to provide
trade credit insurance. The qualifying criteria will include a strong shareholders’ fund and
solvency position, favourable supervisory risk assessment by Bank Negara and a track record
of positive underwriting results. The adequacy of technical support and expertise available to
applicant insurers to underwrite the business will also be considered by the Bank.
The Dialogue also discussed proposals by Persatuan Insuran Am Malaysia (PIAM) to reduce
vehicle theft claims in Malaysia, focusing in particular on theft of private cars which accounted
for 80% or RM395 million of the industry’s total theft claims in 2002. The proposals include a
system of incentives for policyholders who install effective anti-theft devices in their motor
vehicles, as well as enhancing consumer awareness on basic preventive measures. The
proposals will be examined in greater detail before implementation, taking into account any
potential impact on policyholders.
The Life Insurance Association of Malaysia (LIAM) also briefed the meeting on developments
relating to Registered Financial Planning (RFP) programme and the establishment of the
Malaysian Financial Planning Council (MFPC) which is envisaged to further enhance the role
of financial planners in Malaysia. Since its launch in November 2002, the RFP programme
has enrolled more than 1,000 students, while the MFPC is pending registration with the
Registrar of Societies and preparations are being made for its immediate operations
thereafter.
Bank Negara Malaysia
30 October 2003
Embargo: Not for publication or broadcast before 1800 hours on Monday, 28 April 2003
The 2002 Takaful Annual Report
Bank Negara Malaysia released the Takaful 2002 Annual Report today.
The Takaful 2002 Annual Report provides a review of the performance and developments of
the Malaysian takaful industry and the administration of the Takaful Act 1984 by Bank Negara
Malaysia in 2002.
The market share of the takaful industry expanded further to account for 5.6% (2001: 4.8%) of
insurance sector contributions (total takaful and insurance industry), led by the growth in
combined contributions of both the family and general takaful business of 27.0% from
RM787.6 million to RM1,000.2 million 1 in 2002. The family takaful business, which accounted
for 66.7% of total contributions, remained as the major income generator for the takaful
industry. Market penetration of the family takaful business, as measured by the number of
certificates in force to total population, also increased from 3.2% to 3.8%. Total assets of the
takaful funds increased further by 20.1% from RM3,019.5 million to RM3,626.9 million,
accounting for 5.2% (2001: 4.8%) market share of the insurance sector. Moving forward, the
potential growth of the takaful industry remains positive with the entry of new industry players.
Family Takaful
Except for the annuity takaful plans, all plans under the family takaful business recorded an
overall growth of 22.6% from RM368.8 million to RM452.2 million in total new business
contributions in 2002. Similarly, sums participated arising from this new block of business
increased by 10.6% to RM14,174.8 million. A total of 237,037 new family takaful certificates
were issued in 2002, representing an increase of 15.1% (2001: 205,873 certificates). The
performance of the annuity takaful plans, which was largely influenced by the annuity scheme
(SATK) marketed to the contributors of the Employees Provident Fund was affected when the
scheme was discontinued in May 2001.
Growth in new business led to further expansion of business in force for family takaful in 2002.
The number of takaful certificates in force increased by 20.9% to 932,212 certificates. Total
sums participated in force increased by 10.4% to RM53,625.9 million while contributions
increased marginally by 4.3% to RM2,105.8 million. In terms of the distribution of sums
participated in force, mortgage takaful plans continued to dominate with 44.5% share.
The family takaful business registered total income of RM809.1 million in 2002 with growth in
contributions receipts (excluding SATK) of 28.9%. Total expenditure incurred by family takaful
funds increased by 40.3% to RM294.8 million. Arising from the above, excess of income over
outgo before transfers to the shareholders' fund and the family takaful participants' fund stood
at RM514.3 million. As at end of 2002, total family takaful fund assets registered a growth of
19.6% from RM2,644.7 million to RM3,162.8 million.
General Takaful
The general takaful business has been expanding steadily with gross contributions increasing
by 24.7% from RM266.8 million to RM332.7 million in 2002. For the year under review, gross
contributions from the fire sector increased by 28.9% due to the addition of a large risk
account secured by one takaful operator. In addition, there was an increase in the number of
major corporations taking fire coverage from takaful operators. The distribution of general
takaful business remained unchanged in 2002 with fire sector accounting for 44.9% of total
gross contributions.
In year 2002, the overall net retention ratio declined from 67.6% to 66.8% due to increase in
cessions to hedge against the large risk exposure, in particular from the fire sector. The
industry's overall claims experience worsened with increase in claims ratio to 54.4% in 2002,
arising from the increase in claims recorded by the fire and motor sectors. Fire sector claims
ratio rose to 23.3% as compared to 15.1% in the previous year, whilst motor claims ratio
escalated to 65.4% from 49.1% in 2001. The deterioration in motor claims ratio was partly
attributable to the high incidence of motor vehicle thefts. The industry has been actively
working with the authorities to identify measures to mitigate the theft cases. The high claims
ratio registered in 2002 has substantially affected the underwriting margin recorded by takaful
operators, which declined to 36.4% as compared to 43.4% in the previous year. Total assets
of the general takaful fund, however, continued its growth momentum at a rate of 23.8% from
RM374.8 million to RM464.1 million in 2002.
Developments and Measures to Strengthen the Industry
During year 2002, Bank Negara Malaysia and the takaful operators continued the efforts to
develop an efficient and progressive takaful industry as envisaged in the Financial Sector
Masterplan. The efforts focused on financial infrastructure development, institutional capacity
enhancement as well as product and market development. In May 2002, one new takaful
operator was registered under the Takaful Act 1984 to conduct takaful business. In addition,
Bank Negara Malaysia approved the registration of another takaful operator, Takaful Ikhlas
Sdn. Bhd., to conduct takaful business with effect from 21 April 2003. Takaful Ikhlas Sdn. Bhd,
which is wholly owned by Malaysian National Reinsurance Berhad, a licensed reinsurance
company, is the country's fourth takaful operator. The entry of these new players who are
owned by financially sound and well-capitalised financial institutions will inject greater market
competition and hence hasten the development of the industry to become an important
component of the financial system.
During the year, Bank Negara Malaysia introduced the requirement for the takaful operators
to conduct stress tests on their financial performance. This is aimed at early detection of
possible sources of vulnerability and to ensure that problems could be identified beforehand
by takaful operators. To complement this, a benchmarking exercise was implemented
covering various aspects of takaful operations such as financial resilience, financial
performance and productivity aimed at facilitating takaful operators to identify their relative
efficiency and competitiveness, and to improve and deliver the best results.
In addition, the year also saw the establishment of a mandatory association for the takaful
operators, the Malaysian Takaful Association. The association is expected to promote
uniformity in market practices among takaful operators and serve as an official platform to
promote the interest of the industry players.
During the year under review, takaful operators continued their efforts to promote takaful
business and enhance their efficiency and effectiveness. Various innovative takaful products
were introduced by the takaful operators to meet the increasingly differentiated demands of
their customers. The takaful operators, in collaboration with the Islamic Banking and Finance
Institute Malaysia (IBFIM), the centre for research and training in the Islamic financial services
industry, continued to conduct training programmes in the areas of human development and
Islamic work ethics in the effort to increase the professionalism of the takaful industry
personnel.
At the international level, IBFIM in collaboration with a new takaful company in Bangladesh
organised the "International Summit on Takaful" in Dhaka. In addition, under the Developing
Eight (D-8) platform, IBFIM organised the "Convention on Takaful for the D-8 Countries and
Organisation of Islamic Conference (OIC) Member Countries" in Kuala Lumpur. These were
aimed at facilitating the transfer of technical knowledge and expertise amongst the D-8 and
OIC member countries as well as addressing the current issues affecting takaful and retakaful
practices in the global business environment. In tandem with the development of takaful
business worldwide, the ASEAN Retakaful International (L) Ltd. (ARIL) continued its efforts to
retain its position as the preferred retakaful operator for the D-8 member countries. To further
strengthen its financial position, ARIL embarked on a capital raising exercise which is
expected to be completed in July 2003. In addition, ARIL has obtained a licence as an
offshore takaful operator from the Labuan Offshore Financial Services Authority. These
developments would also contribute towards developing Islamic financial services activities in
Labuan and promote Labuan as a niche player in Islamic financial services.
Note : 1 The combined contributions excluded the annuity scheme (SATK) marketed to the
contributors of the Employees Provident Fund which was discontinued in May 2001.
See also: Takaful Annual Report 2002
Bank Negara Malaysia
28 April 2003
Takaful Annual Report 2002
All the documents here are in Portable Document File (PDF) format. Please note that these
documents are not printable at this time. The hardcopy is available for purchase or order
from our KL Office at nominal cost.
In order to read this document, you will need AdobeTM AcrobatTM ReaderTM, which is
downloadable for free from the AdobeTM Web Site. [Go there]
If you already have the software, choose any of the following:
Mission & Letter of Transmittal [PDF 24K]
Governor's Statement [PDF 25K]
Tables [PDF 12K]
Chapter 1: The Takaful Industry Performance [PDF 106K]
Chapter 2: Policies and Developments [PDF 16K]
Chapter 3: Administration of the Act [PDF 13K]
Appendices [PDF 52K]


Subsidiary Legislation Made under the Takaful Act 1984 as at 31 December 2002
Takaful Operators Registered under the Takaful Act 1984 as at 31 December 2002





Syariah Supervisory Council Required under Section 8(5)(b) of the Takaful Act 1984
Organisation Chart: Islamic Banking & Takaful and Insurance Supervision
Departments as at 31 December 2001
Circulars and Guidelines to the Industry during 2002
Calendar of Events 2002
Glossary of Takaful Terms
Summary of Statutory Returns [PDF 21K]
FAMILY TAKAFUL [PDF 50K]




TK 1 : Abstract of Revenue Accounts - Income and Outgo
TK 2 : Liabilities and Assets of Statutory Funds
TK 3 : New Certificates Issued, Terminations etc., of Liabilities or Contributions and
Certificates in Force at End of Year
TK 4 : Summary of Valuation Reports
GENERAL TAKAFUL [PDF 31K]





TA 1 : Abstract of Revenue Accounts - Income and Outgo
TA 2 : Liabilities and Assets of Statutory Funds
TA 3 : Contributions
TA 4 : Claims
TA 5 : Underwriting Account
Embargo: Not for publication or broadcast before 1800 hours on Monday, 11 March 2002
The 2001 Takaful Annual Report
Bank Negara Malaysia (BNM) released the Takaful Annual Report 2001 today. Further
information about BNM and its publications is available at http://www.bnm.gov.my.
The Annual Report of the Director General of Takaful 2001 provides a review of the
performance and developments of the Malaysian takaful industry, which comprised two
takaful operators, namely, Syarikat Takaful Malaysia Berhad (STMB) and Takaful Nasional
Sendirian Berhad (TNSB), during 2000/2001, and the administration of the Takaful Act 1984
by BNM.
The growth of the takaful industry gained momentum in 2001 with the main business
indicators recording higher growth rates. The combined contribution of the family and general
takaful sectors increased by 229.5% (2000: 30.5%) to RM1,465.5 million, of which 89.1% of
the contribution being generated by the family takaful sector. Total assets of takaful funds
grew by 106% (2000: 40.1%) to reach RM2,407 million.
Family Takaful
The family takaful sector recorded strong growth in 2001 with new takaful contributions
increasing by 367.4% (2000: 80.8%) to RM1,306.4 million. A total of 221,868 new family
takaful certificates were issued in 2001, an increase of 35.7% (2000: 163,492 certificates).
The overwhelming demand for the newly introduced annuity scheme (SATK) for Employees
Provident Fund (EPF) contributors was a major positive development in family takaful
business in which the annuity scheme captured 67.4% share of total new contributions and
10.1% share of total sums participated. Mortgage takaful plans continued to register strong
growth with 21.3% increase in the number of new certificates but its share of total new takaful
contributions declined to 22.3% in 2001 (2000: 58.6%). On the other hand, term individual
family takaful plans recorded negative growth in terms of new sums participated and
contributions.
Business in force of the family takaful sector continued to expand in 2001. The number of
takaful certificates in force increased by 47.5% (2000: 57.4%) to 648,654 certificates while
total sums participated and takaful contributions in force grew by 46.6% and 184.6% to reach
RM37,492 million and RM1,698.5 million respectively. In terms of distribution of sums
participated in force, mortgage takaful plans and group family takaful plans continued to
dominate, with shares of 38.3% (2000: 42.6%) and 36.7% (2000: 44.2%) respectively.
Total income of the family takaful funds grew substantially by 286.8% (2000: 32.7%) to
RM1,359.1 million in 2001. Correspondingly, total expenditure grew by 55.7% (2000: 45.8%)
to RM136.4 million resulting in an excess of income over outgo of RM1,222.7 million in 2001,
representing 90.0% of total income of the family takaful funds in 2001. Total assets of family
takaful funds increased by 132.5% to RM2,039.6 million in 2001.
General Takaful
General takaful business continued its growth momentum in year 2001 with total gross
contributions increasing moderately by 28.6% (2000: 23.9%) to RM227.7 million. The
increase in business was from the miscellaneous sub-sectors, namely personal accident,
workmen compensation, liability and miscellaneous accident. Marine, aviation and transit
(MAT) recorded growth of only 11.2% in 2001, a sharp drop as against a growth rate of
353.3% in the previous year. In terms of portfolio distribution, fire maintained its dominance
for the third consecutive year since 1999, constituting 41.9% share of total general takaful
gross contributions.
The net retention ratio of the general takaful industry declined slightly from 71.7% in 2000 to
69.9% in 2001. Overall claims experience of the general takaful fund had worsened as
reflected by the escalation in claims ratio from 38.6% in 2000 to 41.5% in 2001. However, the
general takaful industry managed to maintain its good underwriting performance with an
underwriting surplus of RM70.7 million, an increase of 18.6% (2000: 10%) from RM59.6
million in 2000. In terms of assets, the general takaful funds registered a growth rate of 26.2%
to reach RM367.4 million in 2001.
While having registered a commendable performance for the year 2001, takaful operators
should continuously develop and enhance their capabilities, particularly in the area of product
innovation in order to increase the market penetration level further.
See also: Takaful Annual Report 2001
Bank Negara Malaysia
11 March 2002
Takaful Annual Report 2001
All the documents here are in Portable Document File (PDF) format.
In order to read this document, you will need Adobeâ„¢ Acrobatâ„¢ Readerâ„¢, which is
downloadable for free from the Adobeâ„¢ Web Site. [Go there]
If you already have the software, choose any of the following:
Mission, Letter of Transmittal [PDF 31K]
Governor's Statement [PDF 32K]
Chapter 1: The Takaful Industry Performance [PDF 189K]
Chapter 2: Policies and Developments [PDF 143K]
Article: Enhancing Market Penetration
Chapter 3: Administration of the Act [PDF 41K]
Appendices [PDF 96K]







Subsidiary Legislation Made under the Takaful Act 1984 as at 31 December 2001
Takaful Operators Registered under the Takaful Act 1984 as at 31 December 2001
Syariah Supervisory Council Required under Section 8(5)(b) of the Takaful Act 1984
Organisation Chart: Islamic Banking & Takaful and Insurance Supervision
Departments as at 31 December 2001
Circulars to the Industry during 2001
Calendar of Events 2001
Glossary of Takaful Terms
Summary of Statutory Returns [PDF 22K]
FAMILY TAKAFUL [PDF 46K]
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TK 1 : Abstract of Revenue Accounts - Income and Outgo
TK 2 : Liabilities and Assets of Statutory Funds
TK 3 : New Certificates Issued, Terminations etc., of Liabilities or Contributions and
Certificates in Force at End of Year
TK 4 : Summary of Valuation Reports
GENERAL TAKAFUL [PDF 81K]
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TA 1 : Abstract of Revenue Accounts - Income and Outgo
TA 2 : Liabilities and Assets of Statutory Funds
TA 3 : Contributions
TA 4 : Claims
TA 5 : Underwriting Account
Embargo: Not for publication or broadcast before 0000 hours on Wednesday, 28 March 2001
The 2000 Takaful Annual Report
Bank Negara Malaysia (BNM) released the 2000 Annual Report of the Director General of
Takaful today.
The 2000 Annual Report of the Director General of Takaful highlights the operations of takaful
(Islamic insurance) business during 1999 and 2000 and summarises the administration of the
Takaful Act 1984.
The growth of the takaful industry gained momentum in year 2000 with the main business
indicators recording higher double-digit growth rates. The combined contribution of the family
and general takaful sectors increased by 30.5% (1999: 24%) to RM444.7 million, of which
71.5% of the contribution being generated by the family takaful sector. Total assets of the
takaful funds grew by 40.1% (1999: 50.4%) to reach RM1,168.2 million.
Family Takaful
The family takaful sector recorded strong growth in 2000 with new takaful contributions
increasing by 80.8% (1999: 29.6%) to RM279.5 million. A total of 163,492 new takaful
certificates were issued in 2000, comprising mostly individual and mortgage family takaful
plans. This reflects the increasing awareness of individuals on the benefits of takaful. Group
takaful plans registered the highest growth rate of 393% in new contributions to RM49.3
million in year 2000, indicating that the improved economic conditions had increased the
ability of employers to provide group takaful cover for their employees. Business in force of
the family takaful sector continued to expand in year 2000. The number of takaful certificates
in force increased by 57.4% (1999: 73.7%) to 439,822 certificates while total sums
participated and takaful contributions in force grew by 34.3% and 49.5% to reach RM25,568.2
million and RM596.7 million respectively. In terms of sums participated in force, group family
takaful and mortgage takaful plans continued to dominate with shares of 44.2% (1999: 49.7%)
and 42.6% (1999: 40.1%) respectively.
Total income of the family takaful funds grew by 32.7% (1999: 36.8%) to RM351.4 million in
year 2000. Correspondingly, total expenditure grew by 45.8% (1999: 41.7%) to RM87.6
million resulting in an excess of income over outgo of RM263.8 million in year 2000,
representing 75.1% of total income of the family takaful funds in year 2000. Total assets of
family takaful funds increased by 44.4% to RM877.1 million in year 2000.
General Takaful
After recording moderate growth in the preceding year, the general takaful business pickedup its growth momentum in year 2000, with gross contributions increasing by 23.9% (1999:
16.5%) to RM177 million. In tandem with the stronger growth, all sectors of the general takaful
business recorded at least double-digit growth. The MAT sector recorded the strongest
growth of 353.3% to RM6.8 million in year 2000. This was followed by the fire sector which
registered a growth rate of 24.6% (1999: 22.4%) resulting in fire sector continuing to be the
dominant sector. Motor takaful sector grew at a higher rate of 20.1% after experiencing a
slower growth of 9% in 1999, due to better performance in the sales of motor vehicles in year
2000. The net retention ratio of the general takaful industry declined slightly from 75.5% in
1999 to 71.7% in year 2000. In terms of claims, the overall industry claims ratio moderated
marginally from 38.1% in 1999 to 38.6% in year 2000. However, the general takaful industry
managed to maintain its good underwriting performance with an underwriting surplus of
RM59.6 million, an increase of 10% (1999: 22.4%) from RM54.2 million in 1999. In terms of
assets, the general takaful funds registered a growth rate of 28.2% to reach RM291.1 million
in year 2000.
Developments in the Takaful Industry
During the year, the Code of Ethics for Takaful Operators was implemented. The Code was
drawn up with the assistance of BIMB Institute of Research and Training Sdn. Bhd. (BIRT) in
consultation with the takaful operators. Subsequently, a Takaful Industry Committee and
Disciplinary Committee were established to supervise the compliance aspect of the Code as
well as to deal with any breaches of the Code. The implementation of the Code is envisaged
to further elevate the standard of corporate governance among takaful operators and create a
common platform for them to collaborate and promote takaful business efficiently.
During the year under review, takaful operators continued in their efforts to develop and
promote takaful business by conducting training programmes for their staff and agents to
market takaful products. Takaful operators have also entered into strategic alliances with
financial institutions and co-operatives to provide additional channels to market their takaful
products. Several new products were introduced during the year and among the most
significant was the Employee Provident Fund (EPF) Takaful Annuity Scheme or SATK. Under
the SATK, contributors can withdraw their EPF contributions to purchase annuity products
from takaful operators. To-date, the response from the public on SATK has been encouraging.
The Sixth Annual Conference of the ASEAN Takaful Group (ATG) was held in Labuan on 9 10 October 2000 as part of the efforts to foster and enhance understanding and cooperation
among takaful and retakaful operators in the ASEAN member countries. The Conference was
hosted by Asean Retakaful International (L) Limited (ARIL). Towards achieving the objective
of transforming ARIL into a well-capitalised retakaful operator in this region, ARIL also
conducted working visits to a number of countries including Iran, Qatar, Bahrain, Saudi Arabia
and Bangladesh to promote and solicit retakaful business. The response in terms of retakaful
support for ARIL from these countries and from foreign takaful operators has been
encouraging.
The Malaysian takaful operators have also continued to render technical assistance and
support to various parties in their effort to promote takaful business in the region as well as
the international level. Serious efforts have been undertaken to explore the possibility of jointventures and knowledge sharing with parties in Asia and the Middle East. One takaful
operator provided its technical assistance to a Singapore takaful entity to offer general takaful
products in meeting the requirements of the Muslim community in Singapore. The D-8 project
on takaful has also made considerable progress, whereby two new takaful operators were
established in Bangladesh. This development is in line with the resolutions of the workshop
on retakaful for D-8 member countries held in Kuala Lumpur in June 1999. In the Middle East,
Malaysian takaful operators continued to forge alliances with Islamic financial institutions in
Qatar, Saudi Arabia and Bahrain.
Conclusion
In conclusion, the performance of the takaful industry has been encouraging during the year
under review. However, it is still relatively insignificant compared with conventional insurance.
Therefore, under the Financial Sector Masterplan, specific strategies have been outlined to
further develop takaful business and deepen its market penetration. These efforts would also
contribute towards strengthening Malaysia's position as a regional Islamic financial centre.
Bank Negara Malaysia
28 March 2001
Embargo: Not for publication or broadcast before 0000 hours on Monday, 20 March 2000
The 1999 Insurance Annual Report and 1999 Annual
Report of The Director-General of Takaful
Bank Negara Malaysia (BNM) released the 1999 Insurance Annual Report as well as the
1999 Annual Report of the Director General of Takaful today.
The 1999 Insurance Annual Report provides a review of the administration of the Insurance
Act 1996 and the performance and development of the Malaysian insurance industry during
1998 and 1999. The 1999 Annual Report of the Director General of Takaful highlights the
operations of takaful (Islamic insurance) business during 1998 and 1999 and summarises the
experience of BNM in administering the Takaful Act 1984.
A. The 1999 Insurance Annual Report
The performance of the insurance industry was affected by the economic slowdown in 1998.
Premium income in 1998 declined by 2.1%, mainly due to the negative growth in the general
sector. However, in tandem with the economic recovery in 1999, the performance of the
industry in 1999 rebounded to register encouraging growth in premium income and assets.
Improvement was particularly evident in the life insurance sector with a growth of 27.3% in
new business premiums.
With the positive signals of economic recovery in 1999, BNM considered it timely to restore
the original solvency and capital requirements which were deferred since the onset of the
financial crisis. To accelerate the consolidation of the industry, the minimum absolute
margin of solvency for insurers (excluding foreign professional reinsurers) was increased
from RM30 million to RM40 million with effect from 1 January 2000 and RM50 million with
effect from 1 January 2001. The minimum required paid-up share capital to be maintained
by an insurer underwriting direct insurance business was similarly increased from RM35
million to RM40 million and RM50 million by end 1999 and 2000 respectively. The
reinstatement of these requirements was crucial to boost the financial strength of insurers and
to accelerate the pace of industry consolidation.
1999 saw the encouraging start of the consolidation process with the successful completion of
three mergers and acquisition (M&A) exercises involving six insurers while three more
proposals involving six more insurers were at various stages of implementation. To accelerate
the pace of industry consolidation, various incentives such as tax incentives in respect of
stamp duty on transfer of assets, real property gains tax and tax credits on accumulated tax
losses were being offered by the Government. In order for the industry to remain viable and
competitive in the more global and liberalised environment of the future, BNM will continue to
focus its efforts to accelerate M& A with the aim of developing a core of strong domestic
players.
In the cross-over into the new millennium, efforts taken by both BNM and the industry to
prepare for the Year 2000 (Y2K) computing risk proved to be adequate and effective when
the industry had a smooth rollover into the third millennium. With the Y2K rollover issue
resolved, e-commerce is set to play an integral role in the insurance industry in the future. In
this regard, it is an encouraging development to note that several insurers had developed
internet web-sites as an alternative distribution channel for motor insurance business.
With the strengthening economy, the outlook for the insurance industry is promising. To
accelerate further the development of the industry, BNM focused on addressing the various
weaknesses revealed in the economic crisis of the recent past. In particular, the pace of
consolidation of the insurance industry will be accelerated to prepare the industry players for
a liberalised market in the future. BNM commenced on the formulation of a master plan for
the banking and insurance sector. The new master plan, with a ten-year horizon, will chart the
role of the insurance sector as a catalyst to promote real sector activity and accelerate
economic growth.
Performance of Industry in 1998 and 1999
The financial crisis which began in 1997 had affected the growth performance of the
insurance industry in 1998. The combined premium income of both the life and general
sectors declined by 2.1% to RM10,902.9 million due to the negative growth in the general
sector in 1998. As a percentage of nominal gross national product (GNP), total premium
income decreased marginally from 4.2% in 1997 to 4.1% in 1998. Total industry's insurance
fund assets increased at a slower rate of 12.5% to RM39,324.6 million as at end 1998.
However, with the onset of economic recovery in 1999, the industry's performance
rebounded to register a growth of 7.1% in total combined premium income whereas
premium income as a percentage of nominal GNP improved marginally to 4.2% in 1999. Total
insurance fund assets recorded an impressive growth of 15.6% to RM45,454.5 million as at
end 1999. With higher premium growth and recovery of asset values, the insurers' share of
the total assets of the financial system increased significantly from 3.1% to 3.6%, the highest
level registered in the 1990s.
Life Insurance
In tandem with the economic slowdown in 1998, total new premiums recorded a decline of
10.2% to RM1, 438.9 million while new sums insured declined by 2.9% to RM87,464.4 million.
Despite the reduction in new premiums and new sums insured, the number of new policies
sold increased by 1% to 1,123,472. An analysis of the new business portfolio revealed that
whole life and endowment policies registered larger contractions with new business premium
declining by 19% and 8.3% respectively. However, children education policies, credit-related
policies, investment-linked policies and medical insurance riders recorded impressive growth
of 14.8%, 20.9%, 7.5% and 33% respectively in new premiums.
In line with the decline in new business production and the continued increase in terminations,
the growth of life insurance business in force dampened in 1998. Total sums insured and
annual premium in force rose by 5.5% and 4.6% to RM339,598.9 million and RM6,240 million
respectively while the number of policies in force increased by 6.6% to 6,318,992 policies.
Total income of life insurance funds recorded a lower growth of 9.5% to reach RM8,429
million in 1998, mainly attributable to the slowdown in the growth of premium income from
14.6% in 1997 to only 4.1% in 1998. In contrast, total outgo of life insurance funds decreased
by 2% to RM4,995.5 million due to the significant reduction in acquisition costs and lower
provision for diminution in value of investments. Provision for diminution in value of
investments decreased significantly by 89% to RM124.3 million, reflecting a gradual recovery
of the securities market in 1998. With a higher growth in income and a decline in outgo, the
excess of income over outgo increased significantly by 32% to RM3,433.5 million in 1998.
Total assets of life insurance fund increased by 12.9% to reach RM26,314.9 million in 1998.
With economic recovery in 1999, the insurance industry was back on track to record an
impressive double digit growth. Based on preliminary statistics, total new premiums increased
significantly by 27.3% to RM1,831.6 million while new sums insured and new policies
increased by 21.3% and 18.5% in 1999 to RM106,099.8 million and 1,331,732 policies
respectively. Total income of the life insurance industry increased by 10.9% to reach
RM9,344.1 million, supported mainly by an increase of 12.5% in premium income which stood
at RM6,994.8 million in 1999. Total outgo of the industry improved by 18% to RM4,095.9
million in 1999, mainly due to a significant reduction in the provision for diminution in value of
investments and lower losses on disposal of assets. With the significant reduction in total
outgo, the excess of income over outgo recorded a huge increase of 52.8% to RM5,248.2
million. In line with the overall improvement in business performance, total assets of life
insurance funds expanded by 19.7% to RM31,509 million in 1999 with investments in
corporate and debt securities forming the single largest portfolio of assets at 39.4% of total
assets.
General Insurance
The growth of general insurance business which moderated in 1997, suffered a further
setback in 1998 with written premiums contracting by 10.7% to RM5,422.8 million. All sectors
of general insurance business experienced negative growth rates, except for medical
expenses, personal accident and fire business.
Net retention of insurance premiums within the country continued to improve with the
retention ratio rising to 86.4% in 1998. All classes of business recorded higher retention of
premiums. Factors that contributed to the increased retention include the higher underwriting
capacity arising from higher capitalisation of a number of insurers and the bigger market
share captured by the professional reinsurers operating in the country.
The sharper increase of 10.5% in net claims incurred in 1998 surpassed the marginal
increase in earned premium income, resulting in a deterioration in the industry overall claims
ratio from 58% in 1997 to 64.1% in 1998. All classes registered deterioration, except the
contractors' all risks and engineering, motor 'Act' and liability classes of business.
The contraction in premiums underwritten coupled with higher claims costs resulted in the
general insurance industry recording a substantial decline of 54.2% in underwriting profit to
RM284 million in 1998, compared with RM619.9 million in 1997. The decline in underwriting
profit was also contributed by an increase in commission payments and management
expenses. Despite the lower underwriting profit, the general insurance industry recorded a
significant increase in operating profit to RM948 million in 1998 due mainly to substantial write
back of provisions for diminution in value of investments, increase in investment and other
income, capital gains and lower capital losses. In contrast to declining premiums, total assets
of the general insurance funds increased albeit at a slower pace of 11.7% (14.3% in 1997) to
reach RM13 billion at the end of 1998. Cash and deposits continued to be the largest
component, representing 42.1% of total assets.
Gross premiums generated by general insurers from business outside Malaysia was still low
at RM292.9 million, representing 5.4% of written premiums derived by insurers from business
within Malaysia. The bulk (about 70%) of such premiums was generated by professional
reinsurers, with the balance by direct insurers. Fire insurance was the dominant class,
accounting for 46.2% of total gross premiums for business outside Malaysia. Total general
fund assets of insurers held abroad amounted to RM516.7 million, constituting only 4% of the
total general fund assets in Malaysia.
In line with the economic recovery, the performance of the general insurance industry showed
signs of improvement in 1999. Although written premiums continued to decline, the
contraction moderated by only 0.9% to RM5,374.8 million. Four sectors, namely fire, medical
expenses and personal accident, liabilities, and workmen's compensation and employers'
liability recorded an increase in premiums while the other classes registered negative growth
rates. The industry's net retention ratio continued to improve to reach 87.2%. The total assets
of the general insurance funds grew by 7.1% to reach RM13,945.5 million at the end of 1999.
Administration of the Insurance Act 1996
Several legislative amendments were undertaken in 1999 to reinstate the capital and
solvency regulations in tandem with the recovering economy. These changes were brought
into force in 1999 by order published in the Gazette.
Two licences for the conduct of general insurance business were revoked in 1999 following
the successful mergers of Sun Alliance Insurance (Malaysia) Sdn. Bhd. and Commercial
Union Assurance (Malaysia) Bhd. with two other licensees. On 1 January 1999, five foreignincorporated insurers domesticated their Malaysian insurance operations to become locallyincorporated public companies, thereby increasing the number of Malaysian-incorporated
insurers to 56 on 31 December 1999. One new licence for the conduct of professional
general reinsurance business was issued to Arig Reinsurance Company B. S. C.( c) of
Bahrain in 1999 while the general reinsurance licence of GIO Insurance Limited was revoked
in January 2000 due to the closure of its Malaysian branch, thereby maintaining the number
of licensed professional reinsurers at 10 to date.
Given the need for higher solvency requirements, 34 licensees (including insurance brokers
and adjusters) increased their paid-up capital during 1999. As a result, total capitalisation of
insurers, insurance brokers and adjusters rose to RMRM4,015.4 million, RM34.8 million and
RM10.4 million respectively as at 31 December 1999.
The results of examinations conducted on licensees as well as BNM's overall supervision in
1999 revealed the need for insurers to continue to improve standards in respect of corporate
governance, customer service, productivity and financial resilience. Towards instilling greater
financial and market discipline among insurers, fines were imposed on a number of licensees
during the year for various offences committed in breach of the provisions of the Act.
A computerised database system on public complaints against financial institutions was
implemented by BNM at end 1999. Besides functioning as an overall regulatory tool, the
system will enhance the efficiency of the Customer Services Bureau in dealing with all
complaints and enquiries on insurance matters received from the public.
Policies and Measures to Strengthen the Insurance Industry in 1999
With the economy back on track, BNM focused on promoting good corporate governance,
administrative efficiency and enhancing the financial capacity of licensees to gear the industry
for the next phase of development which will be more challenging and competitive.
Given the need for insurers to improve their corporate image and accountability to the public
at large, BNM focused on the promotion of good corporate governance amongst insurers.
A prudential framework of corporate governance for insurers was developed with the aim of
further improving the general conduct of insurance business in Malaysia and strengthening
public confidence in the insurance industry. In an article in the Annual Report on the corporate
governance framework, BNM highlights the principles of good corporate governance in six
key areas considered critical to the governance issue for insurers. As the business of
insurance is fundamentally about managing risks, the adequacy of internal controls and risk
management systems is a crucial aspect of good corporate governance in insurance
companies. With this in view, each insurer is required to set up its own internal audit
department by January 2001. In addition, the Guidelines on Derivatives were released to
govern the participation of insurers in derivative activities while the Guidelines on Related-
party Transactions were also issued to ensure greater transparency and to protect the
interest of policy owners.
Although insurance penetration improved to 28.4% in 1998, the prospect for the future growth
of life insurers is tremendous in view of the current state of the market which is vastly
unexplored. The life insurance sector can expect better prospects ahead given further tax
incentives under Budget 2000 for education and medical policies. The introduction of
special life insurance schemes under the Employees Provident Fund (EPF) for
annuities and critical illnesses would also see wider market penetration and higher
mobilised savings in the near future. As regards product development, two more insurers
were granted approval in 1999 to carry on investment-linked insurance business,
increasing the total number of insurers permitted to carry on such business to seven at
present.
In the general insurance sector, the Guidelines to Control the Operating Costs of General
Insurance Business were revised to improve the effectiveness of the Guidelines. The
commission limit for certain classes of business were reduced and particular emphasis was
placed on the agency expenses of insurers. With the encouragement of BNM to promote the
local placement of marine cargo insurance to reduce the outflow of funds, five insurers have
established tie-ups with banks to offer comprehensive trade financing packages.
Conclusion
While the industry has begun to see improvement due to the recovering economy in 1999,
there is still room for further development. In particular, the industry must strive towards
greater resilience and reduce its vulnerability to external shocks. The advent of the
knowledge-based economy presents a new challenge to the insurance industry. The industry
must equip itself with the required intellectual capital if it intends to increase its competitive
edge in an open market environment. As the regulatory authority, BNM remains committed to
play a catalytic role to develop the insurance industry into an important sub-sector of the
financial system.
B. Annual Report of the Director General of Takaful
The takaful industry, which comprised two companies, namely, Syarikat Takaful Malaysia
Berhad (STMB) and Takaful Nasional Sdn. Berhad, expanded moderately in 1999 compared
with 1998. The combined contribution income of the family and general takaful sectors
increased by 24% (1998: 40%) to RM340.8 million, with 68.4% of the income being generated
by the family takaful sector. However, total assets of takaful funds grew by 50.4% (1998:
25.7%) to reach RM834.4 million, largely due to the writing back of a huge provision for
diminution in value of investments provided by one takaful operator.
Family Takaful
The family takaful sector recorded slower growth in 1999 with new takaful contributions
increasing by 29.6% (1998: 50.7%) to RM154.6 million. A total of 100,511 new takaful
certificates were issued in 1999, comprising mostly individual and mortgage family takaful
plans. This reflects the increasing awareness of individuals on the benefits of takaful. Group
takaful plans experienced a decline of 47.4% in new contributions to RM10 million in 1999,
indicating the impact of the economic slowdown on the ability of employers to provide group
takaful cover for their employees. Business in force of the family takaful sector continued to
expand in 1999. The number of takaful certificates in force increased by 73.7% (1998: 42.9%)
to 279,491 certificates while total sums participated and takaful contributions in force grew by
54.8% and 57.7% to reach RM19,031.4 million and RM399.1 million respectively. In terms of
sums participated in force, group family takaful and mortgage takaful plans continued to
dominate with shares of 49.7% (1998: 57.9%) and 40.1% (1998: 32.4%) respectively.
However, a large proportion of the sums participated in force for mortgage takaful plans was
protection extended to civil servants who had taken housing loans from the Government.
Total income of the family takaful funds grew by 36.8% (1998: 39.6%) to RM264.8 million in
1999. Correspondingly, total expenditure grew by 41.7% (1998: 71.6%) to RM60.1 million
resulting in an excess of income over outgo of RM204.7 million in 1999, representing 77.3%
of total income of the family takaful funds in 1999. Total family takaful funds assets increased
by 53.2% to reach RM607.4 million in 1999.
General Takaful
After recording rapid growth in the preceding two years, the general takaful sector moderated
in 1999, with gross contributions increasing by 16.5% (1998: 33.1%) to RM142.8 million.
Consonant with the moderation in growth, all classes of the general takaful business recorded
slower growth, with the exception of marine, aviation and transit (MAT) class which contracted
by 11.4% to RM1.5 million in 1999. The contraction in MAT class was brought about by lower
gross contributions recorded by one takaful operator due mainly to the softening of marine
cargo rates. Motor takaful class grew significantly slower at only 9% in 1999 due to the
sluggish sales of motor vehicles,. The net retention ratio of the general takaful industry
improved slightly to 75.5% in 1999 compared with 74.7% in 1998. The industry's overall
claims ratio deteriorated marginally from 36% in 1998 to 38.1% in 1999. The general takaful
industry maintained its good underwriting performance with an underwriting surplus of
RM54.2 million, an increase of 22.4% (1998: 16.3%) from RM44.3 million in 1998.
Developments in the Takaful Industry
Bank Negara Malaysia (BNM) continued to pursue the strategies outlined in the five-year
strategic plan for the takaful industry, introduced in 1998, to spur the development of the
takaful industry into an important component of the Malaysian financial system. In this respect,
BNM embarked on measures to enhance the regulatory framework and financial surveillance
of takaful operators, including reviewing the Takaful Act 1984 and developing accounting
standards, model accounts and financial statements for takaful business. With the objectives
of establishing a minimum standard of best practice and promoting healthy business conduct
among takaful operators, a code of ethics for takaful operators has been formulated. In
addition to enhancing the standard of corporate governance among takaful operators, the
code also aims to establish a common platform for the takaful operators to collaborate and
promote takaful business.
Takaful operators also took steps to develop and promote takaful business by establishing
more outlets throughout the country, recruiting more marketing personnel specialising in
marketing family takaful products, and capitalising on strategic alliances with financial
institutions, unit trusts and co-operatives. One takaful operator was among the pioneer
participants (along with five insurance companies) of Premium Link, an interactive web-site
which allows motor takaful participants to renew their takaful certificates.
Recent developments in the Middle East, particularly the development of financial products
with protection elements by banks and the passing of a health scheme for foreign workers in
Saudi Arabia, saw Islamic financial institutions there seeking strategic alliances with
Malaysian takaful operators. An offshore takaful operator was incorporated in Bahrain, as a
joint-venture between a healthcare and hospitalisation services provider in Saudi Arabia and
a Malaysian takaful operator, to market health takaful products. A few other Middle East
countries are also seeking strategic alliances with Malaysian takaful operators to establish
takaful operations in their countries.
As a member of the Developing Eight (D-8) Group, Malaysia has been promoting the
development of takaful and retakaful business in D-8 and OIC member countries. Towards
this end, Malaysia organised a two-day workshop on retakaful for D-8 and OIC member
countries in June 1999 to formulate strategies to promote takaful and retakaful. The workshop
adopted four resolutions, which included the implementation of specific retakaful
arrangements between ASEAN Retakaful International (L) Ltd. (ARIL) and takaful operators in
D-8 and OIC member countries and enhancement of ARIL's paid-up capital over the next five
years. These resolutions were endorsed by the D-8 Commission at the meeting held in Dhaka,
Bangladesh in February 2000.
Bank Negara Malaysia
20 March 2000
Embargo: Not for publication or broadcast before 0000 hours on Monday, 8 March 1999
Annual Report of the Director-General of Insurance and
the Director-General of Takaful 1998
Bank Negara Malaysia (BNM) released the 1998 Insurance Annual Report as well as the
1998 Annual Report of the Director General of Takaful today.
The 1998 Insurance Annual Report provides a review of the administration of the Insurance
Act 1996 and the performance and development of the Malaysian insurance industry during
1997 and 1998. The 1998 Annual Report of the Director General of Takaful highlights the
operations of takaful (Islamic insurance) business during 1997 and summarises the
experience of BNM in administering the Takaful Act 1984.
A. The 1998 Insurance Annual Report
Developments in the insurance industry as well as the performance of insurers and insurance
intermediaries in 1998 were substantially affected by the financial crisis which began in 1997
and protracted into 1998. The performance of the insurance industry suffered a significant
setback as evident in the sharp moderation of premium and asset growth during 1997 and
1998. While both the life and general insurance sectors were affected by the economic
downturn, the effects of the financial crisis were more pronounced in the general sector,
which was particularly hard hit by the slowdown in construction as well as the depressed
property market and motor vehicle sales.
The insurers were to a large extent insulated from the full impact of the crisis by the new
minimum solvency and capital requirements which were being progressively phased in under
the Insurance Act 1996, which came into force on 1 January 1997. The imposition of limits on
various categories of investments under BNM's investment guidelines also served to mitigate
losses suffered by insurers on their equity investments. Insurers, therefore, had the benefit of
facing the onslaught of the crisis from a considerably stronger financial footing. For the
financial year ended 1997, shareholders' funds of Malaysian-incorporated insurers continued
on a rising trend to reach RM4.5 billion, while the insurance industry as a whole registered an
aggregate solvency surplus in insurance funds of RM3.8 billion. In carrying out its primary
responsibility of safeguarding the interests of policy owners, BNM also stepped up financial
surveillance efforts during the year to ensure that insurers remain financially secure to be able
to meet claims obligations as and when they fall due.
Notwithstanding the comfortable surplus position of the industry, in a move to provide some
temporary relief and the flexibility for insurers to adapt asset management strategies
necessary to cope with the crisis, a package of measures for the insurance industry was
implemented on 2 October 1998. Among other things, the measures included a deferment of
the final phase of implementation of the solvency and capital requirements which were to
have taken effect on 1 January 1999. Under the amended regulations, the minimum absolute
margin of solvency for insurers (excluding foreign professional reinsurers) was reduced from
RM50 million to RM30 million, while the minimum required paid-up share capital to be
maintained by an insurer underwriting direct insurance business, or the equivalent of surplus
of assets over liabilities in the case of a foreign-incorporated insurer, was similarly reduced
from RM50 million to RM35 million.
In tandem with global trends in the international insurance industry and also reflective of the
regulatory emphasis accorded to financial consolidation, 1998 saw heightened activity in
mergers and acquisitions (M&A) among insurers in moves to address structural weaknesses
which had surfaced in the wake of the financial crisis. The more positive response of the
industry to M&A initiatives also signalled a general awakening among insurers to the need to
consolidate and rationalise their operations in order to succeed in an increasingly competitive
business environment. To date, a total of seven M&A proposals involving 14 insurers are at
various stages of negotiations, of which at least three are expected to be firmed up by the end
of the year. To facilitate the successful conclusion of potential M&As, BNM issued a set of
Guidelines on Mergers and Acquisitions which provides a framework for M&A negotiations in
the domestic insurance industry.
In the approach to the new millenium, preparations for the Year 2000 (Y2K) computing risk
will be a critical consideration for both insurers and insurance intermediaries. In this regard,
progress made so far towards Y2K readiness has been satisfactory among insurers, with
more than half the total number of insurers already reported to be Y2K ready. BNM will
continue to closely monitor the preparations of insurers to ensure Y2K compliance well-ahead
of the century date change. At the same time, all insurers have also been directed to develop
and lodge with BNM business contingency plans for their respective companies.
The motor insurance sector remained a focal point for supervisory efforts made to promote
professionalism, healthy competition and best market practices in the insurance industry. In
an article in the Annual Report dedicated to developments in motor insurance, BNM highlights
improvements made so far in the conduct of motor insurance business as well as plans in the
pipeline for the future development of the motor sector. The various measures for
improvement over the years have generally been effective, particularly in improving the
quality of service to policy owners and reducing the cost of underwriting motor business.
Plans for the future development of the motor sector include the establishment of a repair
estimation and motor-spare parts database to reduce the level of subjectivity in the
assessment of motor claims, and implementation of a Motor Insurance Anti-Fraud and Theft
Register to combat motor insurance fraud.
With more positive indicators of economic recovery emerging since the last quarter of 1998,
the outlook for the insurance industry is good. The thrust of measures identified under the
National Economic Recovery Plan was geared towards developing the role of insurers in
facilitating economic recovery, particularly in the mobilisation of long-term funds for economic
development and improving the net services account by reducing foreign expenditure on
insurance services. In this context, the measures focused on the development of pension and
annuity business to enhance the market penetration of life insurance, and marine cargo
insurance to support domestic and international trade activities. The industry remains
optimistic of a steady recovery in demand for insurance services and asset values.
Performance of Industry in 1997 and 1998
Despite the economic slowdown, the insurance industry continued to record double-digit
growth in premium income in 1997, albeit at a slower rate than in 1996. The combined
premium income of the life and general sectors increased by 14.4% to RM11,111.6 million in
1997. As a percentage of nominal gross national product (GNP), total premium income
increased to 4.3% in 1997 from 4.1% in 1996. Total industry's insurance fund assets grew at
a slower rate of 13% to reach RM34,942.9 million as at end-1997. However, the effect of the
financial turbulence on the insurance industry was greatly felt in 1998. The growth of total
combined premium income slowed down significantly to 1.9% in 1998 whereas premium
income as a percentage of GNP remained stagnant at 4.3% in 1998. The growth of total
insurance fund assets moderated further to 10.5% in 1998 to reach RM38,625.2 million.
Life Insurance
The life insurance industry continued to register double-digit growth despite the economic
slowdown in 1997. Total new premiums recorded a growth of 11.1% to RM1,581.4 million
while the number of new policies and new sums insured increased by 21.9% and 18.2% to
1,106,764 policies and RM89,919.3 million respectively. An analysis of new premiums written
in 1997 revealed that all classes of business with the exception of temporary policies
registered double-digit growth in 1997. Temporary policies, which are mainly credit-related
policies sold via financial institutions, suffered a decline of 1.7% in new premiums partly due
to the sluggish mortgage demand in 1997.
In line with the growth in new business, business in force continued to expand in 1997 despite
the higher level of terminations recorded in the year. The number of policies in force
increased by 10.5% to 5,921,302 policies, while total sums insured and annual premiums in
force grew by 13.9% and 13.3% to reach RM321,866.3 million and RM5,957.8 million
respectively.
Total income of life insurance funds grew at a slower rate of 11.6% to RM7,675.4 million in
1997, mainly attributable to the sharp decline in profit on sale of assets which contracted by
33.2% in 1997. In contrast, total outgo of life insurance funds increased significantly by 53.7%
due to huge provisions for diminution in value of investments and losses on sale of assets
resulting from the downturn of the stock market in 1997. Provisions for diminution in value of
investments increased to RM1,134.1 million to account for 22.3% of total outgo while losses
on sale of assets increased from RM0.3 million in 1996 to RM337 million in 1997. With the
slower growth in income vis-à-vis outgo, the excess of income over outgo for the life
insurance industry reduced significantly by 27.5% to RM2,589.4 million in 1997. Total assets
of the life insurance fund recorded a slower growth rate of 12.4% to reach RM23,291.1 million
as at the end of 1997.
The economic slowdown has affected the growth of new life business in 1998. Based on
preliminary statistics, new premiums written decreased by 7.8% to RM1,457.5 million
whereas the number of new policies and new sums insured increased, albeit at lower rates of
12.6% and 2.4% in 1998 to 1,246,460 policies and RM92,032.7 million respectively.
Aggregate income of the life insurance industry recorded a slower growth of 7.8% to
RM8,272.2 million, whereas total outgo decreased by 3.7% to RM4,896.6 million due to lower
provisions for diminution in value of investments in 1998. Consequently, total income over
outgo of the industry improved by 30.4% to RM3,375.5 million. Total assets of life insurance
funds grew at a slower rate of 11.8% to RM26,043.4 million in 1998 with cash and deposits
overtaking investments in corporate securities as the single largest portfolio of assets with a
share of 25.3% of total assets.
General Insurance
The growth of the general insurance business slowed down considerably in 1997, after
recording nine consecutive years of strong growth. Total written premiums grew at a slower
pace of 7.1% to RM6,074.2 million in 1997. All sectors of the industry registered slower
growth in written premiums except the marine, aviation and transit sector which recorded a
decline in written premiums.
Retention of Malaysian business rose substantially past the 80% mark for the first time. The
net retention ratio of the industry improved from 79.5% in 1996 to 85% in 1997. All classes of
business recorded higher retention levels due to increased capacity of a number of insurers
arising from higher capitalisation as well as the increased market share captured by the
licensed foreign professional reinsurers operating in the country.
The industry's overall claims ratio deteriorated marginally from 56.8% in 1996 to 58% in 1997.
The deterioration in the claims ratio was attributable to the higher claims ratio for all the
classes of business, except the motor sector. Motor business registered an improvement in
claims ratio from 65% in 1996 to 60.7% in 1997.
Despite the slower premium growth and deteriorating claims experience, the general insurers
registered an increase of 19.8% in underwriting profit to RM619.9 million in 1997 due to the
ability of insurers to continue to control net commissions and management expenses ratio.
Despite achieving higher underwriting profit, the general insurance industry recorded a
decline of 58.8% in operating profit to RM466.2 million. The reduction in operating profit was
mainly the result of higher provisions for diminution in value of investments and significant
capital losses due to the volatility of the stock market. Reflecting the slower growth in
premium income, total assets of general insurance funds grew at slower pace of 14.3% to
reach RM11,651.8 million at the end of 1997.
In 1998, in tandem with the economic slowdown, the general insurance industry recorded a
decline of 7.6% in written premiums to RM5,614.9 million. All the sectors, except the fire class
of business recorded negative growth rates. The industry's net retention ratio continued its
rising trend to reach 85.4%. The total assets of the general insurance funds grew at a slower
pace of 8% to reach RM12,581.8 million at the end of 1998.
Administration of the Insurance Act 1996
Several legislative changes were initiated in 1998 to amend the solvency and capital
regulations in line with the measures to offer temporary relief to insurers. A series of
exemptions from several provisions of the Insurance Act 1996 (Act) were also approved
during the year to streamline its administration and eliminate duplication in some areas of
supervisory responsibility. These changes are expected to be gazetted shortly.
One new licence for the conduct of professional general reinsurance business was issued to
The Toa Fire and Marine Reinsurance Company, Limited of Japan in 1998, bringing the
number of licensed insurers operating in Malaysia to 68 as at 31 December 1998. Of this
number, five foreign-incorporated insurers successfully completed the domestication of their
Malaysian insurance operations on 1 January 1999 to become locally-incorporated public
companies, thereby increasing the number of Malaysian-incorporated insurers to 58 to date.
During 1998, 60 licensees (including insurance brokers and adjusters) increased their paid-up
capital, mainly to comply with the minimum capital requirements under the Act. As a result,
the total capitalisation of insurers, insurance brokers and adjusters rose further to RM3.4
billion, RM32.5 million and RM9.4 million, respectively as at 31 December 1998. On average,
the paid-up capital of insurers, insurance brokers and adjusters were 83.1%, 49.2% and
75.7% respectively higher than the statutory minimum capital requirements, reflecting the
continued strength of the balance sheets of licensees in general.
The results of examinations conducted on licensees as well as BNM's overall supervision in
1998 showed that there remained room for improvement in the industry in the areas of
customer service, market conduct, compliance with regulatory requirements and financial
resilience. Towards instilling greater financial and market discipline among insurers, fines
were imposed on a number of licensees and their officers during the year for various offences
committed in breach of the provisions of the Act.
Apart from examinations and industry feedback, public complaints represented the other main
indicator of market conduct concerns. In a move to facilitate a more pro-active approach
towards promoting a professional and responsive insurance industry, BNM set up a dedicated
Customer Services Bureau (CSB) in its Insurance Regulation Department as a central point of
contact for all public complaints and general enquiries on insurance-related matters. The CSB
will enable BNM to better appreciate the common and persistent problems which continue to
plague the insurance industry and the full extent of their impact across the industry as a whole.
This in turn, will place regulators in a better position to identify the most appropriate measures
necessary to arrest unhealthy market practices. Insurance consumers will also benefit from
the convenience of a common reference and information point to which they can direct their
grievances, concerns or enquiries.
Policies and Measures to Strengthen the Insurance Industry in 1998
Issues related to the financial crisis underscored many of the policies and measures
implemented in 1998. From BNM's standpoint, it was necessary to ensure that the
supervisory regime was sufficiently flexible to enable insurers to play a bigger role in
supporting economic recovery, as well as to preserve their competitiveness and viability
through the crisis. Towards this end, in addition to the amended solvency and capital
regulations, other changes on investments and loans were also implemented to prevent the
further erosion of the capital market. In November 1998, insurers were allowed direct access
to the Bond Information and Dissemination System (BIDS) in a move to encourage greater
participation by insurers in the bond market.
Developments in the life insurance industry are expected to set the stage for the future growth
of the life insurance industry into a more important component of the financial system.
Included under the 1999 Budget as an incentive for the further build-up of policyholders' funds
was the new taxation basis for life insurance companies under which the taxation of actuarial
surplus was changed from surplus determined as apportionable to surplus actually transferred.
Two more insurers were given approval in 1998 to carry on investment-linked insurance
business, increasing the total number of insurers permitted to carry on such business to five
at present. The year also saw the industry embark on various plans to diversify and expand
the distribution network beyond the traditional agency force. In particular, more insurers
continued to explore and develop strategic alliances with financial institutions through
bancassurance as an alternative distribution channel.
Other major developments within the insurance industry included allowing eligible offshore
insurers licensed in the Labuan International Offshore Financial Centre to underwrite selected
Malaysian risks on a direct insurance basis and the commencement of operations of the
Central Administration Bureau (CAB) in July 1998. CAB is a fully-integrated system which
serves as a central electronic clearing house for domestic reinsurance transactions and is
expected to enable faster account settlements, reduce administrative backlogs and eliminate
reconciliation problems.
Conclusion
Although the economic downturn has affected the growth in the premium income and assets
of the insurance industry, with the emergence of positive signs of economic recovery, the
prospects for the Malaysian insurance industry remain good. Prospects for the future would
depend on the ability of the industry to penetrate the market and meet the needs of a more
discerning public. BNM will continue to put in place the necessary measures to strengthen the
financial position of insurers and spur the further development of the insurance industry.
B. Annual Report of the Director General of Takaful
In 1998, takaful operations was conducted by two companies, namely Syarikat Takaful
Malaysia Berhad (STMB) and Takaful Nasional Sdn. Berhad (TNSB) (formerly known as MNI
Takaful Sdn. Berhad). The business continued to register strong growth for both classes of
business - family takaful and general takaful. In 1998, STMB operated through a network of
27 branches and 61 takaful desks while TNSB had 11 branch offices. The combined
contribution income of the family and general takaful sectors increased by 40% (1997: 34.9%)
to RM274.8 million.
As at the end of 1998 financial year, total assets of takaful funds amounted to RM554.7
million, of which 71.5% were assets of family takaful funds. The largest proportion of the total
assets was placed in investment accounts with financial institutions (22.7%), followed by
investments in Government Investment Certificates (20.5%).
Family Takaful Business
Family takaful business continued to register strong growth in 1998 despite the economic
slowdown. A total of 56,126 new certificates were issued with total participation amounting to
RM5,606.6 million. Total contributions received on new certificates increased by 50.7% to
RM119.3 million. The strong growth in the new business of family takaful plans was
attributable largely to the increase in the takaful mortgage business received from
Government employees and increased participation in group family takaful plans. However, a
total of 4,447 certificates were terminated with total contributions amounting to RM6.3 million.
Family takaful business in force continued to expand, consonant with the continued growth in
new business in 1998 where the total number of certificates in force registered was 160,944,
with total contributions amounting to RM253 million. A total of RM26.9 million was paid by
both takaful operators as takaful benefits (including payment of profits to participants), an
increase of 70.3%. The participants' special account of the family takaful funds recorded
lower actuarial surplus of RM3.4 million in 1998 compared with RM15.8 million in 1997 due to
large provision for diminution in value of investments and provision for non-performing
financing.
General Takaful Business
The general takaful business continued to record strong double-digit growth in 1998 with
gross contributions increasing by 33.1% to RM122.6 million, albeit a lower growth rate than
the previous year's growth rate of 37.5%. The industry overall claims ratio (net claims incurred
to earned contribution income) improved marginally with a lower claims ratio of 36% in 1998
(1997: 37.2%). As in the previous years, the general takaful industry maintained its good
performance record with underwriting profits of RM44.3 million or an underwriting margin of
58.1%.
Developments in the Takaful Industry
In its effort to develop the takaful industry, BNM, in consultation with the takaful operators and
the insurance industry, has mapped out a five-year strategic framework for the development
of takaful business in Malaysia. The objectives of the strategic framework are to formulate
new strategies to position the takaful industry as one of the key components of the financial
system and to promote takaful as a viable alternative to conventional insurance. Under the
strategic framework, targets in terms of assets size and contribution income of the takaful
funds and market penetration of family takaful business have been set for the takaful industry
to achieve over the next five years. The strategic framework will focus on several areas with
defined objectives and key strategic actions to achieve the objectives set for each focus area.
BNM is also reviewing the Takaful Act 1984 with the aim of strengthening the regulatory
framework governing the operations of the takaful industry, while at the same time allowing
some flexibility to accommodate the pace of change to assist takaful operators to compete
effectively in the local and international arena.
Efforts are also being made to promote takaful business beyond the limited regional market.
Hence, Asean Retakaful International (L) Ltd. (ARIL), a retakaful joint-venture between takaful
operators from Malaysia, Brunei and Singapore has begun soliciting takaful business from
takaful operators and Islamic insurance companies in the Middle East, North Africa and
Europe. The response from takaful operators and Islamic insurance companies in these
countries appears encouraging.
As part of the training project offered by Malaysia at the Developing Eight (D-8) Commission
meeting in Istanbul, Turkey in June 1997, the "International Seminar on Takaful" was
successfully held in Kuala Lumpur from 30 March to 1 April 1998. The seminar, organised by
BNM and facilitated by BIMB Institute of Research and Training Sdn. Bhd., was sponsored by
the Government of Malaysia. The seminar has been successful in forging closer cooperation,
promoting business relationships for the mutual benefit of developing countries and
generating new business opportunities that could lead to business expansion overseas.
Interestingly, two non-members of the Organisation of Islamic Conference (OIC), namely
South Africa and Sri Lanka have also shown interest in takaful business. In line with the
leading role played by Malaysia in the development of takaful business, a Malaysian takaful
operator was given approval to acquire an equity stake in a takaful company to be
incorporated in a non-OIC country, and provide technical assistance and cooperation in the
establishment and management of the new takaful company.
Bank Negara Malaysia
8 March 1999
About the Bank
Objectives & Functions
Bank Negara Malaysia is the central bank for Malaysia. It was established on 26 January
1959, under the Central Bank of Malaya Ordinance, 1958, with the following objectives:
1.
2.
3.
4.
To issue currency and keep reserves safeguarding the value of the currency;
To act as a banker and financial adviser to the Government;
To promote monetary stability and a sound financial structure; and
To influence the credit situation to the advantage of the country.
In meeting these objectives, the Bank is guided by the principle that it should act only in the
economic interest of the nation and without regard to profit as a
primary consideration.
Hence, the functions of the Bank are carried out within the
context of the broader goals of promoting economic growth, a
high level of employment, maintaining price stability and a
reasonable balance in the country's international payments
position, eradicating poverty and restructuring society.
In particular, the Bank ensures that the availability and cost of
money and credit in the economy are consonant with national
macroeconomic objectives. In this respect, the Bank acts as the
banker for currency issue, keeper of international reserves and safeguarding the value of the
ringgit, banker and financial adviser to the Government, agency responsible for monetary
policy and management of the financial system and banker to the banks.
Mission Statement
Bank Negara Malaysia, as the Central Bank, is committed to excellence in promoting
monetary and financial system stability and fostering a sound and progressive financial
sector, to achieve sustained economic growth for the benefit of the nation.
This will be achieved through:






promoting a work culture which emphasises the highest standards of professionalism
and integrity, prudence, teamwork and innovation;
developing and maintaining a committed workforce which is highly competent and
proactive, sensitive to the changing needs of the industry;
adopting a collaborative approach in everything we do;
promoting the effective use of technology and good work practices to enhance
productivity, efficiency and quality;
adopting policies and practices to enhance the competitiveness of local financial
institutions to face international competition; and
having the necessary financial resources and financial instruments to effectively
manage monetary stability.
Administered Legislation
To enable the Bank to meet the objectives of a central bank, it is vested with comprehensive
legal powers under the following legislation to regulate and supervise the financial system.
These pieces of legislation include:
Central Bank of Malaysia Act 1958 (Revised 1994)
The Act provides for the administration, objectives of the Central Bank. It also enumerates the
powers and the duties of the Central Bank in relation to issuance of currency, maintenance of
external reserve, authorised business of the bank, specific powers to deal with ailing
institutions, its relationship with the Government and financial institutions. The Act also
contains general provisions on the Bank's accounts, powers to compound etc.
Full Text
Banking and Financial Institutions Act 1989 (BAFIA)
The BAFIA which came into force on October 1, 1989 provides for the licensing and
regulation of institutions carrying on banking, finance company, merchant banking, discount
house and money-broking businesses. It also provides for the regulation of institutions
carrying on scheduled business comprising non-bank sources of credit and finance, such as
credit and charge card companies, building societies, factoring, leasing companies and
development finance institutions. Non-scheduled institutions which are engaged in the
provision of finance may be subject to Part X and XI of the BAFIA as the Minister of Finance
may decide.
Full Text
Exchange Control Act 1953
The Act restricts dealings in gold and foreign currencies, payments to and from residents,
issuance of securities outside Malaysia, imports and exports and settlements. The Act also
empowers the Controller for Foreign Exchange to grant permissions and consent on the
foregoing and to enforce the provisions of the Act.
Full Text
Islamic Banking Act 1983
An Act to provide for the licensing and regulation of Islamic banking business. The Act inter
alia has provisions on the financial requirements and duties of an Islamic Bank, ownership,
control and management of Islamic banks, restrictions on its business, powers of supervision
and control over Islamic bank and other general provisions such as penalties etc.
Full Text
Insurance Act 1996
The provisions of the Act deal with the licensing of insurers, insurance brokers adjusters and
reinsurers. It also deals with setting up of subsidiary and offices, establishment of insurance
fund, direction and control of defaulting insurers, the control on management of licensee,
accounts of licensee, examination and investigation powers of the Central Bank, winding-up,
transfer of business of licensee. The Act also provides for matters relating to policies,
insurance guarantee scheme fund, enforcement powers of the Central Bank, offences and
other general provisions.
Full Text
Takaful Act 1984
An Act to provide for the registration and regulation of takaful business in Malaysia and for
other purposes relating to or connected with takaful. "Takaful" in this context means a scheme
based on brotherhood, solidarity and mutual assistance which provides for mutual financial
aid and assistance to the participants in case of need whereby the participants mutually agree
to contribute for that purpose.
Full Text
Development Financial Institutions Act 2002 (Act 618)
The DFIA which came into force on 15 February 2002 focuses on promoting the development
of effective and efficient development financial institutions (DFIs) to ensure that the roles,
objectives and activities of the DFIs are consistent with the Government policies and that the
mandated roles are effectively and efficiently implemented. DFIA also emphasises on efficient
management and effective corporate governance, provides a comprehensive supervision
mechanism and mechanism to strengthen the financial position of DFIs through the
specification of prudential requirements.
See also : The Salient Features of the DFIA
Full Text
Anti-Money Laundering Act 2001 (Act 613)
The AMLA, which came into force on 15 January 2002 criminalises money laundering of
proceeds from the predicate offences and provides for suspicious transaction reporting,
record-keeping and the functions of a financial intelligence unit that could co-operate with
domestic as well as foreign enforcement agencies. In this respect, the Minister of Finance has
appointed Bank Negara Malaysia as the competent authority to carry out the functions of the
financial intelligence unit. The law also provides for investigation into money laundering
activities, law enforcement agencies to freeze, seize and forfeit proceeds from predicate
offences as well as prosecution of money launderers.
Full Text
See also: Essential (Protection of Depositors) Regulations 1986
Loan (Local) Ordinance 1959
Payment Systems Act 2003 (Act 627)
An Act to make provisions for the regulation and supervision of payment systems and
payment instruments and for matters connected therewith. The Act was gazetted on 7 August
2003 and came into effect on 1 November 2003.
Full Text
See
also:
Submission Guideline for Operating Payment System or Issuing Designated
Payment Instrument
Money-Changing Act 1998 (Act 577)
An Act to provide for the licensing and regulation of money-changing business and for other
matters related thereto.
Full Text
Central Bank of Malaysia Act 1958 (Revised 1994)
LAWS OF MALAYSIA
Act 519
Central Bank of Malaysia Act 1958
(Revised—1994)
Revised up to
31-Mar-1994
Date of publication in the Gazette
12-May-1994
Date of coming into force of revised
version
18-May-1994
An Act to provide for the establishment,
administration, powers and duties of a Central Bank of
Malaysia.
[Part III and section 30 (1) (a)—
12th June 1967—Throughout
Malaysia;
Remaining provisions—
West Malaysia—26th January
1959;
Sabah and Sarawak—21st
January 1965.]
ARRANGEMENT OF SECTIONS
PART I
PRELIMINARY
1. Short title.
2. Interpretation.
PART II
ESTABLISHMENT, CAPITAL AND
ADMINISTRATION OF THE BANK
3. Establishment of Bank.
4. Principal objects of Bank.
5. Offices of the Bank.
6. Capital.
7. General Reserve Fund.
8. Board of Directors.
9. Governor and Deputy Governor.
10. Appointment of directors.
11. Disqualification of directors.
12. Vacancies in the office of Governor or Deputy
Governor or of another director.
13. Meetings and acts of the Board.
14. Director’s interest in contract to be made known.
15. Officers and employees of the Bank.
16. Preservation of secrecy.
16A. Bank’s power to report suspected offence.
16B. Establishment of Syariah Advisory Council.
17. Remuneration not to be related to profits.
PART III
P.U. 241/67.
L.N. 12/59.
Act 16/65.
CURRENCY
18. Unit of currency.
19. Parity.
20. Right to issue bank notes and coin.
21. Power to buy and sell Malaysian currency.
22. Printing of notes, minting of coins and issue of notes
and coins.
23. Denominations and forms of notes and coins.
24. Legal tender.
25. Coins tampered with or notes defaced.
26. Withdrawal of notes and coins and their disposal.
27. Refund of lost or imperfect notes or coins.
27A. Restriction on the use of photographs, drawing or
design of note or coin in advertisements, etc.
PART IV
RESERVE OF EXTERNAL ASSETS
28. Reserve of external assets.
29. External reserves as proportion of Bank’s liabilities.
PART V
BUSINESS OF THE BANK
30. Authorized business of Bank.
30A. Establishment of body corporate for training, etc.
31. Business which Bank may not transact.
31A. Loans to, and acquisition of, banking and other
financial institutions.
31B. Power of Bank to make an order in respect of a
deposit-taker to protect the interests of its depositors,
etc.
31C. Power to reduce share capital and to cancel shares of
financial institution.
PART VI
RELATIONS WITH THE GOVERNMENT
32. Bank as a banker to the Government.
33. Temporary advances to the Government.
34. Issues of policy.
PART VII
RELATIONS WITH BANKING AND OTHER
FINANCIAL INSTITUTIONS
35. Co-operation with banking institutions and other
financial institutions.
36. (Repealed).
37. Recommendations to banking institutions, other
financial institutions or institutions or persons as
specified in paragraphs (a), (b), (c), (d) and (e).
38. Recommendations to persons or classes of persons
(other than banking institutions).
39. Directions to banking institutions, etc.
40. Saving in respect of sections 37 to 39.
41. No discrimination in directions.
42. Special loans to banking and other financial
institutions.
43. Clearing Houses and settlement of balances between
banking and other financial institutions.
44. (Repealed).
PART VIII
GENERAL
44A. Interpretation.
44B. Bank may establish systems for funds, debt securities,
etc.
44C. Bank may require information relating to debt
securities.
44D. Bank may prohibit certain activities.
45. Bank’s financial year.
46. Audit.
47. Return of assets and liabilities.
48. Preparation and publication of annual report and
balance sheet.
49. Loans and scholarships to officers and employees,
and scholarships and study loans to other persons.
49A. Power to appoint Attorney.
50. (Repealed).
51. Penalties.
51A. Power of Governor to compound.
52. Fiat of Public Prosecutor.
53. Jurisdiction.
53A. Bank may be represented by director, officer or
employee of Bank in civil proceedings.
54. Power of Bank to make regulations.
54A. Fees and charges.
55. (Omitted).
PART IX
EXTENSION OF JURISDICTION
56. Special provision relating to extension of jurisdiction,
etc., of the Bank.
PART I
PRELIMINARY
Short title. 1. This Act may be cited as the Central Bank of
Malaysia Act 1958.
(Proviso omitted).
Interpretation. 2. In this Act, unless the context otherwise requires—
Act 372.
Act 276.
“bank”, in relation to Malaysia, means a licensed
bank as defined in the Banking and Financial
Institutions Act 1989 or an Islamic bank, and in
relation to any country, territory or place outside
Malaysia means a person lawfully carrying on therein
business corresponding in whole or in part or in
substance to “banking business” as defined in the
Banking and Financial Institutions Act 1989, or to
“Islamic banking business” as defined in the Islamic
Banking Act 1983;
“Bank” or “Central Bank” means the Central Bank of
Malaysia established by section 3;
“banking institution” means a licensed bank, a
licensed merchant bank or a licensed finance
company as defined in the Banking and Financial
Institutions Act 1989 or an Islamic bank;
“Board” means the Board of Directors of the Central
Bank;
“certificate of deposit” means a document relating to
money, in any currency, which has been deposited
with the issuer or some other person, being a
document which recognises an obligation to pay a
stated amount to bearer or to order, with or without
interest, and being a document by the delivery of
which, with or without endorsement, the right to
receive that stated amount, with or without interest, is
transferable;
“Deputy Governor” means any Deputy Governor of
the Central Bank;
“director” means a director appointed under section
10, and includes the Governor or Deputy Governor;
“Governor” means the Governor of the Central
Bank;
“investment account liabilities” in relation to an
Islamic bank means the deposit liabilities at that bank
in respect of funds placed by a depositor with that
bank for a fixed period of time under an agreement to
share the profits or losses of that bank on the
investment of such funds;
Act 276.
“Islamic bank” means a bank licensed under the
Islamic Banking Act 1983;
“licensed institution” has the meaning assigned
thereto in the Banking and Financial Institutions Act
1989;
“Minister” means the Minister charged with the
responsibility for finance;
“other deposit liabilities” in relation to a banking
institution other than an Islamic bank means deposit
liabilities at that banking institution other than savings
account, sight and time liabilities and deposit liabilities
from another banking institution or the Central Bank;
and in relation to an Islamic bank means deposit
liabilities at that bank other than savings account,
investment account, sight and time liabilities and
deposit liabilities from another banking institution or
the Central Bank;
“other financial institution” means—
Act 372.
(a) any licensed discount house, licensed
money-broker, or scheduled institution, or
representative office, as defined in the
Banking and Financial Institutions Act 1989;
(b) any non-scheduled institution, as defined in
the aforesaid Act, which is engaged in the
“provision of finance” as this expression is
defined in that Act; or
(c) such other person as may be specified by
the Bank, from time to time, by notice
published in the Gazette;
“record of balance of payments” means a record of
such economic and financial transactions of Malaysia,
whether direct or indirect, howsoever, wheresoever, or
by whosoever, made, in relation to countries,
territories or places outside Malaysia as the Bank
may, from time to time, determine for the purpose of
being included in such record;
“savings account liabilities” in relation to a banking
institution means the total deposits at that banking
institution which normally require the presentation of
passbooks or such other documents in lieu of
passbooks as approved by the Central Bank for the
deposit or withdrawal of monies;
“sight liabilities” in relation to a bank means the total
deposits at that bank which are repayable on demand,
but does not include savings account liabilities or the
deposits of any other banking institution or of the
Central Bank at that bank;
“Syariah Advisory Council” means the Syariah
Advisory Council established under subsection 16B(1);
Act A1213.
“time liabilities” in relation to a banking institution
means the total deposits at that banking institution
which are repayable otherwise than on demand, but
does not include savings account liabilities or the
deposits of any other banking institution or of the
Central Bank at that banking institution.
PART II
ESTABLISHMENT, CAPITAL AND
ADMINISTRATION OF THE BANK
Establishment of 3. There shall be established a bank, to be called
Bank. “Bank Negara Malaysia” or, in English, “Central Bank
of Malaysia”, which shall be a body corporate and
shall have perpetual succession and a common seal
and may sue and be sued in its own name.
Principal objects 4. The principal objects of the Bank shall be—
of Bank.
(a) to issue currency in Malaysia and to keep
reserves safeguarding the value of the
currency;
(b) to act as a banker and a financial adviser to
the Government;
(c) to promote monetary stability and a sound
financial structure;
(ca) to promote the reliable, efficient and
smooth operation of national payment and
settlement systems and to ensure that the
national payment and settlement systems
policy is directed to the advantage of
Malaysia; and
(d) to influence the credit situation to the
advantage of Malaysia.
Offices of the 5. (1) The Bank shall have its Head Office in Kuala
Bank. Lumpur.
Act A1213.
(2) The Bank may open branches and appoint
agents and correspondents within and without
Malaysia.
Capital. 6. (1) The authorized capital of the Bank shall be
two hundred million ringgit.
(2) Twenty million ringgit of the authorized capital
shall be subscribed and paid up by the Government
on the establishment of the Bank.
(3) The paid up portion of the authorized capital
may be increased by such amount as the Minister
may approve from time to time and the Government
shall subscribe and pay the amount of the increase to
the Bank:
Provided that the payment of the increase in capital
may be made by way of such transfers from the
General Reserve Fund as the Minister may from time
to time approve.
General Reserve 7. (1) There shall be a General Reserve Fund of the
Fund. Bank.
(2) At the end of each financial year, the net profit of
the Bank for that year shall be determined after
allowing for the expenses of operation and after
provision has been made for bad and doubtful debts,
depreciation in assets, contributions to staff and
pension funds and such other contingencies as are
usually provided for by banks.
(3) The net profit of the Bank shall be dealt with as
follows:
(a) such amount as the Minister, after
consultation with the Board, so determines
shall be placed to the credit of the General
Reserve Fund; and
(b) the remainder shall be paid to the
Government:
Provided that—
(i) in the case of any year at the end of which
the General Reserve Fund is less than half
the paid up capital of the Bank, the whole of
the net profit shall be credited to the
General Reserve Fund; and
(ii) in the case of any year at the end of which
the General Reserve Fund is not less than
half the paid up capital of the Bank, but less
than twice the paid up capital of the Bank,
not less than thirty per centum of the net
profit shall be credited to the General
Reserve Fund.
Board of Directors. 8. (1) There shall be a Board of Directors
constituted as provided in this section, which shall be
responsible for the policy and general administration
of the affairs and business of the Bank.
(2) The Board of Directors of the Bank shall consist
of—
(a) the Governor;
(b) not more than three Deputy Governors; and
(c) not less than five but not more than eight
directors appointed under section 10.
(3) The Governor or, during any period of his
absence or inability to act from illness or any other
cause, any Deputy Governor so designated by the
Governor, shall be entrusted with the day-to-day
administration of the Bank, and may, subject as is
expressly stated in this Act, give decisions and
exercise all powers and do all acts which may be
exercised or done by the Bank.
(4) The Governor and the Deputy Governors shall
be answerable to the Board for their acts and
decisions.
(5) In the event of the absence or inability to act of
the Governor or any Deputy Governor during his term
of office the Minister may appoint a person to
discharge the duties of such office during the period of
such absence or inability; and while so acting the
person so appointed by the Minister shall act as an
ex-officio member of the Board.
Governor and 9. (1) The Governor shall be appointed by the Yang
Deputy Governor. di-Pertuan Agong and the Deputy Governors by the
Minister.
(2) The Governor and the Deputy Governors shall
each be appointed for a term not exceeding five years
and shall be eligible for reappointment.
(3) The Governor and Deputy Governor shall
devote the whole of their professional time to the
service of the Bank and while holding office shall not
occupy any other office or employment whether
remunerated or not:
Provided that they may if so appointed with the
approval of the Minister—
(a) act as members of any committee or
commission appointed by the Government
to enquire into any matter affecting
currency, banking, economic or financial
matters in Malaysia;
(b) become directors, governors or members of
the board, by whatever name called, of any
international bank or international monetary
Note.
authority to which the Government shall
have adhered or given support or approval;
(c) become directors of any corporation in
Malaysia in which the Bank may participate
under section 30 (1)(j);
Act 125.
(d) become directors or members of the board
of management, by whatever name called,
of any statutory authority or of any
company as defined in section 4 (1) of the
Companies Act 1965.
(4) The Governor and the Deputy Governors shall
be appointed on such terms and conditions as may be
provided for in their respective letters of appointment.
(5) Notwithstanding anything contained in the
foregoing provisions of this section, or in any other
provision of this Act, it shall be lawful for the Governor
or the Deputy Governors to be appointed by any
written law to exercise such powers, discharge such
duties, and perform such functions as may be
specified in or under such written law, and to be
conferred by such written law with such title of office in
relation thereto as may be specified in such written
law.
Appointment of 10. (1) The directors referred to in section 8 (2) (c)
directors. shall be appointed by the Yang di-Pertuan Agong.
(2) The directors appointed under subsection (1)
shall be persons of standing and experience in affairs,
and as directors of the Bank shall not act as delegates
on the Board from any commercial, financial,
agricultural, industrial or other interests with which
they may be connected:
Provided that the said prohibition shall not extend to
any directors holding or for the time being acting in the
office of Secretary General to the Treasury or Deputy
Secretary General to the Treasury.
(3) A director appointed under subsection (1) shall
hold office for a term not exceeding three years and
shall be eligible for reappointment.
(4) The directors appointed under subsection (1)
shall be paid by the Bank such remuneration and
allowances as may be prescribed by the Minister.
Disqualification of 11. (1) No person shall be appointed or shall remain
directors. as Governor, Deputy Governor or other director of the
Bank who—
(a) is or becomes a member of the Senate or
House of Representatives or any
Legislative Assembly;
Act 372.
(b) is or becomes an “officer” or, subject to
Note.
section 9 (3), a “director” (as those words
are defined in the Banking and Financial
Institutions Act 1989) of any banking
institution or other financial institution; or
(c) is or becomes a public officer:
Provided that one of the directors appointed under
section 10 may be the person holding the office of
Secretary General to the Treasury or Deputy
Secretary General to the Treasury, and
notwithstanding section 10 (3) any director so
appointed shall remain a member of the Board for so
long as he holds the office of Secretary General to the
Treasury or Deputy Secretary General to the
Treasury, as the case may be, or for such lesser time
as may be provided in his letter of appointment.
(2) The Yang di-Pertuan Agong may terminate the
appointment of the Governor, or any other director if
he—
(a) resigns his office;
(b) becomes of unsound mind or incapable of
carrying out his duties;
(c) becomes bankrupt or suspends payment or
compounds with his creditors;
(d) is convicted by a court of law in Malaysia of
an offence and sentenced to imprisonment
for a term of not less than two years, or of
any offence involving dishonesty, and has
not received a free pardon;
(e) is guilty of serious misconduct in relation to
his duties;
(f) is absent, except on leave granted by the
Minister, from all meetings of the Board
held during two consecutive months or
during any three months in any period of
twelve months;
(g) fails to comply with his obligations under
section 14.
(3) The Minister may terminate the appointment of
any Deputy Governor on the grounds specified in
subsection (2).
Vacancies in the
office of Governor
or Deputy
Governor or of
another director.
12. If the Governor or any Deputy Governor or any
other director dies or resigns or otherwise vacates his
office before the expiry of the term for which he has
been appointed another person may be appointed by
the Yang di-Pertuan Agong, or in the case of a Deputy
Governor, by the Minister, for the unexpired period of
the term of office of the person in whose place he is
appointed.
Meetings and acts 13. (1) The Governor, or in his absence any Deputy
of the Board. Governor so designated by the Governor, shall be the
chairman of the Board.
(2) The chairman of the Board shall summon
meetings as often as may be required but not less
frequently than once in each month.
(3) At every meeting of the Board a quorum shall
consist of four directors, and decisions shall be
adopted by a simple majority of the votes of the
directors present and voting:
Provided that in the case of an equality of votes, the
chairman shall have a casting vote.
Director’s interest 14. (1) A director who is directly or indirectly
in contract to be interested in a contract made, or proposed to be
made known. made, by the Bank shall disclose the nature of his
interest at the first meeting of the Board at which he is
present after the relevant facts have come to his
knowledge.
(2) A disclosure under subsection (1) shall be
recorded in the minutes of the Board and, after the
disclosure, the director—
(a) shall not be present at, or take part in, any
deliberation or decision of the Board with
respect to that contract; and
(b) shall be disregarded for the purpose of
constituting a quorum of the Board for any
such deliberation or decision.
(3) No act or proceeding of the Board shall be
questioned on the ground of the contravention by a
member of the Board of this section.
Officers and 15. (1) The Bank may appoint such officers and
employees of the employees as it considers to be necessary for the
Bank. efficient conduct of the business of the Bank.
(2) Officers and employees of the Bank shall hold
office for such period or periods, receive such salaries
and allowances, and be subject to such other terms
and conditions of service as may be determined by
the Board.
(3) The Bank may, with the approval of the Minister,
out of the funds of the Bank establish and maintain a
pension and provident fund for its officers and
employees and their dependents.
In this subsection, the expression “officers” includes
the Governor and Deputy Governors.
(4) Where officers or employees of the Bank have
been seconded or transferred to the service of the
Bank from or have previously been in the service of
the Federal or a State Government or other public
authority approved by the Board, the appointments of
those officers or employees shall, subject to any
Federal or State law, be made in accordance with
such arrangements as to pensions and allowance for
previous service as the Board may determine.
(5) The Bank may, with the approval of the Minister,
out of the funds of the Bank, create and maintain a
trust account to be called “the Bank Negara Malaysia
Staff Welfare Account” for the benefit of its officers
and employees, including their dependants.
(6) The Bank Negara Malaysia Staff Welfare
Account shall be utilised for such purposes conducive
to the welfare of the officers and employees of the
Bank, including their dependants, as may from time to
time be provided in trust directions to be issued by the
Board with the approval of the Minister, and such
directions may provide for the manner and the
procedure for the making of the grants, loans or other
payments from such Account.
Preservation of 16. Without prejudice to section 16A, except for the
secrecy. purpose of the performance of his duties or the
excercise of his functions or when lawfully required to
do so by any court or under any law, no director,
officer, or employee of the Bank, shall disclose to any
person any information relating to the affairs of the
Central Bank or of a banking institution or other
financial institution or of a customer of the Central
Bank or of a banking institution or other financial
institution which he has acquired in the performance
of his duties or the exercise of his functions.
Bank’s power to 16A. (1) Where the Bank in the course of the
report suspected exercise of any of its powers, or the discharge of any
offence. of its duties, or the performance of any of its functions,
Act 17. under this Act, the Exchange Control Act 1953, the
Act 89.
Act 276. Insurance Act 1963, the Islamic Banking Act 1983, the
Act 312. Takaful Act 1984, the Banking and Financial
Act 372. Institutions Act 1989, the Money-Changing Act 1998,
Act 577.
or under any other written law whatsoever, suspects
any person to have committed any offence under this
Act, or any of the aforesaid Acts, or any other written
law whatsoever, it shall be lawful for the Bank to give
information of such commission to a police officer in
charge of a police station or to any other police officer,
or to convey any or all information in relation to such
offence to any banking institution, or to any other
financial institution or other person affected by such
offence, or to any authority or person having power to
investigate under, or enforce, the provision of the law
under which the offence is suspected by the Bank to
have been committed.
(2) Subsection (1) shall have full force end effect,
notwithstanding anything inconsistent therewith, or
contrary thereto, in the Act and the Acts mentioned in
[sic]
Act A1010.
subsection (1) or in any other written law.
Establishment of *16B. (1) The Bank may establish a Syariah
Syariah Advisory Advisory Council, which shall be the authority for the
Council ascertainment of Islamic law for the purposes of
Islamic banking business, takaful business, Islamic
financial business, Islamic development financial
business, or any other business which is based on
Syariah principles and is supervised and regulated by
the Bank.
(2) The Syariah Advisory Council shall consist of
such members as may be appointed by the Minister,
on the recommendation of the Bank, from amongst
persons who have knowledge or experience or both in
the Syariah and also—
(a) banking;
(b) finance;
(c) law; or
(d) any other related discipline.
(3) If a judge of the High Court, the Court of Appeal
or the Federal Court, or a judge of the Syariah Appeal
Court of any State or Federal Territory, is to be
appointed under subsection (2), such appointment
shall not be made except—
(a) in the case of a judge of the High Court, the
Court of Appeal or the Federal Court, after
consultation with the Chief Justice; and
(b) in the case of a judge of the Syariah Appeal
Court of any State or Federal Territory,
after consultation with the Chief Syariah
Judge of the respective State or Federal
Territory, as the case may be.
(4) The Syariah Advisory Council shall have such
functions as may be determined by the Bank and shall
determine its own procedure.
(5) The members of the Syariah Advisory Council
shall be paid such remuneration and allowances as
may be determined by the Board from the funds of the
Bank.
(6) Unless the Bank otherwise approves in writing,
no member of the Syariah Advisory Council shall
become a member of any Syariah advisory body of, or
act as a Syariah consultant or Syariah advisor of, or
assume any position or office to such effect for, or
occupy any office or employment whether
remunerated or not with, any banking institution or
other financial institution.
(7) The Bank shall consult the Syariah Advisory
Council on Syariah matters relating to Islamic banking
business, takaful business, Islamic financial business,
* Note
Act A1213.
Islamic development financial business, or any other
business which is based on Syariah principles and is
supervised and regulated by the Bank, and may issue
written directives in relation to those businesses in
accordance with the advice of the Syariah Advisory
Council.
(8) Where in any proceedings relating to Islamic
banking business, takaful business, Islamic financial
business, Islamic development financial business, or
any other business which is based on Syariah
principles and is supervised and regulated by the
Bank before any court or arbitrator any question arises
concerning a Syariah matter, the court or the
arbitrator, as the case may be, may—
(a) take into consideration any written
directives issued by the Bank pursuant to
subsection (7); or
(b) refer such question to the Syariah Advisory
Council for its ruling.
(9) Any ruling made by the Syariah Advisory
Council pursuant to a reference made under
paragraph (8)(b) shall, for the purposes of the
proceedings in respect of which the reference was
made—
(a) if the reference was made by a court, be
taken into consideration by the court in
arriving at its decision; and
(b) if the reference was made by an arbitrator,
be binding on the arbitrator.
(10) The Bank may establish a secretariat and such
other committees as it considers necessary to assist
the Syariah Advisory Council in the performance of its
functions and may appoint any of the officers of the
Bank or any other person to be a member of the
secretariat or any of such committees.
(11) Any request for consultation or reference for a
ruling of the Syariah Advisory Council under this Act
or any other law shall be submitted to the secretariat.
(12) In this section—
(a) “Islamic banking business” has the
meaning assigned thereto in the Islamic
Banking Act 1983;
(b) “Islamic financial business” means financial
business whose aims and operations do
not involve any element which is not
approved by Syariah; and
(c) “takaful business” has the meaning
assigned thereto in the Takaful Act 1984.
*
Notwithstanding the introduction of subsections
16B(2) and (3) into the Act by subsection (1), the
existing Syariah Advisory Council which was
appointed on 2 August 1996 is deemed to have
been validly appointed and shall continue to
perform the functions for which it was appointed
until a Syariah Advisory Council is appointed in
accordance with subsections 16B(2) and (3) of
the Act, and references to the Syariah Advisory
Council in subsections 16B(1), (4), (5), (6), (7),
(8), (9), (10), (11) and (12) of the Act shall be
construed as references to the existing Syariah
Advisory Council.
Any directive, notice or circular issued or any act
or thing done by the Bank in relation to Islamic
banking business, Islamic financial business,
takaful business, Islamic development financial
business, or any other business which is based
on Syariah principles and is supervised and
regulated by the Bank, in accordance with the
advice of the existing Syariah Advisory Council
referred to in subsection (2) is deemed to have
been validly issued or done.
Remuneration not 17. No salary, fee, wage, or other remunerations, or
to be related to allowance, paid by the Bank shall be computed by
profits. reference to the profits of the Bank.
PART III
CURRENCY
Unit of currency. 18. (1) The unit of currency in Malaysia shall be the
ringgit, which shall be divided into one hundred sen.
(2) Upon the coming into force of this section, every
contract, sale, payment, bill, note, instrument and
security for money and every transaction, dealing,
matter and thing whatsoever relating to money or
involving the payment of, or the liability to pay, any
money which but for this subsection would have been
deemed to be made, executed, entered into, done and
had for, in and in relation to Malaysian dollars shall be
deemed instead to be made, executed, entered into,
done and had for, in and in relation to ringgit.
Parity. 19. (1) The parity of the ringgit shall be determined
by the Minister on the recommendation of the Bank in
terms either of the currency or currencies of other
members of the International Monetary Fund, the
Special Drawing Right, the common denominator
prescribed by the International Monetary Fund under
paragraph I of Schedule C to the Articles of
Agreement of the International Monetary Fund, or any
other denominator consistent with the obligations of
Malaysia under Article IV and Schedule C to the
Articles of Agreement of the International Monetary
Fund:
Provided that if and when the Bank notifies the
International Monetary Fund of the parity of the ringgit
upon the International Monetary Fund deciding under
the Articles of Agreement to introduce a widespread
system of exchange arrangements based on stable
but adjustable par values, such parity shall be
published in the Gazette and shall take effect
accordingly.
(2) The parity of the ringgit may be changed to such
an extent as the Minister on the recommendation of
the Bank may determine.
(3) Any change under subsection (2) shall be
published in the Gazette and shall take effect
accordingly in substitution of the parity gazetted under
subsection (1).
(4) Notwithstanding subsection (1), the Minister
may decide on the recommendation of the Bank that it
is necessary and expedient for Malaysia not to
determine a parity for the ringgit, but instead to apply
any exchange arrangement for the ringgit that is not
inconsistent with the Articles of Agreement of the
International Monetary Fund, including, but not limited
to, the severing of the parity of the ringgit to any
currency or currencies or any denominator.
Right to issue 20. The Bank shall have the sole right of issuing
bank notes and notes and coin throughout Malaysia and neither the
coin. Government nor the Government of any State nor any
public authority, or banking institution or other financial
institution, or other institution or persons shall issue
currency notes, bank notes or coin or any documents
or tokens payable to bearer on demand being
documental tokens which, in the opinion of the Bank,
are likely to pass as legal tender.
Power to buy and 21. The Bank shall at its discretion buy and sell
sell Malaysian Malaysian currency against gold or other currency
currency. eligible for inclusion in the reserve of external assets
specified under section 28:
Provided that the rate of exchange quoted for any
such transaction shall be consistent with the Articles
of Agreement of the International Monetary Fund.
Printing of notes, 22.
minting of coins
and issue of notes
and coins.
The Bank shall —
(a) arrange for the printing of notes and the
minting of coins;
(b) issue, re-issue and exchange notes and
coins at the Bank’s offices and at such
agencies as the Bank may, from time to
time, establish or appoint;
(c) arrange for the safe custody of unissued
stocks of currency and for the preparation,
safe custody and destruction of plates and
paper for the printing of notes and of dies
for the minting of coins.
Denominations 23. (1) Notes and coins issued by the Bank—
and forms of notes
and coins.
(a) shall be in such denominations of the
ringgit or fractions thereof as shall be
approved by the Minister on the
recommendation of the Bank;
(b) shall be of such forms and designs and
bear such devices as shall be approved by
the Minister on the recommendation of the
Bank.
(2) The standard weight and composition of coins
issued by the Bank and the amount of remedy and
variation shall be determined by the Minister on the
recommendation of the Bank.
Legal tender. 24. (1) Notes issued by the Bank shall, if such notes
are not defaced, be legal tender in Malaysia at their
face value for the payment of any amount.
(2) Coins issued by the Bank shall, if such coins
have not been tampered with, be legal tender in
Malaysia at their face value—
(a) for the payment of any amount in the case
of coins of the denomination exceeding one
ringgit;
(b) for the payment of an amount not
exceeding ten ringgit in the case of coins of
the denomination of fifty sen and one
ringgit; and
(c) for the payment of an amount not
exceeding two ringgit in the case of coins of
the denomination of less than fifty sen.
(3) Notwithstanding subsections (1) and (2) the
Bank shall have power, on giving not less than three
months’ notice in the Gazette of its intention to do so,
to call in any of its notes and coins on payment of the
face value thereof; and any such notes or coins with
respect to which notice has been given under this
subsection shall, on the expiration of the notice, cease
to be legal tender.
Coins tampered 25. A coin shall be deemed to have been tampered
with or notes with if the coin has been impaired, diminished or
defaced. lightened otherwise than by fair wear and tear or has
been defaced by stamping, engraving or piercing,
whether the coin shall or shall not have been thereby
diminished or lightened, and a note shall be deemed
to have been defaced if any word, sign, symbol,
drawing, caricature, or other thing whatsoever, has
been written, inscribed, or in any other manner or by
any other means whatsoever has been shown on its
surface, or if it is torn, marred, burnt, injured, spoilt or
otherwise howsoever mutilated.
Withdrawal of 26. (1) The Bank may take all such steps as it may
notes and coins deem appropriate to withdraw from circulation coins
and their disposal. which are worn or which have been tampered with, or
note which are defaced, or unfit for circulation, and
may destroy, deal with or otherwise dispose of the
same in such manner as may be directed in writing by
the Governor or any Deputy Governor or other officer
of the Bank as may be authorised in writing by either
the Governor or any Deputy Governor.
(2) The provisions of subsection (1) as to
destruction or disposal of, or dealing with, notes and
coins shall apply to notes and coins which have been
called in and will cease to be, or have ceased to be,
legal tender under section 24 (3).
Refund of lost or 27. (1) No person shall be entitled to recover from
imperfect notes or the Bank the value of any lost, stolen or imperfect note
coins. or coin or any coin that has been tampered with or any
note which is defaced.
(2) The circumstances in which, and the conditions
and limitations subject to which, the value of lost,
stolen, or imperfect notes or coins or coins that have
been tampered with or notes which are defaced may
be refunded as an act of grace shall be within the
absolute discretion of the Bank.
Restriction on the
use of
photographs,
drawing or design
of note or coin in
advertisements,
etc.
27A. Except with the permission of the Bank, no
person shall, in any size, scale or colour, use any
photograph of or any drawing or design resembling
any note or coin or part thereof, in any advertisement
or on any merchandise or products which that person
manufactures, sells, circulates or otherwise
distributes.
PART IV
RESERVE OF EXTERNAL ASSETS
Reserve of 28. It shall be the duty of the Bank to maintain at all
external assets. times a reserve of external assets to meet its
obligations under this Act, consisting of all or any of
the following:
(a) gold coin or bullion;
(b) notes, coin, bank balances and money at
call in such country or countries as may be
approved by the Minister on the
recommendation of the Board;
(c) Treasury bills of such government or
governments as may be approved by the
Minister on the recommendation of the
Board of a maturity not exceeding one year;
(d) bill of exchange bearing at least two good
signatures and drawn on and payable at
such place or places as may be approved
by the Minister on the recommendation of
the Board and having a maturity not
exceeding three months (exclusive of days
of grace);
(e) securities of, or guaranteed, by such
government or governments or international
financial institutions as may be approved by
the Minister on the recommendation of the
Board;
(f) securities purchased under section 30
(1)(oo)(i);
(g) any readily available international drawing
facility as may be approved by the Minister
on the recommendation of the Board.
External reserves 29. The aggregate value of the reserve of external
as proportion of assets specified in section 28 shall not be less than
Bank’s liabilities. such percentage of the Bank’s notes and coins in
33/51. circulation as the Minister may by notice in the
Gazette declare to correspond to the minimum
reserve of extrernal assets which the Board of
Commissioners of Currency, Malaya and British
Borneo, would have been required to maintain against
notes and coin issued by the Commissioners under
the Currency Ordinance 1951, including any
amendments thereto in force immediately prior to the
coming into effect of Part III:
Provided that the Yang di-Pertuan Agong may by
order published in the Gazette vary the percentage
declared.
[sic]
PART V
BUSINESS OF THE BANK
Authorized 30. (1) The Bank may—
business of Bank.
(a) issue and redeem notes and coin in
accordance with Part III;
(b) issue demand drafts and other kinds of
remittances made payable at its own offices
and branches or at the offices of agencies
or correspondents;
(bb) (i) issue, with the approval of the Minister,
securities in its own name and the issue,
holding and sale of such securities shall be
subject to such terms and conditions as the
Bank may determine at the time of the
issue of such securities:
Provided that the total amount of
securities so issued shall not at any time
exceed three times the total of the Bank’s
paid-up capital and General Reserve Fund;
(ii) purchase, sell and redeem securities
issued by the Bank pursuant to paragraph
(bb) (i);
(c) purchase, accept on deposit and sell gold
coin or bullion;
(d) accept deposit of money in any currency;
(e) purchase, sell, discount and rediscount
inland bills of exchange and promissory
notes arising out of bona fide commercial
transactions bearing two or more good
signatures and maturing within twelve
months or such period as may be approved
by the Minister on the recommendation of
the Board (exclusive of days of grace) from
the date of acquisition;
(f) purchase, sell, discount and rediscount
inland bills of exchange and promissory
notes bearing two or more good signatures
drawn or issued for the purpose of
financing seasonal agricultural operations
or the marketing of primary produce and
maturing within twelve months or such
period as may be approved by the Minister
on the recommendation of the Board
(exclusive of days of grace) from the date
of acquisition;
(ff) make advances for the purpose of assisting
the growing or marketing of primary
produce, to—
w.e.f. 12-Jun-1967.
(i) authorities formed under any written law
in Malaysia; and
(ii) co-operative societies engaged in
farming, agricultural, horticultural,
pastoral, grazing or fishing operations;
(fff) make advances to such public authorities
and corporations in which the Government
or the Bank has an interest, including an
interest in shares (as that expression is to
be construed under the Banking and
Financial Institutions Act 1989), as the
Minister may approve on the
recommendation of the Board:
Provided that the total amount of
advances so made shall not at any time
exceed two-and-one-half times the total of
the Bank’s paid-up capital and General
Reserve Fund;
(ffff) establish a Special Investment Fund to
finance specific projects, wholly or partly, in
the public sector and on such terms as may
be approved by the Minister on the
recommendation of the Board for the
purpose of promoting economic
development from monies set aside from
the reserve held at the Central Bank by
banking institutions under section 37 (1) (c)
and by other financial institutions required
by the Bank from time to time to hold such
reserve:
Provided always that the total amount so
set aside for such Special Investment Fund
shall be approved by the Minister on the
recommendation of the Board and shall not
exceed the amount of the General Reserve
Fund of the Bank;
(fffff) allow for a temporary overdrawing by
account holders subject to the imposition of
such rate of interest on the overdraft as the
Bank may deem fit;
(g) purchase, sell, discount and rediscount
Treasury bills of the Government or of the
Government of any State authorized to
issue Treasury bills;
(h) purchase and sell securities of the
Government or of the Government of any
State, or of any public authority maturing in
not more than thirty years which have been
publicly offered for sale or form part of an
issue which is being made to the public at
the time of acquisition and any other
securities as may be approved by the
Minister on the recommendation of the
Board;
(i) invest in securities of the Government or of
the Government of any State, or of any
public authority for any amount, and to
mature at any time, on behalf of staff and
pension funds and other internal funds of
the Bank;
(j) with the approval of the Minister, acquire,
hold and sell shares of any corporation set
up with the approval of, or under the
authority of, the Government for the
purpose of promoting the development of a
money market or securities market in
Malaysia or for the financing of economic
development in Malaysia:
Provided that the total amount so
invested shall not at any time exceed fifty
per centum of the General Reserve Fund of
the Bank;
(k) grant advances for fixed periods not
exceeding three months against Treasury
bills of the Government or of the
Government of any State authorized to
issue Treasury Bills;
(l) grant advances for fixed periods not
exceeding twelve months or such period as
may be approved by the Minister on the
recommendation of the Board secured by
the pledge with the Bank of—
(i) gold coin or bullion;
(ii) securities of the Government or of the
Government of any State, or of any
public authority which have been
publicly offered for sale and are to
mature within a period of thirty years or
any other securities as may be
approved by the Minister on the
recommendation of the Board:
Provided that no such advance so
secured shall at any time exceed the
market value of the security pledge;
(iii) such bills of exchange and promissory
notes as are eligible for purchase,
discount or rediscount by the Bank;
(iv) warehouse warrants or their equivalent
(securing possession of goods), in
respect of staple commodities or other
goods duly insured and with a letter of
hypothecation from the owner:
Provided that no such advance shall
exceed sixty per centum of the current
market value of the commodities or
goods in question;
(m) purchase and sell currencies, and
purchase, sell, discount and rediscount bills
of exchange and Treasury bills drawn in or
on places outside Malaysia and maturing
within one year from the date of acquisition;
(mm) borrow money, establish credits and
provide guarantees and indemnities in any
currency, within and without Malaysia on
such terms and conditions as it may deem
fit;
(mmm) (i) establish a credit bureau to collect, in
such manner and to such extent as the
Bank thinks fit, credit information
(including information on and relating to
the rejection of any cheque by a paying
bank by reason of insufficiency of funds
in the account of the drawer of the
cheque) on the customers of any
banking institutions or other financial
institutions; and
(ii) notwithstanding section 16, disclose, in
such manner and to such extent as the
Bank thinks fit, the credit information
collected by the credit bureau to—
(A) any banking institutions or other
financial institutions for the purpose
of assisting in assessing the
creditworthiness of its existing and
potential customers or for the
purpose of assisting the banks to
assess the eligibility of the customer
to maintain or open a current account
with the bank; and
(B) the customer of the banking
institutions or other financial
institutions in respect of his own
account for the purpose of verifying
the accuracy of the credit information
provided by the banking institutions
or other financial institutions:
Provided that the information
disclosed by the Bank to the banking
institutions and other financial
institutions shall be secret between the
Bank and the institutions unless the
banking institutions and other financial
institutions were requested by a
customer to disclose the information in
respect of his account:
Provided further that no action, suit,
prosecution or other proceeding
whatsoever shall lie or be brought,
instituted or maintained in any court or
before any other authority against the
Bank on account of or in respect of any
act done or statement made or omitted
to be done or made under this provision
if the act or statement was done or
made or omitted to be done or made in
good faith;
(mmmm) (Deleted).
(n) maintain accounts with central banks
outside Malaysia and with other banks
within and without Malaysia;
(nn) place deposits in any banking institution
within Malaysia;
(nnn) purchase, under repurchase agreements,
and subject to such terms as may be
approved by the Minister on the
recommendation of the Bank, and sell any
certificate of deposit issued by any banking
institution;
(o) purchase and sell securities of, or
guaranteed by, such government or
governments or international financial
institutions as may be approved by the
Minister on the recommendation of the
Board;
(oo) (i) purchase and sell such other securities
as may be approved by the Minister on
the recommendation of the Board;
Act 472.
(ii) pay to the International Monetary Fund
the subscriptions in respect of which the
Government is responsible under the
Bretton Woods Agreements Act 1957,
as amended from time to time, and take
to the Bank’s own account the
payments of the aforesaid subscriptions
already made by the Government;
(iii) pursuant to paragraph (oo) (ii), create
and issue to the International Monetary
Fund in such form as is appropriate any
such non-interest bearing and nonnegotiable notes or other obligations as
the International Monetary Fund may
under section 4 of Article III of the
Articles of Agreement of the
International Monetary Fund determine
to accept in place of any part of the
subscription of the Government which
would but for such acceptance be
payable in Malaysian currency;
(iiia) draw from time to time on the
compensatory financing facility and
other facilities of the International
Monetary Fund and upon the request of
the Government make available to the
Government funds arising from such
drawings, which funds the Government
is hereby authorised to receive;
(iv) draw from time to time on the buffer
stock financing facility of the
International Monetary Fund and make
available to the Government funds
arising from such drawing required for
contribution to any buffer stock created
under any international commodity
agreement to which Malaysia is a
signatory; and in the case where such
drawing is not available or insufficient to
meet the requirement, make available
to the Government funds from the
Bank’s own resources;
(v) create and issue to the International
Monetary Fund in such form as is
appropriate any such non-negotiable
notes or obligations as may be
acceptable to the International
Monetary Fund in respect of any
transactions with the International
Monetary Fund;
(vi) exchange, if requested by other
members of the International Monetary
Fund at the time of purchase, balances
of Malaysian currency purchased by
other members from the International
Monetary Fund, or obtained by other
members in exchange for currency
purchased from the International
Monetary Fund, for a freely usable
currency (defined in Article XXX (f) of
the Articles of Agreement of the
International Monetary Fund) selected
by the Bank at an exchange rate
between the ringgit and that currency
as may be consistent with section 7 (a)
of Article XIX of the Articles of
Agreement of the International
Monetary Fund;
(p) act as correspondent, banker or agent for
any central bank or other monetary
authority and for any international bank or
international monetary authority established
under governmental auspices;
(q) open accounts for and accept deposits from
the Government, State Governments,
public authorities, banking institutions and
other financial institutions and, with the
prior approval of the Minister, other persons
in Malaysia;
(r) underwrite loans in which it may invest;
(s) undertake the issue and management of
loans publicly issued—
(i) by the Government;
(ii) by the Government of any State;
(iii) by any public authority; or
(iv) with the approval of the Minister, by any
corporation referred to in paragraph (j);
(t) (Repealed);
(tt) (Repealed);
(ttt) (Repealed);
(u) accept from customers for custody
securities and other articles of value;
(v) undertake on behalf of customers and
correspondents the purchase, sale,
collection and payment of securities,
currencies and credit instruments within
and without Malaysia, and the purchase or
sale of gold and silver;
(w) establish bank Clearing Houses in Kuala
Lumpur and in such other places as the
Bank may consider necessary;
(ww) participate in schemes undertaken in
conjunction with Central Banks or
authorities outside Malaysia to promote
regional and international co-operation in
economic and financial research and
training;
(www) with the approval of the Minister, participate
on its own behalf or as agent of the
Government in schemes undertaken in
conjunction with Central Banks or
authorities outside Malaysia to promote
regional and international monetary co–
operation;
Act 372.
Act 276.
(x) do generally all such things as may be
commonly done by bankers and are not
inconsistent with the exercise of its powers
or the discharge of its duties under this Act
or under the Banking and Financial
Institutions Act 1989 or the Islamic Banking
Act 1983.
(1A) Nothing in subsection (1) shall prevent the
Bank, in exercising any of its powers under that
subsection, from making such necessary adjustments
as may be approved by the Syariah Advisory Council
whether or not such adjustments involve a sale, a
purchase, a sale and repurchase, a lease, a sale and
lease back, or any other business or dealing involving
assets or properties, which would otherwise be
prohibited by this Act:
Provided that where any difficulty or doubt arises in
the application of subsection (1) in relation to any
Act A1213.
particular banking institution or other financial
institution, or any particular matter or circumstance, or
generally, the Minister may on the reference of the
difficulty or doubt to him by the Bank, resolve the
difficulty or doubt by a direction in writing.
(2) The expression “primary produce” in subsection
(1) (f) and (ff) means such goods as the Minister may
on the recommendation of the Board prescribe:
Provided that any advance under paragraph (ff)
shall not be made for more than one year.
Act 17.
Act 89.
Act 276.
Act 312.
Act 372.
Act 577.
*(3) It shall be the duty of the Bank to administer,
enforce, carry out and give effect to the provisions of
the Exchange Control Act 1953, the Insurance Act
1963, the Islamic Banking Act 1983, the Takaful Act
1984, the Banking and Financial Institutions Act 1989
and the Money-Changing Act 1998,, and to exercise
any other function under any other written law in
respect of which provision is made by Federal law.
(4) The Bank shall maintain at all times for such
period or periods as it may deem appropriate, a record
of balance of payments containing such information,
statistics and particulars as it may from time to time
determine, for the purpose of carrying out the principal
objects of the Bank under section 4 and discharging
its duties and functions under this Act.
(5) For the purpose of maintaining the record of
balance of payments, the Bank shall have the power
to require in writing at any time any person which, in
the opinion of the Bank, has in its possession or under
its custody or control, or has within its capacity to
obtain, compile or submit, any information, statistics or
document relating to the record of balance of
payments—
(a) to submit such information, statistics or
document to the Bank, within such period,
at such intervals, in such manner, in such
form and in writing or by means of any
visual recording (whether of still or moving
images) or any sound recording, or any
electronic, magnetic, mechanical or other
recording whatsoever, on any substance,
material, thing or article as the Bank may
specify in the requirement; or
(b) to attend before an officer of the Bank to
answer any enquiries in relation to such
information, statistics or document.
(6) Any—
(a) information, statistics or document
submitted pursuant to any requirement
under paragraph (a); or
(b) answer to any enquiry pursuant to any
requirement under paragraph (b),
* Note.
Act A1010.
[sic]
of subsection (5), shall be true, correct and complete,
and shall not be designed, directly or indirectly, to
mislead the Bank in relation to such requirement.
(7) The Bank may publish in any manner it deems
fit, consolidated statements of all or any part of the
record of balance of payments, aggregating the
information, statistics or particulars in documents
received or obtained under subsection (5), provided
that such publication shall not in any manner lead to
the identification of any person to which such
information, statistics or particulars relate.
(8) Notwithstanding section 16A or any other written
law, but without prejudice to subsection (7), any
information, statistics or document received or
obtained by the Bank under subsection (5) shall be
used by the Bank for the purposes of maintaining the
record of balance of payments, carrying out its
principal objects under section 4 and discharging its
duties and functions under this Act, and shall not be
disclosed by the Bank to any person other than the
Governor, Deputy Governors, or an officer or
employee of the Bank for all or any of the aforesaid
purposes.
(9) For the purposes of giving effect to subsections
(4), (5) and (6), the Bank may make such regulations
under section 54 as it deems necessary or expedient.
* Deemed to have been in force in relation to—
(a) the Exchange Control Act 1953 with effect
from 28th July 1966;
(b) the Insurance Act 1963 and the Takaful Act
1984 with effect from 1st May 1988; and
(c) the Islamic Banking Act 1983 and the
Banking and Financial Institutions Act 1989,
respectively, with effect from their
respective dates of commencement.
(See s. 14 (3) of Act A737.)
Establishment of *30A. (1) Notwithstanding section 31, the Bank may
body corporate for establish a body corporate for the purposes of
training, etc. training, research and development of human
resource in relation to banking and financial services.
(2) The Bank may grant, donate, loan or advance
any sum of money as may be necessary for the
establishment or operations of a body corporate
established under subsection (1) and create and
manage a fund to meet the expenses of such body
corporate.
*
All things done by the Bank or any person or
* Note
Act A1213.
authority on behalf of the Bank in the preparation
of and towards the proper implementation of the
provision of section 30A of this Act as introduced
by subsection (1), and any expenditure incurred
in relation to such implementation, in anticipation
of the enactment of section 30A of this Act shall
be deemed to have been authorized by this Act.
Business which 31. The Bank may not—
Bank may not
transact.
(a) engage in trade or otherwise have a direct
interest in any commercial, agricultural,
industrial or any other undertaking except—
(i) as provided in section 30 (1) (j); or
(ii) in the course of the satisfaction of debts
due to the Bank: provided that any such
interest shall be disposed of at the
earliest suitable opportunity;
(b) grant loans upon security of any shares;
(c) except as provided in section 30 (1) (j) and
(oo) (i), purchase the shares of any
corporation, including the shares of any
banking institution or other financial
institution which is a company;
(d) except as provided in sections 33, 42 and
49, grant unsecured advances or advances
secured otherwise than as laid down in
section 30 (1) (ff), (fff), (ffff), (fffff), (k) and
(l):
Provided that in the event of any debt due
to the Bank becoming in the opinion of the
Bank endangered, the Bank may secure
such debt on any immovable or movable
property of the debtor and may acquire
such property, which shall, however, be
resold at the earliest suitable moment;
(e) purchase, acquire or lease immovable
property except in accordance with the
proviso to paragraph (d) and except so far
as the Bank shall consider necessary or
expedient for the provision, or future
provision, of business premises for the
Bank and its agencies and any Clearing
Houses established pursuant to section 30
(1)(w) and of residences for the Governor,
Deputy Governors, officers and employees
and of amenities for the promotion of the
welfare of officers and employees:
Provided that where any immovable
property purchased, acquired or leased by
the Bank for any of the said purposes, is
not immediately required for those
purposes, or where any immovable
property referred to in the proviso to
paragraph (d) cannot be immediately
resold, it shall be lawful for the Bank to
grant leases or tenancies of such
immovable property for such period as the
property is not required for the said
purposes or cannot be resold, as the case
may be;
(f) draw or accept bills payable otherwise than
on demand;
(g) allow the renewal or substitution of
maturing bills of exchange purchased,
discounted or rediscounted by or pledged
with the Bank:
Provided that in exceptional
circumstances the Bank may authorize one
renewal or one substitution only in either
case of not more than fifty per centum of
the original amount of any such bill for a
period not exceeding ninety days;
(h) accept for discount, or as security for an
advance made by the Bank, bills or notes
signed by members of the Board or by the
Bank’s officers or employees, except in
relation to any loan made by the Bank
under section 49.
Loans to, and
acquisition of,
banking and other
financial
institutions.
31A. (1) Notwithstanding section 31, where the
Bank considers that a licensed institution, or an
institution in respect of which an order has been made
by the Minister under section 24 (1) or 93 (1) of the
Banking and Financial Institutions Act 1989 is—
Act 372.
(i) likely to become unable to meet its
obligations; or
(ii) about to suspend payment,
the Bank may, with the concurrence of the Minister—
(a) grant loans to such institution against the
security of its own or any shares or any
other sufficient security;
(b) grant loans to any licensed institution to
purchase any shares or the whole or any
part of the properties and liabilities of such
institution; or
(c) purchase any shares of such institution for
the purpose of controlling the business of
such institution.
Act 372.
(2) For the purposes of this section, section 31B,
section 78 of the Banking and Financial Institutions
Act 1989, there shall be established an Advisory
Panel to advise the Minister on matters falling within
the purview of those provisions for which the
concurrence or consent of the Minister is required.
(3) The Advisory Panel shall consist of such
persons as may be appointed by the Minister on the
recommendation of the Bank.
(4) The persons appointed under subsection (3)
shall be paid by the Bank such remuneration and
allowances as may be specified in writing by the
Minister.
Power of Bank to *31B. (1) The Bank may, with the concurrence of
make an order in the Minister, if it is satisfied that—
respect of a
deposit-taker to
protect the
interests of its
depositors, etc.
(a) a deposit-taker—
(i) has become, or is likely to become,
unable to meet all or any of its
obligations; or
(ii) is about to suspend, or has suspended,
payment to any extent; and
(b) it is consequently necessary to take action
under this section for the purpose of—
(i) securing or maintaining the financial
stability of Malaysia; and
(ii) the protection of the interests of
depositors in the deposit-taker,
by order published in the Gazette, make all or any of
the following provisions:
(aa) provide for the Bank—
(i) to purchase any shares of a licensed
finance company;
(ii) to make an advance of its funds to a
licensed finance company, repayable
with or without interest, for the purpose
of being utilised by the licensed finance
company solely to acquire the property
and liabilities of the deposit-taker, or the
interests of the depositors in the
deposit-taker; or
(iii) to make an advance of its funds to a
bank incorporated in Malaysia,
repayable with or without interest, to be
utilised by the bank solely to acquire a
licensed finance company which,
thereafter, shall acquire the property
* Note
and liabilities of the deposit-taker or the
interests of the depositors in the
deposit-taker; and
(bb) provide for the depositors, in exchange for
their interest in the deposit-taker, to be
given shares in the licensed finance
company referred to in subparagraph (i),
(ii), or (iii), as the case may be, of
paragraph (aa).
(2) An order under subsection (1) shall not be made
by the Bank unless—
(a) the consent of the deposit-taker has been
obtained;
(b) the available unencumbered assets of the
deposit-taker are insufficient to meet its
deposit-liabilities; and
(c) the consents of the depositors have been
obtained, except where, on the application
of the Bank to the High Court by way of ex
parte originating summons, it is ordered by
the High Court that such consents be
dispensed with:
Provided that the above provisions shall not apply to
any amendment or revocation of the original order
made under subsection (1).
(3) Where the Bank makes an order under
subsection (1), order shall constitute sufficient
authority for the Bank or any other person named or
described in the order to do all or any of the acts or
things as may be required or authorised to be done by
the Bank or such person under the terms of the order,
and to do all other acts and things as may be
reasonably incidental to, or reasonably necessary to
be done, to give effect to such terms.
(4) For the purpose only of giving effect to the terms
of an order under subsection (1), the Bank may
authorise the licensed finance company referred to in
the order by virtue of subparagraph (i), (ii) or (iii), as
the case may be, of subsection (1) (aa), to—
(a) undertake a reconstruction exercise;
(b) purchase and acquire the property and
liabilities of the deposit-taker and the
interests of the depositors in the deposittaker;
(c) enter into such arrangement, agreement or
transaction with the deposit-taker or its
depositors as may be necessary, expedient
or desirable; or
(d) do any other act or thing which is not
inconsistent with the order, which, in the
opinion of the Bank, is required to be done
to ensure the successful implementation of
[sic]
the order.
(5) An order under subsection (1) may provide for
all or any of the following:
(a) the date on and from which the order shall
take effect, being a date earlier or later than
the date of the making of the order
(hereinafter in this section referred to as
“the transfer date”);
(b) the vesting of any property held by the
transferor either alone or jointly with any
other person in the transferee either alone
or, as the case may be, jointly with such
other person, on and from the transfer date,
in the same capacity, upon the trusts, and
with and subject to the powers, provisions
and liabilities applicable thereto
respectively;
(c) for any existing instrument, whether in the
form of a deed, will or otherwise, or order of
any court, under or by virtue of which any
property became vested in the transferor, to
be construed and to have effect as if for
any reference therein to the transferor there
were substituted a reference to the
transferee;
(d) for any existing contract or agreement to
which the transferor was a party to have
effect as if the transferee had been a party
thereto instead of the transferor;
(e) for any account between the transferor and
its customer, including a depositor, to
become an account between the transferee
and the customer or depositor, subject to
the conditions and incidents as theretofore,
and for such accounts to be deemed for all
purposes to be a single continuing account;
(f) for any existing instruction, order, direction,
mandate, power of attorney, authority,
undertaking or consent, whether or not in
relation to an account, given to the
transferor, either alone or jointly with
another person, to have effect, in respect of
anything due to be done as if given to the
transferee either alone or, as the case may
be, jointly with the other person;
(g) for any negotiable instrument or order for
payment of money drawn on, or given to, or
accepted or endorsed by, the transferor or
payable at the place of business of the
transferor, whether so drawn, given,
accepted or endorsed before, on, or after,
the transfer date, to have the same effect
on and from the transfer date, as if it had
been drawn on, or given to, or accepted or
[sic]
endorsed by, the transferee or were
payable at the place of business of the
transferee;
(h) for the custody of any document, goods or
thing held by the transferor as bailee
immediately before the transfer date to
pass to the transferee and the rights and
obligations of the transferor under any
contract of bailment relating to any such
document, goods or thing to be transferred
to the transferee;
(i) for any security held immediately before the
transfer date by the transferor, or by a
nominee of, or trustee for, the transferor, as
security for the payment or discharge of
any liability of any persons to be held by the
transferee or, as the case may be, to be
held by that nominee or trustee as the
nominee of, or trustee for, the transferee,
and to the extent of those liabilities, be
available to the transferee as security for
the payment or discharge of those
liabilities; and where any such security
extends to future advances or future
liabilities, to be held by, and to be available
as aforesaid to, the transferee as security
for future advances by, and future liabilities
to, the transferee in the same manner in all
respects as future advances by, or future
liabilities to, the transferor were secured
thereby immediately before the transfer
date;
(j) where any right or liability of the transferor
is transferred to the transferee, for the
transferee to have the same rights, powers
and remedies (and in particular the same
rights and powers as to taking or resisting
legal proceedings or making or resisting
applications to any authority) for
ascertaining, protecting or enforcing that
right or resisting that liability as if it had at
all times been a right or liability of the
transferee, including those rights or
liabilities in respect of any legal
proceedings or applications to any authority
pending immediately before the transfer
date by or against the transferor;
(k) any judgement or award obtained by or
against the transferor and not fully satisfied
before the transfer date to be enforceable
by or, as the case may be, against the
transferee; and
(l) for all and every such incidental,
consequential and supplemental matters as
are necessary, expedient, or desirable, to
give full force end effect to the terms of the
order.
(6) Where the order under subsection (1) provides
for the transfer of any property vested in or held by, or
any liabilities suffered by, the transferor, either alone
or jointly with any other person, then, by virtue of the
order, that property and those liabilities shall, subject
to subsection (8), on and from the transfer date,
become vested in or held by, or be sufferred by, the
transferee, either alone or jointly with such other
person, as the case may be.
(7) The Bank shall, within thirty days of the
publication of an order in the Gazette under
subsection (1), lodge a copy of the order with—
(a) the Registrar of Companies;
(b) the Registrar General of Co-operative
Societies in West Malaysia, or the
respective Registrar of Co-operative
Societies in Sabah or Sarawak, or the
Registrar of Farmers’ Organizations, or the
Registrar of Fishermen’s Associations, as
may be relevant, where the deposit-taker to
which the order relates is a co-operative
society;
(c) any other authority, person, or body which
is responsible for the registration, licensing
or otherwise of the deposit-taker to which
the order relates; and
(d) the appropriate authority, if any, concerned
with the registration or recording of dealings
in any movable property, or interest in any
movable property, transferred pursuant to
the order.
(8) Any provision in any order under subsection (1)
providing for the transfer of any alienated land, or any
share or interest in any alienated land, to any person
shall not have effect unless the transferee makes an
application to the High Court by way of an ex parte
originating summons for an order of the High Court
vesting such alienated land, or such share or interest
in alienated land, in the transferee, pursuant to the
order under subsection (1), and where the High Court
grants an order to vest the same in the transferee—
Act 56/65.
Sabah Cap. 68.
(a) the High Court shall, where the alienated
land is in West Malaysia, pursuant to
section 420 (2) of the National Land Code,
cause a copy of such order to be served on
the Registrar of Titles or the Land
Administrator, as the case may be,
immediately after the making of such order
so that the Registrar of Titles or the Land
Administrator, as the case may be, gives
effect to subsections (2), (3) and (4) of the
said section 420;
(b) where the alienated land is in Sabah, the
transferee shall, as soon as practicable
after such order has been made, present
such order to the Registrar of Titles for
registration of the transferee as the
registered owner of such alienated land, or
of such share or interest in alienated land,
as provided under section 114 (2) of the
Land Ordinance of Sabah; or
Swk. Cap. 81.
(c) where the alienated land is in Sarawak, the
transferee shall, as soon as practicable
after such order has been made, produce
an authenticated copy of such order to the
Registrar for the registration of the vesting
of such alienated land, or of such share or
interest in alienated land, in the transferee,
as provided under section 171 of the Land
Code of Sarawak.
(9) An order under subsection (1) may relate to any
property or business of the transferor in any country,
territory or place outside Malaysia and, if it so relates,
effect may be given to it in accordance with the law
applicable in such country, territory or place.
(10) Without prejudice to subsection (2) (a) and (c),
an order under subsection (1) shall be legally binding
on all persons to whom the order is directed or who
are affected thereby, regardless that the person to
whom it is directed or who is affected by it had no
notice of any of the circumstances which led to the
making of the order, or had no opportunity to make
any representation thereon to, or to be heard thereon
by, the Bank.
(11) Where, pursuant to subsection (1) (aa) (i), the
Bank purchases any shares of a licensed finance
company, it shall dispose of any shares it may
continue to hold after the order under subsection (1)
under which such shares were purchased has been
given effect to, and the Bank is satisfied that the
circumstances referred to in subsection (1) (a), and
the purposes mentioned in paragraph (b) of that
subsection, no longer exist.
(12) For the purposes of this section—
Act 372.
(a) “deposit”, “depositor”, “liabilities”, “licensed
finance company”, and “property” have the
respective meaning assigned thereto in
section 2 (1) of the Banking and Financial
Institutions Act 1989, with the definition of
“deposit” modified in the manner provided
under section 25 (3) of that Act;
Act 372.
(b) “business” and “security” have the
respective meaning assigned thereto in
section 50 (8) of the Banking and Financial
Institutions Act 1989; and
Act 372.
(c) “deposit-taker” means (without prejudice to
paragraphs (i) and (ii) of this definition) any
person who takes, receives, or accepts, a
deposit in contravention of section 25 of the
Banking and Financial Institutions Act 1989
and includes—
(i) a co-operative society as defined in that
Act; or
Act 81.
(ii) a pawnbroker as defined in the
Pawnbrokers Act 1972.
(13) This section shall have full force and effect
notwithstanding—
(a) anything inconsistent therewith or contrary
thereto contained in any other provision of
this Act;
(b) anything contained in the written law by or
under which the deposit-taker is registered,
incorporated, established, appointed or
constituted; and
(c) anything contained in any other written law,
other than the Constitution.
* The substitution of this section by section 17 (1)
of the Central Bank of Malaysia, Exchange
Control, Insurance and Takaful (Amendment) Act
1989 (Act A 737) shall not in any manner or to
any extent whatsoever affect the continued
validity and operation of any order made by the
Bank under this section as it stood before its
substitution and such order shall, after the
commencement of aforesaid Act, be deemed to
have been made under this section as set out
under section 17 (1) of aforesaid Act and shall,
accordingly, be given effect to thereunder, and
any difficulty arising in this connection may be
removed by the Bank making an amendment of
that order with the concurrence of the Minister.
Act A737.
Power to reduce
share capital and
to cancel shares
of financial
institution.
Act 372.
See s. 17 (2) of Act A 737.
31C. (1) Notwithstanding anything in any written law
or the articles of association of a financial institution,
where the Bank has, under section 73 (2) (a) of the
Banking and Financial Institution Act 1989 assumed
control of and carries on the business of the financial
institution and the paid up capital of such financial
institution is lost or unrepresented by available assets,
the Bank may apply to the High Court for an order to
reduce the share capital of such financial institution by
cancelling any portion of its paid up capital which is
lost or unrepresented by available assets.
(2) Where the High Court makes an order referred
to in subsection (1) to reduce the share capital of a
financial institution, the Court may—
(a) on the application by the Bank; and
(b) if, on the expiry of thirty days from the date
of any call made by the financial institution
on its shareholders to pay on their
respective shares, payment on any such
shares has not been made,
direct that such shares for which payment has not
been made be cancelled accordingly.
(3) Where the share capital of a financial institution
is reduced pursuant to subsection (1), or any of its
shares has been cancelled pursuant to subsection (2),
the Bank may cause the memorandum of association
of such financial institution to be altered accordingly.
(4) For the purposes of this section—
Act 125.
(a) section 64 of the Companies Act 1965
shall, subject to subsection (1) and if the
High Court so directs, apply accordingly;
and
Act 372.
(b) “financial institution” means an Islamic
bank, a licensed local institution as defined
in the Banking and Financial Institutions Act
1989, or an institution in respect of which
the Minister has made an order under
section 24 (1) or 93 (1) of that Act,
respectively.
PART VI
RELATIONS WITH THE GOVERNMENT
Bank as a banker 32. (1) The Bank shall act as a banker and a
to the financial agent of the Government.
Government.
(2) Whenever the Bank shall receive and disburse
Government moneys it shall keep account thereof
without remuneration for such service.
(3) In any place where the Bank has no branch, it
may appoint any banking institution to act as its agent
for the collection and payment of Government
moneys.
(4) The Bank may act generally as agent for the
Government on such terms and conditions as may be
agreed between the Bank and the Government, where
the Bank can do so appropriately and consistently with
the provisions of this Act and with its duties and
functions as a central bank.
Temporary 33. (1) The Bank may grant temporary advances to
advances to the the Government and the Government is hereby
Government. authorised to receive such advances in respect of
temporary deficiencies of budget revenue at such rate
or rates of interest as the Bank may determine.
(2) The total amount of advances granted under
subsection (1) outstanding shall not at any time
exceed twelve and a half per centum of the estimated
receipts of Malaysia shown in the statement laid
before the House of Representatives pursuant to
Article 99 of the Constitution for the Government’s
financial year in which the advances are granted.
(3) All advances granted under subsection (1) shall
be repaid as soon as possible and shall in any event
be payable not more than three months after the end
of the Government’s financial year in which they are
granted; and if after that date any such advances
remain unrepaid, the power of the Bank to grant
further such advances in any subsequent financial
year shall not be exercisable unless and until the
outstanding advances have been repaid.
Issues of policy. 34. (1) The Board shall keep the Minister informed
of—
(a) the monetary and banking policy;
Act 89.
Act 276.
Act 312.
Act 372.
Act 577.
Act 17.
(b) the policies in respect of institutions in
relation to which the Bank is conferred with
powers under the Insurance Act 1963, the
Islamic Banking Act 1983, the Takaful Act
1984, the Banking and Financial Institutions
Act 1989 and the Money- Changing Act
1998; and
(c) the policies in respect of the Exchange
Control Act 1953,
pursued or intended to be pursued by the Bank.
(2) The Minister may, from time to time, if he
disagrees with the Board on any of the aforesaid
policies pursued or intended to be pursued by the
Bank, issue directives to the Board relating to such
policies, and any such directive shall become binding
on the Board, which shall forthwith take all steps
necessary or expedient to give effect thereto.
(3) If the Board objects to any such directive, the
Board may submit its objections and the reasons
therefor in writing to the Minister, who shall cause the
same, together with his directive, to be laid before the
House of Representatives.
PART VII
RELATIONS WITH BANKING AND OTHER
FINANCIAL INSTITUTIONS
Act A1010.
Co-operation with 35. The Bank shall use its best endeavours in cobanking operation with other banks in Malaysia—
institutions and
other financial
institutions.
(a) to promote and maintain banking and
financial services for the public;
(b) to foster higher standards of banking and
finance in Malaysia.
36. (Repealed).
Recommendations
to banking
institutions, other
financial
institutions or
institutions or
persons as
specified in
paragraphs (a),
(b), (c), (d) and
(e).
37. (1) When the Board is satisfied that it is
necessary to do so for the purpose of giving effect to
the objects of the Bank, the Board may make
recommendations to the banking institutions, other
financial institutions or institutions or persons as
specified in paragraphs (a), (b), (c), (d) and (e) on all
or any of the following matters:
(a) the policy to be followed by banking
institutions in relation to the granting of
advances and the extension of credit
facilities, including the classes of purposes
for which advances may or may not be
made or credit facilities extended;
(b) in the case of banking institutions other
than Islamic banks, the rates of interest
payable to or by, the rates of discount
chargeable by, or the rates of commission
and other charges payable to, such banking
institutions;
(c) a reserve to be held by each banking
institution, other than an Islamic bank, at
the Central Bank comprising such amounts
expressed as a percentage of such banking
institution’s sight, savings account, time
and other deposit liabilities in Malaysia and
such other liabilities as may be approved by
the Minister on the recommendation of the
Board, whether denominated in Malaysian
or foreign currency;
(d) a reserve to be held by each Islamic bank
at the Central Bank comprising such
amounts expressed as a percentage of
each bank’s sight, savings account,
investment account, time and other deposit
liabilities as may be approved by the
Minister on the recommendation of the
Board, whether denominated in Malaysian
Note.
or foreign currency;
(e) any other matter relating to—
Act 276.
Act 372.
(i) the supervision and regulation of
banking institutions and other financial
institutions pursuant to this Act, the
Islamic Banking Act 1983 or the
Banking and Financial Institutions Act
1989;
Act 89.
Act 312.
Act 577.
(ii) the supervision and regulation of
institutions and other persons pursuant
to the Insurance Act 1963, the Takaful
Act 1984 or the Money-Changing Act
1998; or
(iii) monetary policy to be given effect to by
banking institutions, other financial
institutions or other institutions or
persons,
whether or not such matter is similar to those specified
in paragraphs (a), (b), (c) and (d).
(2) The recommendations made in pursuance of
subsection (1) (c) or (d) may specify different ratios of
reserves for different categories of banking
institutions. The Board may determine the categories
by reference to the size or location of such banking
institutions or to both, size being measured in relation
to the number of branches, any or all categories of
assets or liabilities of such banking institution or any
combination thereof.
(3) In respect of subsection (1) (a) the Board may,
in regard to the advances of such banking institution
or each class of purpose for which these advances
are made, specify that a deposit or deposits be placed
by such banking institution with the Central Bank
against such advances at such rates of interest
payable to such banking institution as may be
determined by the Central Bank.
(4) Where a banking institution is unable to comply
with any recommendation of the Board under
paragraph (1)(a) (in this subsection referred to as the
“defaulting banking institution”) and any such
recommendation requires the banking institution to
grant advances or extend credit facilities of such
proportion or amount of its advances or credit facilities
for any particular purpose as set out in the
recommendation, the Board may require the banking
institution to place a sum on deposit with the Central
Bank equivalent to such proportion of advances or
credit facilities, free of interest, for such period and on
such terms as may be determined by the Central
Bank.
(5) The Central Bank shall have the power to
transfer the sums deposited with it by the defaulting
banking institution referred to in subsection (4) to
another banking institution for such banking institution
Act A1213.
to grant advances or extend credit facilities for the
purpose set out in the recommendation made under
paragraph (1)(a) for such period and on such terms as
may be determined by the Central Bank.
(6) The Central Bank shall refund to the defaulting
banking institution referred to in subsection (4) the
deposits placed with it, free of interest, after the expiry
of the period determined by the Central Bank under
subsection (4).
Recommendations
to persons or
classes of persons
(other than
banking
institution).
38. When the Board is satisfied that it is necessary to
do so for the purpose of giving effect to the objects of
the Bank, the Board may make recommendations to
such persons or classes of persons (other than
banking institution) carrying on business in relation to
the receipt of money on deposit from members of the
public as may be determined by the Minister on the
recommendation of the Board in relation to the rates
of interest payable to or by, or the rates of discount
chargeable by, such persons or classes of persons.
Directions to 39. (1) When the Board has made a
banking recommendation in accordance with section 37 or 38,
institutions, etc. the Bank may subsequently, with the approval of the
Minister, issue a direction in writing to any institution
or person referred to in section 37 or any person or
class of persons referred to in section 38 on all or any
of the matters referred to in such section requiring that
effect is given to the recommendation within a
reasonable time.
(2) The direction issued under subsection (1) in
relation to a reserve to be held by a banking institution
at the Bank may specify different ratios of the reserve
for different categories of banking institutions. The
Bank may determine the categories by reference to
the size or location of the banking institutions or to
both, size being measured in relation to the number of
branches, any or all categories of assets or liabilities
of the banking institution or any combination thereof.
Saving in respect 40. Nothing in sections 37 to 39—
of sections 37 to
39.
(a) authorizes a recommendation or a
prescription to be made or a direction to be
given in relation to an advance made or
proposed to be made or the extension of
credit facilities to a particular person or the
rate of interest or rate of discount
chargeable to a particular person;
(b) affects the validity of a transaction entered
into in relation to an advance or credit
facility or affects the right of any institution
or person referred to in section 37 or 38 to
recover money advanced or enforce the
security given in respect of money
advanced.
No discrimination 41. The Bank shall not discriminate among licensed
in directions. banks, licensed merchant banks, or licensed finance
Act 372. companies, (as defined in the Banking and Financial
Institutions Act 1989), respectively, or among Islamic
banks, in any directions issued under section 39 in
regard to the policy to be followed by such banking
institutions in granting advances or extending credit
facilities or, in the case of banking institutions other
than Islamic banks, the rates of interest payable to or
by such banking institutions, or the rates of discount
chargeable by such banking institutions:
Provided that the Bank may provide in such
directions for different classes, categories or
descriptions of licensed banks, licensed merchant
banks or licensed finance companies, respectively,
such different proportions of their deposits as the
Bank may specify which may be used for granting
advances or extending credit facilities in such different
proportions for such different purposes as the Bank
may specify, and the Bank may determine such
classes, categories or descriptions by reference to the
size or location of the banking institution or to both,
size being measured in relation to the number of
branches, any or all categories of assets and
liabilities, of the banking institution, or any combination
thereof.
Special loans to
banking and other
financial
institutions.
42. The Central Bank may, if it deems such action
necessary to safeguard monetary stability, make a
loan or advance to any banking institution or other
financial institution, or enter into any transaction for
such purposes with any such institutions, which does
not involve any element which is not approved by the
Syariah, in accordance with the advice of the Syariah
Advisory Council, against such form of security as the
Central Bank may consider sufficient.
Clearing Houses
and settlement of
balances between
banking and other
financial
institutions.
43. (1) In order to facilitate the clearing of cheques
and other credit or payment instruments for banking
institutions and other financial institutions the Bank
shall, at an appropriate time and in conjunction with
such institutions, establish a Clearing House in Kuala
Lumpur and in such other place or places as the Bank
may consider necessary.
(2) A banking institution or other financial institution
shall settle, in such manner as the Central Bank may
from time to time specify by notice in writing, all
balances between itself and any other banking
institution or other financial institution arising out of the
Act A1213.
general clearances effected in Kuala Lumpur and
such other places as the Central Bank may specify.
44. (Repealed).
PART VIII
GENERAL
Interpretation *44A. For the purposes of this Part—
* Note
Act A1213
“central depository” means the system for the
handling of debt securities established or operated by
the Bank pursuant to paragraph 44B(1)(d);
“controller” has the meaning assigned thereto in the
Banking and Financial Institutions Act 1989;
“debt securities” includes—
(a) stock issued under the Loan (Local)
Ordinance 1959 [Ord. 43/1959];
(b) Treasury Bills issued under the Treasury
Bills (Local) Act 1946 [Act 188];
(c) investments under the Government
Investment Act 1983 [Act 275];
(d) securities issued by the Bank under
paragraph 30(1)(bb);
(e) debentures, as defined in the Companies
Act 1965, denominated and payable in
ringgit issued by the Government of any
State, any public authority, any statutory
body, any corporation including a private or
a public company, or such other persons
who under their constituent documents may
issue such debentures that are tendered,
deposited, cleared or settled through any
system established or operated by the
Bank pursuant to subsection 44B(1); and
(f) such securities or debentures as may be
approved by the Minister on the
recommendation of the Board that are
tendered, deposited, cleared or settled
through any system established or
operated by the Bank pursuant to
subsection 44B(1).
Bank may *44B. (1) The Bank may establish or operate such
establish systems systems, electronic or otherwise, as may be
for funds, debt necessary—
securities, etc.
* Note
Act A1213
(a) to facilitate the transferring, clearing and
settlement of funds and debt securities in
the money market;
(b) to facilitate the tendering, issuance,
borrowing and lending of debt securities;
(c) to provide information to any person
relating to the money market or to the
tender, issue, trading and offer, or bid
prices of debt securities or any other
related information relating to debt
securities;
(d) for the central handling of debt securities
deposited with the Bank by means of
entries in debt securities accounts without
physical delivery of certificates;
(e) for the carrying out of any other activity
related to any of the systems in paragraphs
(a) to (d); and
(f) for the dissemination of information relating
to paragraphs (a) to (e).
(2) The Bank may function as a depository or
paying agent or undertake any other ancillary or
incidental function related to the establishment or
operation of any of the systems referred to in
subsection (1).
(3) The Bank may, with the approval of the Minister,
make such regulations as may be necessary for the
regulation and efficient operation of any system
established or operated pursuant to subsection (1),
including regulations—
(a) to ensure orderly dealings in debt securities
through the system;
(b) to impose obligations and duties on
participants of any system established or
operated pursuant to subsection (1);
(c) in relation to the transfer, clearance and
settlement of funds and debt securities;
(d) in relation to the tendering, trading,
borrowing, lending and dissemination of
information of debt securities;
(e) in relation to the deposit, holding, transfer
and withdrawal of debt securities in or from
the central depository; and
(f) in relation to the suspension or withdrawal
of the services of the central depository.
Bank may require *44C. (1) The Bank may, for the purposes of section
information 44B, by notice in writing, require any person to
relating to debt submit—
securities
* Note
Act A1213
(a) any information relating to any debt
securities tendered, traded, acquired, or
held directly or indirectly either for his own
benefit or for any other person;
(b) a statement of his current holding of debt
securities and whether he holds such
securities as a beneficial owner or as a
trustee; or
(c) if he holds any debt securities deposited
with the central depository as a trustee,
information as to the identification of the
persons for whom he holds such debt
securities by name and by any other
particulars sufficient to enable those
persons to be identified and to ascertain the
nature of their interest in such debt
securities.
(2) Any person who has been served with a notice
under subsection (1) shall, within seven days of the
receipt of such notice or such longer period as may be
allowed by the Bank, submit to the Bank information
required by the Bank and duly verified by a statutory
declaration.
Bank may prohibit *44D. (1) The Bank may, by notice in writing,
certain activities prohibit any person from trading, borrowing, lending,
clearing, settling, redeeming, dealing or engaging in
other activities relating to debt securities deposited in
the central depository if it is not satisfied as to the
identity of—
(a) such person;
(b) any person for whom the person referred to
in paragraph (a) holds such debt securities;
or
(c) the controllers of the person referred to in
paragraphs (a) and (b), where such person
is an institution.
(2) Any person who has been served with a notice
under subsection (1) shall cease to engage in the
prohibited activity upon receipt of the notice.
(3) Any person who has been prohibited from
engaging in any activity pursuant to a notice under
subsection (1) may make representations to the Bank
and the Bank may, upon review of his or its
representations, revoke or vary the prohibition subject
to such terms and conditions as may be imposed by
the Bank.
(4) In this section, “controller” has the meaning
assigned thereto in the Banking and Financial
Institutions Act 1989.
* Note
Act A1213
*
This section is deemed to have come into
operation on 1 January 1990.
Any act or thing done by the Bank before the
coming into operation of this section relating to
systems for debt securities shall be deemed to
have been done under or pursuant to the
provisions of sections 44A, 44B, 44C and 44D of
the Act as introduced by this section.
Bank’s financial 45. The financial year of the Bank shall begin on the
year. first day of January and end on the thirty-first day of
December of each year.
Audit. 46. The accounts of the Bank shall be audited by the
Auditor General.
Return of assets 47. (1) The Bank shall forthwith after the fifteenth
and liabilities. day and after the last day of each month make up and
publish a return of its assets and liabilities as at the
close of business on such days respectively or, if
either of those days is a holiday, then at the close of
business on the last business day preceding those
days.
(2) A copy of each return made under subsection
(1) shall be transmitted to the Minister.
Preparation and 48. (1) The Bank shall within three months from the
publication of close of its financial year—
annual report and
balance sheet.
(a) transmit to the Minister a copy of the annual
accounts certified by the Auditor General,
and such accounts shall then be published
in the Gazette;
(b) transmit to the Minister a report by the
Board on the working of the Bank
throughout the year and such report shall
be published by the Bank.
(2) The annual accounts and annual report shall, as
soon as may be, be laid before the Senate and the
House of Representatives.
Loans and
scholarships to
officers and
employees, and
scholarships and
study loans to
other persons.
49. (1) Without prejudice to section 15 (5) and (6),
but subject to subsections (2), (3) and (4) of this
section the Bank shall not lend money to an officer or
employee.
(2) The Bank may lend money with or without
interest or provide finance in accordance with Syariah
principles to an officer or employee—
Act A1213.
(a) for the purchase, erection, alteration,
renovation or enlargement of a house in
which he resides or intends to reside; or
(b) to discharge a mortgage or encumbrance
on such a house; or
(c) for the purchase of a vehicle.
(3) The Bank may, where the Governor is satisfied
that special or compassionate circumstances exist or
the purpose is appropriate, lend to an officer or
employee on such terms and conditions as the
Governor thinks fit, money not exceeding at any one
time an amount equal to three months’ salary of the
officer or employee.
(4) The Bank may grant study loans or scholarships
to any officer or employee of the Bank or any child
(including a step-child or adopted child) of such officer
or employee, or to any suitable person, in accordance
with such terms and conditions as may be approved
by the Board generally or in any particular case.
Power to appoint 49A. The Bank may, by instrument, under its seal,
Attorney. appoint a person (whether in Malaysia or in a place
outside Malaysia) to be its Attorney, and the person so
appointed may, subject to the instrument, do any act
or execute any power or function which he is
authorized by the instrument to do or execute.
50. (Repealed).
Penalties. 51. (1) Any banking institution or other financial
institution which—
(a)-(b) (Repealed).
(c) fails to comply with section 43 (2),
shall, on conviction, be liable to a fine not exceeding
one thousand ringgit for every day during which such
default or contravention continues.
(2) (Omitted).
(3) Any institution or person referred to in section 37
which, or any person who, fails to comply with any
direction issued under section 39 other than in relation
to a reserve to be held by the bank shall, on
conviction, be liable to a fine not exceeding five
hundred thousand ringgit, and to a further fine not
exceeding five thousand ringgit for every day during
which the default continues.
Note.
(4) (a) Any banking institution which, or any
person who, fails to comply with any direction issued
under section 39 in relation to a reserve to be held by
the banking institution shall be liable to pay, on being
called upon to do so by the Central Bank, a penalty of
not more than one-tenth of one per centum of the
amount of the deficiency for every day during which
the deficiency continues.
(b) Any banking institution which, or any
person who, fails or refuses to pay a
penalty under paragraph (a) shall, on
conviction, be liable to a fine not exceeding
five hundred thousand ringgit.
(5) Any person who contravenes section 16 shall,
on conviction, be liable to imprisonment for a term not
exceeding three years or to a fine not exceeding five
thousand ringgit or to both.
(5A) Any director, officer or employee of the Bank or
of a banking institution or other financial institution
who contravenes section 30(1)(mmm) in respect of
maintaining as secret any credit information disclosed
by the Bank shall, on conviction, be liable to
imprisonment for a term not exceeding three years or
to a fine not exceeding five thousand ringgit or to both.
(6) Any person who contravenes section 27A shall
be guilty of an offence and shall on conviction be
liable to a fine not exceeding five thousand ringgit.
(7) Any person who fails to comply with any
requirement of the Bank under section 30 (5) or who
contravenes section 30 (6) shall be guilty of an
offence and shall, on conviction, be liable to a fine not
exceeding fifty thousand ringgit or to imprisonment for
a term not exceeding six months or to both.
(8) Any person who contravenes any written
directive issued under subsection 16B(7) shall be
guilty of an offence and shall, on conviction, be liable
to a fine not exceeding five hundred thousand ringgit,
and to a further fine not exceeding five thousand
ringgit for every day during which the contravention
continues.
(9) Any person who does what he is prohibited or
restricted from doing or fails to do what he is required
or directed to do by regulations made by the Bank
under subsection 44B(3) shall be guilty of an offence
and shall, on conviction, be liable to a fine not
exceeding five million ringgit.
(10) Any person who fails to comply with the notice
issued under subsection 44C(1) or 44D(1) shall be
guilty of an offence and shall, on conviction, be liable
to a fine not exceeding five million ringgit or to
imprisonment for a term not exceeding five years or to
both.
Act A1213.
Power of 51A. (1) The Governor with the concurrence of the
Governor to Minister may compound any offence punishable under
compound. this Act by accepting such sum of money as he thinks
fit not exceeding the amount of the maximum fine to
which that person would have been liable if he had
been convicted of the offence.
(2) Any monies paid to the Governor pursuant to
subsection (1) shall be paid into and form part of the
Consolidated Fund.
Fiat of Public 52. No prosecution in respect of any offence under
Prosecutor. this Act shall be instituted without the consent in
writing of the Public Prosecutor.
Jurisdiction. 53. Notwithstanding the provisions of any other
written law, a Sessions Court shall have jurisdiction to
try any offence against this Act and to impose the full
penalty prescribed therefor.
Bank may be 53A. Notwithstanding the provisions of any written
represented by law—
director, officer or
employee of Bank
in civil
proceedings.
(a) in any civil proceedings by or against the
Bank; or
(b) in any other civil proceedings in which the
Bank is required or permitted by the court
to be represented, or to be heard, or is
otherwise entitled to be represented or to
be heard,
any director, officer or employee of the Bank
authorised by the Governor for the purpose, may, on
behalf of the Bank, institute such proceedings or
appear as an advocate therein and may make all
appearances and applications and do all acts in
respect of such proceedings on behalf of the Bank.
Power of Bank to 54. The Bank may, with the approval of the Minister,
make regulations. make regulations for the better carrying out of the
objects and purposes of this Act.
Fees and charges 54A. The Bank may impose such fees or charges as
it deems appropriate for the services provided by the
Bank in relation to its functions under this Act or any
other written law.”.
55. (Omitted).
Act A1213.
PART IX
EXTENSION OF JURISDICTION
Special provision
relating to
extension of
jurisdiction, etc., of
the Bank.
56. Whenever the Government shall have entered
into an agreement with the Government of any
territory whereby the jurisdiction powers and
obligations of the Bank may be extended to any such
territory, and such agreement has been approved by
resolution of the House of Representatives, the Yang
di-Pertuan Agong may by order amend, adapt or
repeal such provisions of this Act as appear to him
necessary for the purpose of bringing the provisions of
this Act into accord with the provisions of such
agreement.