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The banking system, comprising commercial banks, investment banks, and Islamic banks is the primary mobilize of funds and the main source of financing to support economic activities in Malaysia. The non-bank financial intermediaries, comprising development financial institutions, provident and pension funds insurance companies, and takaful operators, complement the banking institutions in mobilizing savings and meeting the financial needs of the economy. The Malaysian currency is called Malaysian Ringgit (RM). One Ringgit consists of 100 sen. Coins in use are 1,5,10,20,50 and RM 1. Notes are issued in RM 1, RM 2, RM 5, RM 10, RM 50 and RM 100. Malaysias national bank is the Bank Negara Malaysia. A large number of various banks is available. The major Malaysian commercial banks such as CIMB Bank, Maybank, Affin Bank and Alliance Bank Berhad. Several Islamic Banks are represented as well, some of the major ones being Bank Islam Bhd and Bank Mualamat Bhd. All larger foreign banks like HSBC, Deutsche Bank, Bank of America and JP Morgan Chase Bank are reprented in Malaysia offering expatiates the same service they are used to in their home country. Mainstream banking can be very slow in Malaysia and transactions and bill paying can mean waiting in very long queues. Due to this reason many banks offer internet and telephone banking and it is highly recommended to make use of these services. THE CENTRAL BANK Bank Negara Malaysia ( the bank), the Central Bank is the apex of the monetary and banking structure of the country. Its main objectives as defined in the Central Bank of Malaysia Act 1958 are to Issue currency and keep the reserves safeguarding the value of the currency Act as a banker and financial adviser to the government Promote monetary stability and a sound financial structure 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 THE IMPORTANCE OF FINANCIAL STABILITY IN MALAYSIA The financial system plays a critical role in the economy. It enables the financial intermediation process which facilitates the flow of funds between savers and borrowers thus ensuring that financial resources are allocated efficiently towards promoting economic growth and development. Financial stability describes the condition where the financial intermediation process functions smoothly and there is confidence in the operation key financial institutions and markets within the economy. Financial instability and its effects on the economy can be very costly due to its contagion or spillover effects to other parts of the economy. One of the main objectives of central banks is to promote and maintain monetary and financial stability as it contribute to a healthy economy and sustainable growth. Bank Negara Malaysia discharges the responsibility for promoting a sound and effient Malaysian financial system by preserving the soundness of financial institutions and the robustness of the financial infrastructure to with stand adverse economic cycles and shocks, thereby preventing inordinate disruptions to the intermediation process and maintaining confidence in the financial system. This is primarily achieved through the regulation and supervision of the licensed financial institutions by ensuring the continued reliability of major payment and settlement systems and actively contributing to the development of efficient financial markets. The Bank also remains vigilant to new emerging trends and challenges to the Malaysian financial system which could undermine financial stability by devoting significant resources towards instituting robust surveillance processes which aim to identify vulnerabilities and support pre-emptive actions to prevent systematic disturbances DEVELOPMENTS IN MALAYSIAS BANKING SYSTEM The banking system in Malaysia has come a long way to grow both in strength and stature, steadly advancing and maturing as it seeks to become more effective and efficient in performing its intermediation function. In the last decade alone, the industry has undergone some fundamental changes following a period of transformation facilitated by the Financial Sector. Today, our banking system is placed on a solid footing on the back of strong capitalization, strengthened by improved risk management and governance practices. We are also seeing increased sophistication and a wide spectrum of products and services being offered by diverse players in the marketplace. And the more competitive environment has led to continuous performance improvements with pervasive use of new technologies for operational efficiencies from back to front office and new means of interface with consumers. In charting the transformation journey of our financial services sector, we have long been aware that the quality of our workforce is fundamental to its success. Much focus therefore has been since the last decade to talent development with significant investment in capacity building and infrastructural ecosystem dedicated to raise the standards on education in financial services. This design thinking for the industry necessitates the banking system to further enhance its dynamism in the face of competition for innovation and quality in the offering of financial products and services. It also demands greater agility, astuteness and foresight on our part to go beyond and able to ride on the next wave of growth either at the higher end of the spectrum of financial services that focus on sophisticated and high value added activities or the lower end that cater for the traditionally underserved as well as opportunity to fully realize the benefits from the greater regional and international integration. Future success will hinge on our ability to constantly remold the workforce in the banking industry for a new marketplace with emphasis on a corresponding increase in the levels of knowledge, skills, competencies and overall quality of our talents. IMPACT OF THE GLOBAL CRISIS ON MALAYSIAN FINANCIAL SYSTEM Overall confidence and stability in the Malaysian Financial system has been preserved throughout the period of the global financial crisis, underpinned by a strong financial system and negligible exposure to subprime related assets and affected counterparties. Successful reforms of the financial system following the Asian financial crisis have further reinforced the strong fundamentals supporting a sound financial system in Malaysia. As a highly open economy, Malaysia was however not insulated from the global economic downturn. The concerted and preemptive measures taken by the Bank Negara Malaysia (BNM) through the accelerated implementation of fiscal stimulus measure supported by the easing of monetary policy and the introduction of comprehensive measure to sustain access to financing and mitigate any impact of the heightened risk aversion among banks contributed towards stabilizing the domestic economy. The financial intermediation process in the Malaysian Financial system has remained orderly throughout the period of economic, with continuing flows of credit to the real economy. Outstanding loans expanded at an annual rate of 10 between July 2007 and July 2009. Similarly, outstanding private debt securities (PDS) grew by 10 annually during this period. The resilience of the banking system, which account for 59.7 of the total assets of the financial system was a critical factor in ensuring the continued flow of funds into the economy and providing support to borrowers confronting temporary cash flow. The level of capitalization of the banking system in Malaysia was at its highest historical level at the onset of the crisis. Overall profitability as indicated by the return on assets (ROA) and return on equity (ROE) was also maintained at an average of 1.6 and 1 Bank Negara Malaysia. The aggregate credit quality of the banking system financing portfolios did not experience any significant deterioration. CONCLUSION The Malaysian banking system an important role in facilitating the economic transformation and growth of the Malaysian economy through the various phases of economic development. This strategic role of the Malaysian banking system will increase in importance in the years ahead as Malaysia becomes even more integrated with the international banking system and global economy. The rapid changes in the global economic and financial environment will also contribute towards transforming the operating landscape of the Malaysian banking system. At the same time, a more integrated and globalised environment, greater regionalization and the more sophisticated and diverse investment and financing needs of the domestic economy will require a financial system that is more progressive and dynamic to advance the nations vision towards the attainment of a high value added and high income economy. The banking system also compromising commercial banks and investment banks. REFERENCES HYPERLINK https// https// HYPERLINK https// https// HYPERLINK https//…/Introduction-to-Malaysian-Financial-System https//…/Introduction-to-Malaysian-Financial-System PAGE MERGEFORMAT 6 Y, dXiJ(x(I_TS1EZBmU/xYy5g/GMGeD3Vqq8K)fw9
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