Barriers and Opportunities for Enhancing Capital Flows
In the COMCEC Member Countries
37
The development of Malaysia’s financial sector in the 2012-20 period is being guided by the
second Capital Market Masterplan (CMP2), unveiled by the Securities Commission and other
authorities in 2011; it is being guided by the second Financial Sector Masterplan (FSM2),
launched by BNM in the same year. According to CMP2, the Malaysian authorities plan to
continue pursuing the policies of gradual liberalisation coupled with the effective oversight that
characterised the first versions of these master plans.
Among other things, CMP2 and FSM2 allow for the deepening of international financial links and
the expansion of the role of Malaysia’s financial sector in regional financial integration. The
Islamic finance sector has already been strongly promoted, and additional incentives in this area
are expected to be introduced in the coming period as Malaysia seeks to cement its status as a
global hub for sharia-compliant finance. Enhanced regulations to improve corporate governance
also feature prominently in CMP2.
BNM is undertaking a comprehensive review of the legislation governing financial institutions
and payment systems under the central bank’s purview to take account of the changing financial
landscape and of recent regulatory developments. The pieces of legislation under review are the
Payment Systems Act 2003, the Insurance Act 1996, the Banking and Financial Institutions Act
1989, the Takaful Act 1984 and the Islamic Banking Act 1983. BNM has said that the purpose of
the review is:
 to ensure an effective and efficient legislative framework for the regulation and
supervision of financial institutions and the oversight of payment systems;
 to align legislation with more principle-based and differentiated approaches to
regulation and supervision, based on risk;
 to enhance BNM’s ability to take appropriate enforcement, remedial, intervention and
resolution actions in order to promote institutional stability;
 to achieve a more consistent legal framework across the various financial sectors in
common areas; and
 to strengthen provisions to support effective regulation and supervision of market
conduct.
The Malaysian government has drawn up amendments to the Anti-Money Laundering Act to
cover more categories of financial institution and designated non-financial businesses, such as
real estate agents, electronic-money issuers, dealers in precious metals and stones, and leasing
and factoring companies. Some minor amendments to the act took effect in 2009-11, and
further, amendments are expected.