As the due date of Singapore’s digital bank licence application approaches, Malaysia’s central bank Bank Negara Malaysia (BNM) issued its own draft framework for digital bank licensing.

At a glance there are some good similarities between the two – which makes sense, considering the two countries share a lot in common: political system, legal framework and infrastructure.

A summary of the key points in the framework:

  1. No more than 5 digital bank licences will be issued; licences holders can conduct banking or shariah banking services;
  2. The objective is to help those not served or underserved by traditional financial institutions to build savings and financial capabilities;
  3. Licence holders must comply with the Financial Services Act and Islamic Financial Services Act, issued in 2013;
  4. Licensed digital bank will have 3-5 years ‘foundational phase’ to prove its operations and sustainability, during this period BNM will closely monitor operations and risks, and
    1. The regulatory requirements, especially in capital reserve ratio, stress test and information disclosure, will be more relaxed compared to conventional banks;
    2. The minimum capital requirement is RM100m (US$24m); this requirement will be increased to RM300m (US$72m) after the foundational phase
    3. The asset of a digital bank should not exceed RM2 billion (US$480 million)
  5. The applicants must show a business plan that shows breakeven point within 5 years;
  6. Existing banks and shariah banks can form consortiums to bid for the digital bank licence;
  7. Foreign companies can apply, though companies or consortia residing in Malaysia will be preferred;
  8. The digital banks can use the PayNet ATM network;
  9. With approval from BNM, digital banks can use offline agent network, though they could not establish physical branches.

BNM expects to receive feedback (by email:[email protected]) by 28 February, and finalise the regulations by the first half of 2020.

Interesting times.



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