TUTORIAL 2

Topic 1 – The Financial Market Structure

1. Justify how important the role of financial market in Malaysia.

2. Malaysia is the only country in this world with a complex, dynamic, and effective
regulations for conventional and Islamic financial systems. Discuss THREE (3) main
objectives of having a separate legislation for both systems.

3. “This is a government that operates under the rule of law. We will respect the present
role as outlined under the present laws,” quoted by Mr. Lim Guan Eng when he was
asked on the BNM’s status if the Bank would come under the purview of the Finance
Ministry of Malaysia. Justify why the Ministry of Finance (MoF) cannot directly
interfere into all financial market’ matters especially related to the financial policies
and legislations.

4. Justify how a financial intermediary connects the Surplus Spending Units (SSUs) and
the Deficit Spending Units (DSUs) to generate a proper flow of funds in an economy?

5. Kumpulan Wang Simpanan Pekerja (EPF) is a non-depository institution which offers

two (2) savings option accounts, which are conventional account (CA) and Shariah
account (SA). By law, the EPF is required to provide a guaranteed dividend of at least
2.5% a year. Discuss your opinion why there is a difference between the dividend
payout for both accounts.

6. Briefly explain FOUR (4) reasons why people do not prefer lending their money
directly to those who are asking from them charge them high interest but would rather
deposit their money in banking institutions and let the banks lend out their money and
getting only small portion of the interest from the bank.

7. Supported with its dynamic and effective regulations, express your opinion on business
investment opportunity in Malaysia based on current financial market sentiment.

8. Discuss the Bank Negara Malaysia’s initiatives to broaden and attain an effective
financial market. How BNM helps in regulating financial stability in Malaysia.

9. In 2017, Bank Negara Malaysia issued its Code of Conduct for Malaysian wholesale
financial markets, which outlined five key principles. Discuss the objectives of this
BNM CC.

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 TUTORIAL 3

Topic 2 – Supervision & Regulation of Financial Institutions

1. “The objective of banking regulations is to protect the institutions and their customers.
Thus, the more regulations the better”.
Discuss THREE (3) points whether you AGREE or DISAGREE with this statement.

2. The Financial Services Act (“FSA”) and the Islamic Financial Services Act (“IFSA”)
came into force on 30 June 2013, replacing the repealed Payment System Act 2003
(“PSA”).

(i) Discuss why Bank Negara Malaysia (“BNM”) established separate Acts for
Malaysia’s banking system.

(ii) Explain how BNM, as the financial regulatory body, is enacted under the FSA
and IFSA. Name the types of financial institutions that are governed under the
BNM.

3. Merchant banks and investment banks are different types of financial institutions that
perform services that are very distinct from one another. Interestingly, the term
“merchant bank” was the British term used to describe an investment bank, which acts
as an intermediary between a corporation and the financial market in large and complex
financial transactions.

(i) Determine if there is any merchant bank exists in Malaysia and support your
answer with reason.

(ii) Define the objective(s) on the creation of investment banks as outlined in the
Framework?

(iii) State the total number of investment banks in Malaysia and the regulatory and
supervisory bodies for them.

4. In February 2020, Bank Negara Malaysia (“BNM”) established the Domestic

Systemically Important Banks (D-SIBs) Framework policy document, which is in line
with the principles outlined by the Basel Committee on Banking Supervision of BNM.
Define the D-SIBs and explain the purpose of the existence of this D-SIBs in Malaysia
financial system.

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5. The bank’s regulations are designed to reduce moral hazard problems created by
deposit insurance. Discuss whether regulations can eliminate moral hazard problems in
financial institutions.

6. Discuss THREE (3) reasons why the existence of deposit insurance protection schemes
in is essential to protect bank’s failure business failure.

7. Bank Islam commenced operations in 1983 as Malaysia’s first Islamic bank. In

December 2005, Bank Islam reported a loss of RM480 million (US$127,000), the first
time it had experienced a loss in its 22 years in operation. This was then followed by
another whopping of RM1.277 billion loss in 2006. The losses threw a spotlight to
Malaysia’s banking control and the affair has cast doubt on the effectiveness of
Malaysia's regulatory and supervisory control of its banking system. Discuss on how
Bank Islam was not carrying out their responsibility failure to follow the rules and
regulations (breach of laws) for financial institutions.

8. The Bank Bumiputra Finance scandal in 1982/83 was one of Malaysia’s biggest
financial scandals before 1MDB. The BMF scandal was the biggest and dirtiest scandal
in Malaysian history. There has never been anything quite like it, not even1MDB or the
nineties forex scandal involving Bank Negara Malaysia. The BMF case involved
murder, espionage, corruption to the highest of degrees and even associations with
triads based in Hong Kong. In this episode of ‘The Big Steal’ we see how Bank
Bumiputra lost millions in a financial scandal. Discuss the how the bank had loss the
public funds and being bailed out by the Bank Bumiputra (M) Berhad.

9. On April 15, 2021, Citigroup Inc. chief executive officer Jan Fraser announced the
group’s decision to exit retail banking in 13 markets, including Malaysia, across Asia
and the Europe, Middle East, and Africa region. Following the decision of its parent
Citigroup Inc to leave retail banking in here, Citi Malaysia has completed their exit in
November, marked the end of their market operation in the country since 1959. Not
only Citibank, other foreign banks such as Bank of Nova Scotia (Scotiabank), Royal
Bank of Scotland, among the few other foreign banks have been losing their market
share in Malaysia.

Required: Discuss the FOUR (4) major reasons that contribute to foreign banks’ exit
in Malaysia. In your opinion, does this occurrence of event has got to do with market
regulations and direction by local regulatory authorities?

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 TUTORIAL 4

Topic 3 – The Money Market

1. The money market is a key appendage of the banking system. Explain the TWO (2)
main objectives of monetary policy and market operations for BNM.

2. To become a qualified money market dealer and broker, a candidate must acquire a
professional certification from Pasaran Kewangan Malaysia Certificate Malaysia
(PPKM) as a requirement for licensed financial institutions and money broking firms.
What is the aim of this certification? And what are consequences of not possessing this
certification to his/her career?

3. Financial Sector Blueprint 2022-2026 was built on its predecessor, the Financial Sector
Blueprint 2010-2020 to anchor the money market in developing deep and dynamic
financial markets in the country. Discuss the Financial Sector Blueprint 2022-2026
framework in the context of monetary policy.

4. Bank Negara Malaysia conducts daily monetary operations, with its primary objective
is to achieve the desired liquidity in the banking system. However, unique to Malaysia,
there is a separation between conventional and Islamic money market operations.
Discuss the primary objective of the separation.

5. The Malaysian Treasury Bills (MTB) or the Malaysian Islamic Treasury Bills (MITB)
are short term securities issued by the government to raise short-term funds for their
working capital. Examine why the two security instruments possess “zero” credit risk
or in other words, they are “risk free” investment instruments? In your opinion, why
government securities need to be issued via BNM and not directly by the government?

6. Commercial papers (CPs) are money market debt instruments issued by corporations to
fund their working and capital requirements on short term, roll over basis. Generally,
only corporations with the highest credit rating can issue commercial paper. Explain
TWO (2) reasons on why only high rated corporate bodies can issue CPs.

7. Generally, all deposits being placed in the banks are protected under the Perbadanan
Insurans Deposit Malaysia (“PIDM”) including the money market deposit accounts.
However, the money market products such as Interbank money market placements,

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 Negotiable instruments of deposit (NIDs) and Repo are not. Explain the reason of these
instruments are not covered under PIDM.

8. The Statutory Reserve Requirement (SRR) is an instrument to manage liquidity in the

money market. In March 2020, BNM has announced a decrease in the ratio by 100
points from 3% to the recent.

(i) Signify the BNM’s decision in reducing the SRR in March 2020.

(ii) How is the SRR affecting the banks in Malaysia?

(iii) Now that the economy is improving and there is a rumor that BNM is to increase
the SRR rate following an increase in OPR. If that is the case, signify FIVE (5)
the impacts to the banking institutions.

9. Overnight Policy Rate (OPR) is BNM’s policy interest rate that influences, among
others, banks’ lending, and financing rates, as well as deposit rates.

(i) Discuss how the increase of the OPR helps to control the inflation in Malaysia.

(ii) Explain why in some cases, the loan and savings interest rates aren’t increasing
by the same amount of OPR?

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 TUTORIAL 5

Topic 7 – The Foreign Exchange Market

1. In Malaysia, to become a FOREX dealer, a candidate must obtain a professional

certification from Persatuan Pasaran Kewangan Malaysia (“PPKM”) as a requirement
for licensed financial institutions and money broking firms. Justify THREE (3)
objectives of the financial institutions imposing such requirements.

2. The MPC of BNM sets monetary policy by changing the Overnight Policy Rate (OPR)
by lowering it down or increase the rate. Discuss how this monetary policy has its
impact to the Ringgit exchange rate.

3. Explain the legality of undertaking foreign currency trading in Malaysia under the
Exchange Control Act 1953 and Bank Negara Malaysia (BNM).

4. Pursuant to the Financial Services Act 2013 and Islamic Financial Services Act 2013,
specify the penalty imposed by BNM on offenders of illegal foreign currency trading?

5. The Foreign Exchange Administration (FEA) rules are a set of rules that are
administered by Bank Negara Malaysia (“BNM”) under the Financial Services Act
2013 and Islamic Financial Services Act 2013. Answer below questions in accordance
with the FEA and support your answer with reason.

(i) State the objective of the implementation of FEA and to who does this FEA
apply to.

(ii) A resident with domestic ringgit borrowing is free to invest up to RM1 million
equivalent in aggregate per calendar year on individual basis ONLY. But in the
case if a resident wants to invest more than RM1 million, determine whether
he/she is allowed to do so. State your reason.

(iii) Does an individual resident need approval to open a foreign currency account?

(iv) Can a resident individual hedge his investment in foreign currency assets in
Malaysia offered by residents?

(v) How much ringgit can a resident individual convert to credit into a foreign
currency account for education/employment overseas?

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6. “On 1 September 1998, the Government of Malaysia announced new exchange control
measures to curb the internationalisation of the ringgit and to regain monetary policy
independence”. – Bank Negara Malaysia

(i) Explain THREE (3) reasons why the government has its exchange control
policy to be imposed in domestic financial markets.

(ii) Discuss TWO (2) points on how the limitations on funds flowing abroad by
Malaysia government’s policy have contributed to the development of the
Dollar-Ringgit markets.

7. Regulatory bodies have been established by various acts of the law passed in
parliaments and such enacted acts describe the regulators duties, jurisdiction, and how
they will enforce laws and regulations of forex trading. Laws enacted stipulate that all
brokers, signal sellers, and investment banks, must comply with the standards set by
forex regulators.

(i) Express your opinion the importance of regulations in forex trading by

providing FOUR (4) points.

(ii) Do you think that regulations can avoid illegal forex trading?

8. We have witnessed a sharp rise in forex trading scams in recent years. In 2021 itself,
600 investors lose RM12 million in alleged forex scam. As the regulatory authority
which governs all money-related matters, deliberate SIX (6) Bank Negara Malaysia’s
pre-emptive measurements to mitigate forex scam in the financial market.

9. As per September 2022, it was seen that the dollar is at its highest level since 2000.
Even as recession fears mount and the economy show signs of slowing, the dollar
continues to surge. Here’s a view of how the dollar compares to major currencies as of
28 September 2022 compared to 2021.

EUR/USD: One euro buys $0.97 today, compared to $1.17 previously.

USD/JPY: One dollar buys 144.18 yen now, versus 111.54 previously.

USD/CHF: One dollar buys 0.98 Swiss francs today, compared to 0.93 previously.

GBP/USD: One British pound buys $1.09 now, compared to $1.37 previously.

USD/CAD: One dollar buys C$1.36 now, versus C$1.26 previously.

Discuss FOUR (4) points on how the U.S. Federal Reserve policy contributes to their
strong Dollar.

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10. In May 2023, Bank Negara Malaysia (“BNM”) raised the overnight policy rate (“OPR”)
by another 25 basis points to 3.00%, making it the first hike in the year after having
four hikes in 2022. As the OPR increases, savings and investment rates will go up too,
benefiting the depositors and investors. By right, there will be a strong demand for
Ringgit, but it didn’t happen when we see the recent weakness in the Ringgit especially
against Dollar. Discuss your opinion by having THREE (3) factors that drive the recent
weakness in Ringgit in this scenario.

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 TUTORIAL 7

Topic 4 – The Bond Market

1. The Government of Malaysia has been progressively introducing tax rebates and reliefs
to promote the capital market. Discuss the tax incentives given to bond investors.

2. Discuss the reason of Securities Commission introducing the retail bonds and sukuk
framework.

3. In September 2018, SC introduced the Guidelines on Seasoned Corporate Bonds and

Sukuk by lowering the threshold of bond investments to RM1,000 for retail investors.
Explain the significant of decreasing the threshold amount.

4. Malaysian Government securities are marketable debt instruments issued to raise funds
from the domestic capital market. What is the role of BNM in the issuance of the
government bonds and describe the TWO (2) forms of Malaysian government long term
securities (bonds).

5. Under local regulations, Bursa Malaysia Depository Sdn. Bhd. (“Bursa Depository”),
the Securities Commission (“SC”), Bursa Malaysia Securities Bhd. (“Bursa
Securities”), Bank Negara Malaysia (“BNM”), the issuing company and the registrar
of companies (Companies Commission of Malaysia – “CCM”), require disclosure
requirements in relation to the issuance of corporate bonds and sukuk and seasoned
bonds and sukuk.

(i) Briefly describe the importance of these disclosure requirements to bond and
sukuk investors.

(ii) Determine what types of bonds that NEED and DO NOT NEED to fulfil the
disclosure requirements.

6. When the overnight policy rate (OPR) increased in May 2023 the trading activities in
our domestic bond market were found lackluster/ uninteresting and many investors pull
out from bond market. However, primary Malaysia Government Securities (MGS)
especially the Government Investment Issues (GII) were still in demand. Discuss your
opinion on this scenario.

7. Early efforts of the Malaysian Government and Bank Negara Malaysia had pretty much
focussed on institutional and systems building to provide the market institution and the
regulatory infrastructure, systems, and regimes for the debt securities market. As such,
all bonds, notes, and sukuk issued in Malaysia and denominated in Malaysian ringgit
require a mandatory credit rating from the Rating Agency of Malaysia (RAM) and

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 Malaysian Rating Corporation Berhad (MARC). It is to help investors objectively
benchmark bond’s credit risks and evaluate its pricing. However, in January 2017, the
Securities Commission (SC) has completely removed this mandatory bond rating
requirement.

(i) Discuss THREE (3) negative impacts on the scrapping of the rating to the
domestic bond market.

(ii) Discuss FIVE (5) advantages on the scrapping of the rating to the domestic
bond market.

8. On 4 December 2020, Fitch Ratings (Fitch) revised Malaysia’s credit rating from A-/
negative to BBB+ with stable outlook. However, Malaysia is still rated ‘A-’ by S&P
Global Ratings (S&P) and ‘A3’ by Moody’s Investors Services (Moody’s).

(i) Discuss TWO (2) impacts of Fitch’s rating downgrade on Malaysian bond
market.

(ii) What should investors in bond funds do due to the downgrading?

9. When the US Federal Reserve’s (Fed) aggressive hike their interest rates in 2022 to
decades-high levels, most fixed-income and equity markets suffered. Yet, the
Malaysian bond market was relatively resilient as they outperformed global peers, as
well as when compared to global equities, ending up in the positive territory. Discuss
your opinion on the attractiveness of local bonds despite the Fed changes in their
monetary policy. Give FOUR (4) reasons to support your view.

10. Based on the figures shown below, the issuance of Malaysian corporate Islamic bonds
(sukuk) showed an outstanding figures, which were far way ahead of conventional
bonds. From January to October 2023, Malaysia approved 100.59 billion ringgit worth
of corporate bonds, of which 77.5 percent was for sukuk, according to data by the
country's Securities Commission. Discuss on the favoritism on Islamic bonds (sukuk)
compared to conventional bonds in terms of tax treatment of the regulatory bodies.

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 TUTORIAL 8

Topic 5 – The Exchange Trade Bonds and Sukuk (ETBS)

1. Reena purchased a zero-coupon ETBS with a 5-year maturity with a par value of
RM20,000. If she pays RM10,000 today, calculate the yield of her bond. How much
Reena is making from her investment?

2. Danaharta Nasional Berhad needs to expand their building and property facilities and
decided to issue a 20-year ETBS to raise funds for the said purpose. It pays RM110 in
annual interest, with a face value of RM1,000. The required rate of return is 12 percent.
Determine the value of this ETBS.

3. Rework on Q2 with the required rate of return is 9%.

4. DanaInfra Nasional Berhad is issuing a semi-annual coupon ETBS that has a par value
of RM1,000 with a coupon rate of 8%. The bonds will be matured in 5 years and the
effective yield to maturity is 7%. Determine the price of this ETBS.

5. Calculate the Yield-to-Maturity for each of the following ETBS.

(i) DanaInfra A: Face value is RM1,000, the market price is RM820, coupon
rate is 9% annually and the year to maturity is 8.

(ii) DanaInfra 10-year ETBS bonds with par value of $1,000 and semi-annual
coupon of 8% is currently trading at $950.

Case Study#1

Daud is an investor who had invested RM100,000 in a 15-year DanaInfra Retail Sukuk. At the
time of subscription, the Profit Rate of DanaInfra Retail Sukuk was 4.50% per annum, which
the profit payment frequency is semi-annually, and the initial price was RM100. With the given
formulas,

Selling Price
ETBS price: Face value x ( )
Initial price

Total profit or loss

Investment rate of return : Holding period
Face value x No of days in a year

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(i) Calculate his investment rate of return if he holds up until maturity.

(ii) Calculate the price and the investment rate of return if Daud sells his investment after
a 90-day holding period, when the price has increased to RM103 from the initial price
of RM100.

(iii) Calculate the price and the investment rate of return if Daud sells his investment after
a 90-day holding period, when the price has decreased to RM98 from the initial price
of RM100.

Case Study #2

Required: Calculate the YTM of the above ETBS if you purchase it at RM100.60 on 8 February
2020.

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 TUTORIAL 9

Topic 6(a) – The Equity Market

1. Explain the roles of the regulatory entities that regulate the equity market in Malaysia.

2. According to Bursa Malaysia, equities offer considerable potential for capital growth
and are long term risk investments. However, there are certain basic rules where the
beginners should know before they can embark into investing in equities. Evaluate
below scenarios and answer to the required questions:

(i) Ali bought Natgate’s shares on 28 June 2023, which was on Thursday. The next
day was a public holiday. State the settlement date for his purchase according
to the Bursa Malaysia Securities Clearing Sdn. Bhd. (“BMSC”).

(ii) Muthu purchased Ataims’ stock early in the morning and sells his stock on the
same day, in the evening. This transaction is called a ____________________

(iii) Ah Chong bought 10,000 units of Greatech stock on 8 July 2023 at RM3.25. He
was hoping that the stock price will go up in the next coming days. He did not
have an intention to hold or own the stock since he has no money to do that. On
10 July 2023, unfortunately, the stock price dropped to RM3.20, which has
forced him to sell the stock in the market at loss. This transaction is called a
_________________.

(iv) Sean wants to start trading in Bursa Malaysia. The first step he needs to do is to
open a Central Depository System (“CDS”) account with any brokerage house.
He decides to open the CDS account with Kenanga Investment Bank Bhd and
Affin Hwang Investment Bank Bhd simultaneously. How much is the CDS
opening account fee? Justify whether he allow to open amount two CDS
accounts.

(v) Fila’s total net worth is estimated to be at RM1.5 million. As an engineer, she
earns RM10,000 per month. Her husband, who is a senior geologist earns
RM30,000 a month. Define whether she is eligible to trade in the Leap Market.

3. Explain whether capital gains and dividends received from stock investment are taxable
in Malaysia?

4. In Malaysia, companies with a mixed-business activity and have financial positions in

conventional and Islamic banks can still be classified under Shari’ah compliant
securities provided they passed the sector screening set by the Securities Commission.
Evaluate below possible scenarios and conclude the status of the company, whether it
is a Shari’ah compliant or otherwise, with reason.
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 (i) JKL Bhd. has a subsidiary that is a licensed distributor of tobacco products. This
subsidiary only contributes 5 percent of JKL total revenue while the profit
before tax from contributes about 10 percent of JKL’s profit before tax.

(ii) Netgate Bhd. is a conglomerate that has a wholly owned subsidiary involved in
the hotel business. Revenue and profit before tax from that subsidiary comprises
of 20 percent of the group’s revenue and profit before tax.

(iii) ABC Bhd. has a conventional finance division. The revenue and earnings before
tax contributed by this division is approximately 5 percent of the entire
company’s total revenue and earnings before tax.

(iv) Gamuda Bhd. has established itself as a leading construction company in

Malaysia. As for the year ended 31 December 2017, the Group’s total revenue
was RM20.63 billion and its PBT was recorded at RM12.5 billion. Nevertheless,
its total cash was RM20 billion (RM10 billion in conventional accounts), its
interest-bearing debt was at RM40 billion, and its total asset was RM80 billion.

5. Bank Negara Malaysia has once again revised its monetary policy by increasing the
Overnight Policy Rate (OPR) by another 25 basis points to 3.00% in May 2023. It was
expected that this OPR will continue to increase until it reaches a neutral rate of 3.25%-
5%. How does a tight monetary policy affect one’s investment in stock market?

6. Some levels of interest-based and other prohibited activities are tolerated when
screening stocks for Shari’ah compliant investments. Give THREE (3) reasons why
SC did not impose strict requirements by allowing income from prohibited sectors with
some level of tolerance, i.e., 5% and 20%.

7. Bursa Malaysia experienced an eight-day losing streak in June 2023, but an economist
says the downward trend has been in place for a decade. Some experts believed
Malaysia’s stock market performance is unlikely to improve significantly because of
systemic problems and it was said that the poor performance will continue for the next
quarters. Discuss THREE (3) reasons on the deterioration of performance in Malaysia
stock market.

8. The Overnight Policy Rate (OPR) is a critical tool that the Central Bank of Malaysia
uses to control the country's inflation rate and maintain financial stability. The recent
increase in the OPR to 3.00% is set to have a significant impact on all Malaysians. The
OPR increase will affect young people's finances in several ways.

(i) Examine stock market reactions to changes in the overnight policy rate (OPR)
by the Monetary Policy Committee (MPC) in Malaysia.

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 (ii) Briefly explain how does an increase in OPR affect young generation’s
investment in stock market?

9. Bursa Malaysia will issue unusual market activity (UMA) queries on some listed
companies due to their unusual price movement and trading activities. Normally,
companies that are being issued UMA queries have very high trading volumes and
surge in stock prices within a short period of time without any significant corporate
announcement. As a retail investor, justify THREE (3) major reasons, why you should
not buy shares of a company which has been issued UMA by Bursa.

10. During Covid-19 period, many companies have fallen under PN17 and GN3 status.
However, SC and were committed to assist and support these companies in
weathering the challenging times due to pandemic by introducing a relief measure.
Under the relief measures, companies that triggered any of the suspended criteria
between April 17, 2020, and June 30, 2021, would not be classified as a PN17 and
Guidance Note 3 (GN3) company for 12 months. The waiver was extended twice
since then, with the latest extension granting companies that trigger the PN17 or GN3
suspended criteria between July 1, 2021, and Dec 31, 2021, an 18-month relief
period, compared with 12 months previously. Explain THREE (3) benefits of this
relief extension.

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 TUTORIAL 10

Topic 6(b) – The Equity Market (Share Margin Financing)

1. Main Exam: May 2022

Johan decides to purchase a basket of shares and would like to apply for share margin
financing facility from Hong Leong Bank. He puts a cash deposit for RM70,000. The
bank gives 60% margin of finance which squares to his limit to purchase shares.

(i) Calculate the value of shares that he can purchase from the margin finance.

(ii) Assuming the value of his stock increases to RM250,000, calculate the new
percentage of his margin of finance?

(iii) Johan can now afford to borrow some more to finance his purchase of the shares.
How much additional value of stocks he can purchase?

(iv) After his additional purchase, the value of the stocks gradually declines in value
to RM330,000. Estimate how much his new margin of finance has increased (in
percentage), which triggers a margin call by the bank.

2. Replacement Exam: May/ September/ October 2022

Johan decides to purchase a basket of shares and would like to apply for share margin
financing facility from Hong Leong Bank. He puts a cash deposit for RM100,000. The
bank gives 60% margin of finance which squares to his limit to purchase shares.

(i) Calculate the value of shares that he can purchase from the margin finance.

(ii) Assuming the value of his stock increases to RM300,000, calculate the new
percentage of his margin of finance?

(iii) Johan can now afford to borrow some more to finance his purchase of the shares.
How much additional value of stocks he can purchase?

(iv) After his additional purchase, the value of the stocks gradually declines in value
to RM330,000. Estimate how much his new margin of finance has increased (in
percentage), which triggers a margin call by the bank.

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3. Main Exam: September 2022

HL Bank (“the Bank”) is offering Share Margin Financing, a secured credit facility, to
individuals and/ or investment holdings companies to finance their acquisition of
quoted securities listed on Bursa Malaysia. Applicants are offering their pledged
securities acceptable by the Bank for Share Margin Financing (“the Facility”). Below
are the details of the Facility:

Margin of Finance (“MoF”) Up to 60%

Trading Limit Collateral pledge:
(Margin Multiple) Cash/ Fixed Deposit = Up to 2.5 times
Unit Trust/ Shares = Up to 1.5 times
Margin Call Triggered when MoF ≥ 65%
Force Selling Triggered when MoF ≥ 80%

(i) Johan applied for a maximum credit facility with a cash deposit of RM50,000.
Compute the total outstanding loan and the value of the share equity that he can
purchase.

(ii) Johan used the financing amount to buy the 110,000 units of Top Glove shares.
Thereafter, percentage of financing has changed to 63%. Determine the
percentage increase (or decrease) in the stock price. (Note: The prices MUST be
rounded up to four decimals).

(iii) Determine the price of Top Glass when the Bank will automatically force selling
Johan’s stock. (Note: The prices MUST be rounded up to four decimals)?

(iv) Assuming the share price of Top Glass became RM1.25, and Johan can now
afford to borrow some more to finance his purchase of the shares. Calculate how
much additional value of shares he can purchase.

4. Main Exam: December 2022

Share Margin Financing (SMF) is a credit facility to boost clients’ investments in shares
quoted on Bursa Malaysia. The facility provided by conventional banks are regulated
by Bank Negara Malaysia, whereas brokerage-provided facilities are regulated by the
Securities Commission Malaysia. Answer below questions related to SMF.

(i) Eddie applied SMF facility from Bank Harimau (“the Bank”) which offers 3.0
multiple margins with his collateral of RM75,000 cash. Determine the available
trading limit (in amount and percentage). (Note: The percentage to be rounded
to two decimals).

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 (ii) Eddie used half of the financing amount to buy the Solarvest stock at RM0.70
per unit of share. As for the remaining balance, he purchased D&O stock at
RM3.80 per unit of share. Estimate the number of shares Eddie was eligible to
purchase for both stocks respectively?

(iii) After a month, Solarvest share price increased to RM1.00 while the D&O shares
dropped to RM3.50. If the Bank’s margin call is 80%, decide whether Eddie has
triggered the call?

(iv) Based on scenario (iii), determine Eddie’s value of shares that would triggers
the margin call.

5. Main Exam: May 2023

ABMB Bank offers Share Margin Financing facility for their customers to finance share
acquisition via a credit limit secured against different types of collaterals (e.g., cash,
ABMB’s Fixed Deposits (FD) and quoted shares on Bursa Malaysia). Here are the
product’s features:

Financing Amount/ Limit : Minimum RM50,000; Maximum RM20,000,000

Margin of Financing : Up to 60%
(“MOF”)
Margin Call : Up to 70%
Force-selling : Up to 80%
Effective Lending Rate : *SBR + 2.05% p.a.

*Where the Standardized Base Rate ("SBR") on this product is based on the benchmark
rate specified by Bank Negara Malaysia. The benchmark rate is currently set as the
Overnight Policy Rate (“OPR”), which reflects the monetary policy stance as decided
by the Monetary Policy Committee of Bank Negara Malaysia as of November 2022.

Share Margin Financing Purchasing Power:

Collateral Multiplier (Margin Limit) RM

Cash/ Fixed Deposit 2.5x
Unit Trust/ Shares 1.5x

Other obligations:

 Client shall always maintain the MOF at all times.

 In the event the MOF exceed the approved MOF by 5%, there will be a Margin
Call.
Formula used to calculate for MOF:

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 𝑇𝑜𝑡𝑎𝑙 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑏𝑎𝑙𝑎𝑛𝑐𝑒/𝑙𝑜𝑎𝑛 − 𝐶𝑜𝑙𝑙𝑎𝑡𝑒𝑟𝑎𝑙
MOF =
𝑇𝑜𝑡𝑎𝑙 𝑆ℎ𝑎𝑟𝑒 𝐸𝑞𝑢𝑖𝑡𝑦

 If the outstanding balance is more than Approved Facility Limit, repayment(s)

must be made to reduce the outstanding balance.
 The interest is to be serviced monthly in arrears, on daily rest basis.
 When the loan outstanding amount exceeds the Facility Limit, default interest
of 1% per annum is charged on the excess portion above the Facility Limit.

Formula used to calculate the interest charge (daily rest):

𝑇𝑜𝑡𝑎𝑙 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑏𝑎𝑙𝑎𝑛𝑐𝑒 𝑜𝑓 𝑡ℎ𝑒 𝑑𝑎𝑦 𝑥 𝑖

Daily interest charge =
𝑇

where: i = interest rate (p.a.)

T = Number of days in a year (365 days)

Liew Yu Xian collateralized RM125,000 cash for 60% MOF, where 30% of the
financing were used to buy stocks of Natgate for RM1.50 per unit of shares, 50% for
Toyoven for RM1.25 per unit, and the remaining balance was for Ataims for RM0.40
per unit. A month later, the price of Natgate appreciated to RM1.80, Ataims also went
up to RM0.50, whilst Toyoven dropped to RM1.15. Based on his calculation, Liew can
afford to buy more shares and decided to top up Ataims shares at the price of RM0.50
per unit. Unfortunately, Ataims shares dropped to RM0.20 in the following month, so
did Natgate to RM1.10. However, Toyoven price remained at RM1.15.

Required: Determine whether a margin call or force-selling was triggered, and

compute the interest charged by the Bank based on the latest total outstanding loan.

(Notes: Answers must be rounded up to TWO decimals)

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 TUTORIAL 11
Topic 10 – Corporate Governance in Financial Institutions
(ANSWER)
Disclaimer: The Q&A and the presentation of CG in FIs are for educational
purposes only and do not represent/ reflect the official position or
policies nor the real situation of the FIs in Malaysia.

1. Main Exam – September 2023 (June 2023 Semester)

UTAR Bank Berhad was having its monthly board meeting for the year of
ended December 2022, which was attended by eight out of twenty directors
from Nominating and Remuneration Committee, Risk Management
Committee, and Audit Committee. One director has been nominated by another
director to be his proxy at the meeting while there was a director w ho has been
absent for the seventh times throughout the financial year due to health
condition. The meeting was chaired by Encik Norman, an independent non -
executive director, who was the CEO of the Bank from 2017 until his
retirement year in 2020.

Meanwhile, the board was welcoming two new board members, Datuk Scott
and Datin Priscilla, which appointments have already been granted approval
by Bank Negara Malaysia. Datuk Scott is a senator in the Dewan Rakyat
whereas Datuk Priscilla, who is a High Court judge in Kuala Lumpur, owns a
legal firm which is currently servicing UTAR Bank as a panel lawyer. Due to
work commitment, Datuk Scott and Datin Priscilla only attended the bank’s
in-house orientation and education programs after four months from their
official appointment.

All board committees have the majority of independent directors except for the
Audit Committee, which has three non-independent directors out of five
members. All board of directors are accessed for their independency, skills,
and “fit and proper” criteria by Nominating Committee in every two yea rs and
their remuneration packages were being reviewed and approved by the
Remuneration Committee annually.

Required:
Evaluate should there be any bank’s practices that violate the Corporate
Governance of Bank Negara Malaysia (CG-BNM) and its Guidelines.
2. Main Exam - May 2023 (January 2023 Semester)

Harimau Investment Bank Berhad (“the Bank”) had their Board meeting in
March 2022 to discuss post-pandemic business strategies. The meeting was
chaired by a Non-Independent Executive Director from Board Remuneration
Committee. Fifteen Directors presented physically except one, who attended
via videoconferencing with the presence of her husband, who is also a Member
of Parliament. The Board was welcoming a new Director, whose appointment
has been approved by Bank Negara Malaysia (“BNM”). It was noted that this
Director has a history of bankruptcy filed with Malaysian Insolvency
Department in 2021 and now waiting for a certificate of discharge from by the
Director General of Insolvency (“DGI”). Meanwhile, another new Director
was about to be appointed for his wide banking experience, and the
appointment application has already been submitted through FI@KijangNet
portal of BNM, which was yet to receive response.

The Board has also approved on the appointment of E&F as a new external
auditor effective from January 2022 until January 2027 as recommended by
the Audit Committee’s (“AC”) during their meeting in February 2022 with
below attendance as to date:

Member Attendance
Ybhg Datuk Benjamin Oooi 2/2
(Independent Non-Executive Director/ Chairman)
Ybhg Dato’ Zaid Ali 2/2
(Independent Non-Executive Director)
Ms Jenny Ee 2/2
(Independent Non-Executive Director)

The external auditors meet with the AC’s members twice for the year 2022
with the presence of the Bank’s Executive Directors and its management. The
AC has reviewed the independence of the external auditor annually to ensure
other non-audit work shall not conflict with the functions of external auditor.

Required: Evaluate and justify whether there are any governance practices
that violate the Corporate Governance Framework of Bank Negara Malaysi a.
3. Main Exam – December 2022 (October 2022 Semester)

General Investment Bank Berhad was having their 12 th board meeting in

December 2021. The minutes of meeting was taken by a new company
secretary who started her employment in November 2021. Twelve out of
fifteen directors attended the meeting and was chaired by a Non -Independent
Executive Director from Board Remuneration Committee. It was noted that
two board members attended only seven meetings while another member, who
followed her husband staying abroad, attended five meetings throughout the
year. One absent director who fall sick, has appointed another director as a
representative in the meeting. The Board was also welcoming two new board
members, namely Datuk Dr Aliff Wildad, who is currently holding a position
as the Ketua Pemuda UMNO Malaysia, and Datuk Seri Kaya, who has a wide
experience in investment banking. The appointment application was made
through FI@KijangNet portal in October 2021 and the BNM has yet to
respond.

Required: Evaluate and justify whether there are any governance practices
that violate the Corporate Governance Framework of Bank Negara Malaysia.

4. Main Exam - September 2022 (May 2022 Semester)

The Nominating Committee (“NC”) of Bank Netizen Bhd is to provide a

formal and transparent procedure for the appointment of directors and CEOs
as well as assessment of effectiveness of individual directors, board as a whole
and performance of CEO and key senior management officers. During the
financial year ended 30 December 2021, four (4) NC meetings were held, and
the attendance of the RC members was as follows:
Member Attendance
Ybhg Tan Sri Siow Wei Kang 4/4
(Independent Non-Executive Director)
Ybhg Datuk Nickolas Wong (1) 3/3
(Independent Non-Executive Director)
Ms. Yap Kah Wen 4/4
(Non-Independent Non-Executive Director/ Chairman)
Mr. David Liu (2) 1/1
(Non-Independent Non-Executive Director)
Notes:
(1) Resigned from the NC with effect from 30 November 2021.
(2) Appointed to the NC with effect from 30 November 2021.
 Ybhg. Datuk Nickolas Wong has resigned from his post after serving the Board
for 5 years without any intention to continue his service. Mr. David Liu, who
has been replacing Datuk Nickolas, has been declared bankrupt by the High
Court and still not yet being released from the charge. The application on the
appointment of Mr. David was submitted electronically through KijangNet
portal of Bank Negara Malaysia via for approval on 31 October 2021.

Required: Determine whether the Bank was violating the CG-BNM.

5. Main Exam – April 2022 (January 2022 Semester)

The Board of RBB Bank has approved the new package, which is going to be
reviewed in the next two years. Due to the technicality and complexity of both
quantitative measures and qualitative judgement in ensuring the remuneration
is adjusted to all types of risk and must be symmetric with risk outcomes, this
duty has been delegated to the Risk Management Department (“RMD”). Apart
from this, the RMD only takes charge of remuneration of the afore -mentioned
categories of people and not remuneration of external auditors, which lies in
the hands of Board Audit Committee (“BAC”). Analyze the above situation
and express your opinion whether the remuneration system was structured in
accordance with CG-BNM.

6. Main Exam - May 2021 (January Semester)

Tengku Zafrul bin Tengku Abdul Aziz (born 25 June 1973) is a Malaysian
banker and investor who has served as the Minister of Finance in the Perikatan
Nasional (PN) administration under Prime Minister Muhyiddin Yassin and
Senator since March 2020. Prior to his appointment to the Cabinet, he was the
Group Chief Executive Officer (CEO) and Executive Director of the CIMB
Group Holdings Berhad. He was also the CEO and Executive Director of the
CIMB Bank Berhad and President Commissioner of the PT Bank CIMB Niaga
Tbk, Indonesia.

Required: Assess above case study and answer below questions with regards
to Corporate Governance Standard and Practices of Bank Negara Malaysia
(CG-BNM).

(i) Prior to Tengku Zafrul’s appointment as the Minister of Finance, state

the reason on why he must resign from all his positions in financial
institution?

(ii) Due to his resignation, CIMB Group Holdings Berhad (CIMB) was
hiring a new person to replace his positions. Assuming the Board of
Directors of CIMB issued the official appointment letter to the new
director on 1 February 2020, due to urgent management and operational
 matters, discuss whether CIMB was following the CG-BNM if the
application was made on 1 January 2020. State the process of appointing
a new CEO.

(iii) Assuming the new director is facing a corruption trial charge, and he
pleaded not guilty for the charge. Justify whether the new director is
qualified for his position. And under what circumstances that the rules
can be rolled over?