This note is from the Central Bank note earlier
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.
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.
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.
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.
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.
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.
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. 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, recordkeeping 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.
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.
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.
Source: http://www.bnm.gov.my
