Foreign Banks' Participation Yields Immense Benefits To Malaysia's Financial System

KUALA LUMPUR, Dec 13 (Bernama) -- Foreign banks' participation in Malaysia's financial system has yielded numerous benefits to the nation, including contributing immensely to the domestic financial sector, the Senate was told Tuesday. Deputy Minister of Finance Donald Lim Siang Chai said their involvement have also enhanced investment linkages and increased external trade. He said foreign banks' presence has also paved the way for the inflow of specialised expertise needed by the country. The banks have also brought in best practices and technology which could contribute towards developing new and innovative products to meet the financial sector's requirements, he said. Consumers can also benefit from the products and world-class services rendered by the foreign banks, he said. "Many of the foreign financial institutions have set base in Malaysia many years ago besides being the pioneers during the formative years of Malaysia's financial system in the 19th century. "Hence, foreign banks have interests in Malaysia's economy and have contributed continuously to the country's various economic cycle," he said when replying to Senator Tunku Abdul Aziz Tunku Ibrahim during question-and-answer session. Tunku Abdul Aziz wanted to know how many local and foreign banks are operating in the country currently and the foreign banks' impact on Malaysia's economy during an economic slowdown. Lim said 34 local and 22 foreign banks are in Malaysia, with foreign banks' assets accounting for about 22 per cent of the banking sector's total assets. The Deputy Minister also said Malaysia's regulatory framework for foreign banks provided adequate protection to reduce the impact of cross-border transactions. "The eurozone crisis plaguing the 17 European Union (EU) member states and the United States has brought into deeper focus that active financial institutions worldwide have wide-ranging implications on the financial stability of an economy," he said. Among the regulatory measures are through legislations compelling foreign banks to be incorporated so that the banks have separate capital and management set-up from their operations in other countries, he said. He said the requirement to have a fixed capital for a bank or a finance company incorporated in Malaysia was to guarantee the financial affordability, sustainability and continuity of the banks' operations in this country. Bank Negara's (central bank) close supervision on foreign banks' operations was the same as was done for domestic banks, he added. -- BERNAMA