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    BNM Announces 5 Digital Bank Licenses & Plans for Climate Stress Tests

    The Bank Negara Malaysia (BNM) announced five digital bank licenses and published a summary of the Joint Committee on Climate Change (JC3) meeting, which discussed the progress toward climate-related action plans and work priorities for 2022.

    Digital bank licenses

    BNM announced that the Minister of Finance Malaysia approved five digital bank licenses under the Financial Services Act 2013 (FSA) and the Islamic Financial Services Act 2013 (IFSA):

    • a consortium of Boost Holdings Sdn Bhd and RHB Bank Berhad (under FSA)
    • a consortium led by GXS Bank Pte. Ltd and Kuok Brothers Sdn. Bhd (under FSA)
    • a consortium led by Sea Limited and YTL Digital Capital Sdn Bhd (under FSA)
    • a consortium of AEON Financial Service Co., Ltd, AEON Credit Service (M) Berhad, and MoneyLion Inc ((under IFSA)
    • a consortium led by KAF Investment Bank Sdn Bhd ((under IFSA)

    Three out of the five consortiums are majority-owned by Malaysians namely Boost Holdings and RHB Bank Berhad, Sea Limited and YTL Digital Capital Sdn Bhd, and KAF Investment Bank Sdn. Bhd. Following this announcement, the successful applicants will undergo a period of operational readiness that will be validated by BNM through an audit before they can commence operations. This process may take between 12 to 24 months.

    Progress on climate change priorities for 2022

    The published communication notes that, in Malaysia, financial institutions are preparing for the mandatory Task Force on Climate-related Financial Disclosures (TCFD) aligned climate-related financial risk disclosures in 2024. It also outlines the following key updates on the work of sub-committees established under JC3 to address climate risks:

    • Contributed to the exposure draft on Climate Risk Management and Scenario Analysis. The draft will complement the implementation of the Climate Change and Principle-based Taxonomy by financial institutions as well as the plans to conduct climate-related stress tests for the financial sector in 2024. The exposure draft is expected to be finalized in the second half of 2022.
    • Issued the TCFD Application Guide for Malaysian financial institutions; the guide outlines key recommendations and is aimed to assist financial institutions in preparing for the climate-related disclosures.
    • Commenced work to develop a Climate Disclosure Guide for Malaysian businesses; the guide is intended to improve the quality of, and access to, information on business resilience to climate-related risks.
    • Completed the first series of specialized-level training programs for the financial sector, covering the implementation and application of the Climate Change and Principle-based Taxonomy, scenario analysis, and stress testing.
    • Worked on the development of a data catalog to help identify and map available climate data sources to support the critical data needs for identified use cases that include investment and lending decisions, macroeconomic modeling, stress testing, scenario analysis, and product development.
    • Published a report on the sustainable finance landscape in Malaysia, assessing the current state of sustainability practices and product offerings within the financial sector and highlighting the opportunities and challenges for the financial industry to meaningfully support the climate transition.

     

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    Keywords: Asia Pacific, Malaysia, Banking, ESG, Climate Change Risk, Scenario Analysis, Stress Testing, TCFD, Disclosures, Lending, Sustainable Finance, Digital Banking, Islamic Banking, Basel, Reporting, Regtech, BNM, Subheadline

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