BNM published a consultation (exposure draft) in the form of a policy document setting out the approval and notification requirements for equity interests held by financial institutions in corporations. This consultation applies to licensed banks, licensed investment banks, licensed Islamic banks, licensed insurers, licensed takaful operators, financial holding companies, and prescribed development financial institutions. Comment must be submitted by February 28, 2019. This policy document will come into effect on the date of publication of final policy document, save for the transitional arrangements.
This exposure draft sets out the approval requirements of BNM for a financial institution to establish or acquire a subsidiary, or hold a material interest in any corporation in or outside Malaysia. It also sets out the scope of permissible equity investment in non-financial corporations by a financial institution. The prudential safeguards are being introduced to address risks from equity exposures, including a targeted prudential limit that is intended to replace the existing aggregate limits on equity-related exposures applied to banking institutions specified under the Guidelines on Investment in Shares, Interest-in-Shares, and Collective Investments Schemes (IIS) and IIS for Islamic banks.
The financial institutions are increasingly collaborating with, or hold material equity interest in, e-commerce activities and e-payments firms to realize business synergies. Thus, a review of the current requirement on equity investments is necessary to ensure that financial institutions continue to remain relevant, competitive, and are able to offer a fuller range of services to their customers. This policy document must be read together with other relevant legal instruments and policy documents that have been issued by BNM, particularly the following:
- Approach to Regulating and Supervising Financial Groups
- Capital Adequacy Framework (Basel II: Risk-Weighted Assets and Capital Components both)
- Capital Adequacy Framework for Islamic Banks (Both Capital Components and Risk-Weighted Assets)
- Risk-Based Capital Framework for Insurers and Takaful Operators
- Single Counterparty Exposure Limit
- Single Counterparty Exposure Limit for Islamic Banking Institutions
Related Link: Consultation Paper (PDF)
Comment Due Date: February 28, 2019
Keywords: Asia Pacific, Banking, Insurance, Islamic Banking, Takaful Operators, Equity Investment, Equity Exposures, BNM
Previous ArticleESRB Publishes Report on Macro-Prudential Approaches to NPLs
ECB published Guideline 2021/975, which amends Guideline ECB/2014/31, on the additional temporary measures relating to Eurosystem refinancing operations and eligibility of collateral.
EIOPA published a report, from the Consultative Expert Group on Digital Ethics, that sets out artificial intelligence governance principles for an ethical and trustworthy artificial intelligence in the insurance sector in EU.
HKMA published the seventh and final issue of the Regtech Watch series, which outlines the three-year roadmap of HKMA to integrate supervisory technology, or suptech, into its processes.
EC launched a targeted consultation to improve transparency and efficiency in the secondary markets for nonperforming loans (NPLs).
BIS, Danmarks Nationalbank, Central Bank of Iceland, Norges Bank, and Sveriges Riksbank launched an Innovation Hub in Stockholm, making this the fifth BIS Innovation Hub Center to be opened in the past two years.
FDITECH, the technology lab of FDIC, announced a tech sprint that is designed to explore new technologies and techniques that would help expand the capabilities of community banks to meet the needs of unbanked individuals and households.
EC released the EU Taxonomy Compass, which visually represents the contents of the EU Taxonomy starting with the EU Taxonomy Climate Delegated Act.
FDIC is seeking comments on a rule to amend the interagency guidelines for real estate lending policies—also known as the Real Estate Lending Standards.
EIOPA published its annual report, which sets out the work done in 2020 and indicates the planned work areas for the coming months.
The ESRB paper that presents an analytical framework that assesses and quantifies the potential impact of a bank failure on the real economy through the lending function.