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
MAS and Temasek jointly released a report to mark the successful conclusion of the fifth and final phase of Project Ubin, which focused on building a blockchain-based multi-currency payments network prototype.
PRA published a public working draft, or PWD, of version 1.2.0 of the BoE Insurance XBRL taxonomy, along with the related technical artefacts.
CPMI published a report that sets out nineteen building blocks for a global roadmap to improve cross-border payments.
EBA published phase 2 of the technical package on the reporting framework 2.10, providing the technical tools and specifications for implementation of EBA reporting requirements.
APRA updated the lists of the Direct to APRA (D2A) validation rules for authorized deposit-taking institutions, insurers, and superannuation entities.
PRA updated the statement that provides guidance to regulated firms on implementation of the EBA guidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis.
EBA updated the 2019 list of closely correlated currencies that was originally published in December 2013.
ESMA published the final report on the guidelines on securitization repository data completeness and consistency thresholds.
FASB issued a proposed Accounting Standards Update that would grant insurance companies, adversely affected by the COVID-19 pandemic, an additional year to implement the Accounting Standards Update No. 2018-12 on targeted improvements to accounting for long-duration insurance contracts, or LDTI (Topic 944).
APRA updated the regulatory approach for loans subject to repayment deferrals amid the COVID-19 crisis.