Topic 2 Banking System (S) - BNM
Topic 2 Banking System (S) - BNM
Topic 2 Banking System (S) - BNM
Formation Why
How
Issue Currency
Govt. Banker
Role
Monetary & Fin. Stability
Credit situation
BNM
Malaysian Securities
Amount Due from Designated Financial Institutions
Assets (RM
Million) 2nd
Quarter 2016
Residents
Balances in
Other Statutory
Cash and Current Negotiable
Deposits Deposits Property,
Cash Account Non- Instrument Governmen Other Loans and Other
Placed and with Bank Bank Commercia Investment Other Treasury Bills Plant and Total Assets
Equivalen with Bank Islamic Residents Deposits t Securities Securities Advances Assets
Reverse Negara Negara l Banks Banks Banking Equipment
ts Negara Banks Held
Repos Malaysia Malaysia Institutions
Malaysia
Commercial 26,729.1 632.0 26,788.3 29,780.6 79,215.2 23,366.1 15,659.2 6,138.2 720.0 92,601.1 45,835.8 3,145.2 47,605.8 185,963.6 1,033,734.4 5,041.3 183,827.9 1,806,783.9
Banks
Islamic Banks 2,174.2 287.6 2.9 11,373.9 36,956.1 4,462.0 3,077.5 17.5 1,586.6 2,496.7 8,035.4 383.2 122.3 58,553.7 387,859.2 505.2 9,702.1 527,595.9
Investment 775.6 1.3 1,399.3 741.4 2,701.7 1,666.7 174.1 154.1 0.0 328.9 2,259.0 0.0 1,127.3 19,687.0 6,640.8 272.1 13,665.4 51,594.7
Banks
Total 29,678.9 920.9 28,190.4 41,896.0 118,873.0 29,494.8 18,910.8 6,309.8 2,306.6 95,426.7 56,130.2 3,528.4 48,855.4 264,204.3 1,428,234.4 5,818.6 207,195.4 2,385,974.5
BANK NEGARA
MALAYSIA
INVESTMENT
COMMERCIAL BANKS FOREIGN BANKS OFFSHORE
BANKS (MERCHANT REPRESENTATIVES BANKS
BANKS)
CREDIT GUARANTEE
CORPORATION (CGC)
Bank Negara Malaysia (BNM)
MONETARY STABILITY
Bank Negara Malaysia is responsible to maintain monetary stability.
Monetary stability refers to the stability of the value of the Malaysian
currency, the ringgit.
The best way to ensure that the value of the ringgit is preserved is by
ensuring price stability, that is, to ensure that inflation in the country
remains low and stable.
By maintaining monetary stability through appropriate changes in
monetary policy, Bank Negara Malaysia ensures that inflation is kept low
and that the purchasing power of the ringgit is not diminished.
Bank Negara Malaysia (BNM): Monetary Stability
When the rate of inflation is negative, prices are falling and businesses find
their profits shrinking. They may reduce their costs by cutting expenditure and
laying off staff. Workers in turn would have less money to spend and thus
reduce spending, resulting in a further reduction in the demand for goods
and services, resulting in a contraction in the level of overall economic
activity.
When there is price stability, the future value of savings and the future returns
on investments are preserved. This gives savers the incentive to save while
investors have greater confidence to undertake productive activities. It
creates a conducive environment that allows the economy to expand in a
sustainable manner.
Bank Negara Malaysia (BNM): Monetary Stability
Bank Negara Malaysia conducts its monetary policy by influencing the level
of interest rates.
When the economy is overheating and the threat of inflation is high,
monetary policy will be tightened by withdrawing funds from the banking
system and raising interest rates.
The higher interest rates will encourage people to save more and spend
less. This will cause consumption and investment to slow down to a level
that is more sustainable and reduce the prospect for high inflation.
When economic conditions are weak, funds will be injected into the
banking system to reduce interest rates.
With lower interest rates, spending and borrowing would increase. The
resulting increase in consumption and investment would stimulate further
economic activity, leading to higher income, employment and economic
growth.
Bank Negara Malaysia (BNM): Monetary Stability
Bank Negara Malaysia (BNM): Monetary Stability
Bank Negara Malaysia (BNM): Forex
FINANCIAL STABILITY
Financial stability refers to an environment where institutions in a financial
system are strong.
Characteristics: Market participants can confidently enter into transactions at
prices that do not change substantially over short periods when there has not
been any changes in market fundamentals.
Advantage: Financial stability creates a conducive environment for
businesses to undertake their activities and for savers and investors to enter
into short-term or long term contracts.
How to achieve: Financial stability has been achieved through the
formulation of strong legal, regulatory and supervisory framework, the
development and strengthening of new institutions and system infrastructure.
Bank Negara Malaysia (BNM): Institutions and Infrastructures
DEVELOPMENTAL ROLE
Bank Negara Malaysia has an important developmental
role.;
developing the necessary institutions and market infrastructure for
the development of a modern and strong financial system.
In strengthening the financial market infrastructure, Bank
Negara Malaysia has built a strong payment systems.
To promote a good credit culture among banking
institutions, Bank Negara Malaysia also operates the
Central Credit Reference Information System.
Central Credit Reference Information System (CCRIS)
a) The advances should not exceed 12.5% of the budget revenue of the Government
b) The advance be repaid as soon as possible and not later than 3 months after the
end of the Government financial year in which it is granted
c) Additional funds cannot be made available to the Government unless the previous
advances have been repaid
d) The Central Bank has the discretion to determine the rate of interest to be charged
for its advances.
Bank Negara Malaysia (BNM): Achievements