Financial sector liberalisation (Update 3, full statement)
By MAZWIN NIK ANIS and TEH ENG HOCK
PUTRAJAYA: Foreigners will now be allowed to own up to 70% equity in all financial institutions here except commercial banks, up from the current 49%, as the Government announced a list of initiatives to liberalise the financial sector (full statement in Bahasa Malaysia below).
Prime Minister Datuk Seri Najib Tun Razak said the liberalisation package, which comprised six thrusts, was aimed at enhancing Malaysia’s linkages with international economies, bring about greater confidence in the economy, and promote greater economic regional integration.
“Over the past three years, the finance and insurance sector has expanded by 8.8% per annum, outpacing the growth in real gross domestic product(GDP) by about 6%.
“The liberalisation measures announced today will also provide greater access to consumers to a wider ranger of world-class financial products and services and further strengthen our position in Islamc finance to become an international Islamic financial hub,” he told a press conference at his office Monday.
The country’s banking institutions and insurance companies employ about 140,000 workers.
The meat of the liberalisation package is the issuance of new licences for seven banks and two family takaful (Islamic insurance) players from this year until 2011.
Under this, up to two new Islamic banking licences will be issued to foreign players to establish new Islamic banks with a paid up capital of at least US$1bil, and two new commercial banking licences for foreign players that will bring in specialised expertise.
These four licences will be issued this year, together with two new family takaful licences.
In 2011, up to three new commercial banking licences will be issued to “world-class banks that can offer significant value propositions to Malaysi,” he said.
Najib, who is also Finance Minister, said flexibility would be accorded for an increase in foreign equity limits from 49% to 70% of investment banks, Islamic banks, insurance companies and takaful operators.
“Such alliances will strengthen the business potential and enhance the growth prospects of financial institutions through the international expertise and the global networks of foreign shareholders.
“The foreign equity limit for commercial banks will remain at the current 30%,” he added.
Najib said the Goverment would also offer “operational flexibilities” to foreign institutions to improve the outreach of financial products and services by increasing branches, while locally incorporated foreign commercial banks would be allowed to establish four new full-fledged branches with effect in 2010, and 10 microfinance branches starting this year.
Effective June 1, Labuan Holding Companies incorporated under the Offshore Companies Act 1990 will be given the flexibility to establish an operational and management office in Kuala Lumpur to enhance efficiency.
Najib added that offshore banking institutions and insurance companies licensed by Labuan Offshore Financial Services Authority that meet the predetermined criteria would be allowed to have a physical presence onshore from 2010 and 2011 respectively.
“Greater flexibility will also be accorded for employment of expatriates in specialist areas that can contribute to the development of the financial sector,” he said.