The Financial Services Act

BAFIA is no more; long live the FSA (excerpt):

Financial Services Act 2013 and Islamic Financial Services Act 2013 Come Into Force

The regulatory and supervisory framework of Malaysia enters a new stage of its development as the Financial Services Act 2013 (FSA) and Islamic Financial Services Act 2013 (IFSA) come into force on 30 June 2013.

The FSA and IFSA is the culmination of efforts to modernise the laws that govern the conduct and supervision of financial institutions in Malaysia to ensure that these laws continue to be relevant and effective to maintain financial stability, support inclusive growth in the financial system and the economy, as well as to provide adequate protection for consumers. The laws also provide Bank Negara Malaysia with the necessary regulatory and supervisory oversight powers to fulfil its broad mandate within a more complex and interconnected environment, given the regional and international nature of financial developments. This includes an increased focus on preemptive measures to address issues of concern within financial institutions that may affect the interests of depositors and policyholders, and the effective and efficient functioning of financial intermediation.

It is important that Malaysia's regulatory and supervisory system is adequately equipped to respond effectively to new and emerging risks so that confidence in the financial system is preserved and that the critical financial intermediation activities which are vital to the economy are not disrupted. The FSA and IFSA amalgamate several separate laws to govern the financial sector under a single legislative framework for the conventional and Islamic financial sectors respectively, namely, the Banking and Financial Institutions Act 1989 (BAFIA), Islamic Banking Act 1983, Insurance Act 1996 (IA), Takaful Act 1984, Payment Systems Act 2003 and Exchange Control Act 1953 which are repealed on the same date…

Shadow banking has become an increasing concern among regulators the world over in the aftermath of the Great Recession. The FSA and IFSA is BNM’s response, allowing it broader powers and a wider scope for those powers, encompassing “financial holding companies and non-regulated entities to take account of systemic risks that can emerge from the interaction between regulated and unregulated institutions, activities and markets.”

This suggests that entities previously outside banking regulation such as co-ops, development institutions, and companies with significant shareholdings in banks may come under BNM’s withering and critical eye.

I can’t wait to see what happens.