Malaysia's central bank on Dec. 27 issued a draft framework for the licensing of digital banks and said it may issue up to five digital bank licences to qualified applicants to conduct either conventional or Islamic banking business in the country.
Bank Negara Malaysia said the draft framework is part of its ongoing initiative to implement innovative technology in the financial sector. The proposed framework would allow digital banks to offer banking products and services to address market gaps in the underserved and unserved segments. During a foundation phase, licensed digital banks will be subjected to more simplified capital adequacy, liquidity, stress testing and public disclosure requirements, the central bank said.
Digital banks will be required to comply with the requirements under the Financial Services Act 2013 or Islamic Financial Services Act 2013.
The central bank said digital banks will be required to maintain minimum capital funds unimpaired by losses of 100 million ringgit during the initial phase, and 300 million ringgit thereafter.
The central bank is seeking feedback on the draft framework by Feb. 28, 2020, and plans to finalize the policy document by the first half of 2020. It will open the application process for licences once the final document has been issued.
Malaysia is joining other countries in the Asia-Pacific region in allowing digital banks to operate alongside conventional banks. In June, Singapore's central bank said it would issue up to five digital bank licenses, following similar moves by regulators in Hong Kong and South Korea.
As of Dec. 26, US$1 was equivalent to 4.13 Malaysian ringgit.