MCF 304: Bank Management Lecture 1.2 Banking & Financial Institutions Act (BAFIA) 1989

BAFIA Was introduce to provide an integrated regulation on financial system in Malaysia Amalgamation of Banking Act 1973 & Finance Companies Act 1969 Enable BNM to supervise and control all financial institutions, including those controlled by way of administrator

New Provisions Under BAFIA Licensing & Regulations Management of Licensed Institutions Ownership & Control of Financial Institutions Supervision & Control of Licensed Financial Institutions Power to Investigate, Search & Seize

Deposit A sum of money received or paid on terms under which it will be repaid in the form of money or money’s worth, with or without interest, or at a premium or discount Deposits taking have two objectives Development objective Control objectives

Deposit Development Objective - Promote the growth & innovation of bond market and commercial paper market by relaxing the definition of deposits Controlling Objectives - To supervise deposits taking activities in an adequate manner in order to obliterate illegal deposits taking avtivities

Non-Deposit Taking Activities Money paid by way of an advance or part payments under a contract for the sale, hire or other provision of property or services Money paid by way of deposits for the performance of a contract

Secrecy The relationship between a bank and its customers is considered highly confidential to the extend that there are provisions in terms of secrecy provisions in the banking act to protect such relationship In general banks will have to get a written permission from its customers

Electronic Funds Transfer No individual is allowed to operate any electronic transfer system unless he has revealed to BNM the operation scheme in relation to the duties and liabilities of all parties involved in the system

Penalties Offences Section Imprisonment Fines Daily Fines Carrying out banking business without valid license Section 4 (a) 10 years RM 10 million RM 100 thousands Failure to display sign board “licensed bank” Section 16 - RM 5 thousands RM 5 hundred Advertising to solicit deposits without approval Section 27 3 years RM 3 million Fail to appoint auditor Section 40(1) RM 1 million RM 1 thousands

Effect of BAFIA Any person who at the time of commission of the offence was an officer, director or controller of the financial institutions is considered guilty of that offence unless he can prove that the offences was committed without his knowledge or consent and that he had exercise all necessary care and diligence to prevent the commission of that offence

Izdihar Baharin @ Md Daud Thank You! Izdihar Baharin @ Md Daud Post Graduate Centre HP: 006019-5170817 Email: izdi@oum.edu.my