1. MALAYSIAN FINANCIAL SECTOR
Topic 6:
MALAYSIAN FINANCIAL SECTOR

2. At the end of this topic, students should be able to:
Define what is money
List down six characteristics of money
Explain the functions of money
Explain on the Bank Negara Malaysia
Discuss the role of Bank Negara Malaysia
Explain what is commercial bank
Explain discount houses
Explain provident and Pension funds

3. What is money?
A good that acts as a medium of exchange in transactions. Classically it is said that money acts as a unit of account, a store of value, and a medium of exchange.
Money is primarily a medium of exchange or means of exchange. It is a way for a person to trade what he has for what he wants. 4

4. Characteristics of money
i. Acceptability
In terms of a form of currency being accepted within society, money must be accepted by everyone in the economy. This acceptance is for the purpose of the exchange of money for goods and different types of services.
ii. Divisibility
This relates to money being easily divided into smaller denominations for transactional purposes. People will only need as much money as is necessary for their purchases, therefore it is necessary for money to be easily broken down for different types of transactions.

5. Characteristics of money
iii. Durability
This simply refers to the physical wear and use of money over a period of time. If some money is easily destroyed or damaged it is likely that it is fraudulent and therefore cannot be trusted. Yet, money is made from a paper source, so some wear and tear must be expected.
iv. Limited supply
In order for money to retain its worth, there must be a type of limited supply. The more money that is in circulation the less it is valued by the economy. .

6. Characteristics of money
v. Portability
Quite simply it is necessary for money to be easily transported so that people can carry it around with them on a daily basis. This also allows for the ease of transaction so that money can be transferred from one place to another.

7. Functions of money i. Money as a unit of value
Money measures the value of various goods and services which are produced in an economy. In other words, money works as unit of value or standard of value. In barter economy it was very difficult to decide as to how much volume of goods should be given in exchange of a given quantity of a commodity.
ii. Medium of exchange
Right from the beginning, money has been performing an important function as medium of exchange in the society. Money facilitates transactions of goods and service as a medium of exchange.

8. Functions of money iii. Standard of deferred payments
Modern economic setup is based on credit and credit is paid in the form of money only. In reality the significance of credit has increased so much that it will not be improper to call it as the foundation stone of modem economic progress. Money, besides being the basis of current transactions, is also the basis of deferred payments.
iv. Store of value
It was virtually impossible to store surplus value under barter economy; the discovery of money has removed this difficulty. With the help of money, people can store surplus pur­chasing power and use it whenever they want.

9. Bank Negara background
Bank Negara Malaysia has gone through numerous leaps and bounds in its long journey since its establishment in 1959.
BNM replaced the Malaya and British Borneo dollar at par by launching the Malaysian dollar on June 12, 1967.
In 1985 the bank experienced some major losses and to make up these losses BNM introduced a strategy referred as "honest-to-god" trading.
The BNM became a major player in the forex in late 1980s under the expert leadership of its governor, Jaffar Hussein.
The bank suffered huge losses in early 1990s and became technically insolvent and the Malaysian finance ministry bailed it out in 1994.

10. The roles of the Bank Negara Malaysia
Economics and monetary policy
Investment and operations
Regulation
Payment Systems
Supervision
Organizational development
Greater engagement with the public

11. i. Economics and monetary policy
Primarily provides good technical and research support on growth-related issues to enhance formulation of monetary and credit policies in promoting monetary stability and ensuring the availability of adequate credit to finance economic growth.

12. Ii Investment and operations
Manage domestic liquidity and exchange rates to ensure that monetary policy targets are achieved as well as managing external reserves to safeguard its value and optimize its returns..

13. iii. Regulation
Promote financial sector stability through the progressive development of sustainable, robust and sound financial institutions and financial infrastructure, thus enabling a competitive local financial industry to be resilient against the changing future environment as well as leads initiatives to enhance access to financing.

14. iv. Payment Systems
Develop policies and strategies to promote reliable, secure and efficient clearing, settlement and payment systems in the country.

15. v. Supervision
Develop, enhance and implement an effective surveillance framework to ensure safety and soundness of financial institutions and to enforce sound practices in them.

16. vi. Organisational development
Spearhead the Bank's strategic management, organisational-performance management and programme management functions to drive its performance-improvement processes and strengthening the capacity building of the Bank.

17. vii. Greater engagement with the public
To promote the public better understanding of their rights, responsibilities, the opportunities and the associated risks and costs as a result of participation in the financial system, the Bank's efforts has been directed towards the following areas

18. Commercial bankS
A financial institution that provides services, such as accepting deposits, giving business loans and auto loans, mortgage lending, and basic investment products like savings accounts and certificates of deposit. 7

19. Examples of commercial banks IN MALAYSIA are:
AmBank Berhad
CIMB Bank Berhad
Hong Leong Bank Berhad
Malayan Banking Berhad (Maybank)
Public Bank Berhad 7

20. Discount Houses
A Discount House is a financial institution devoted to trading in money market securities in the secondary market.
Discount Houses intervene between the monetary authority, Central Bank and the deposit money banks (DMBs) in mobilizing funds for investments in securities and take positions depending on the liquidity profile of the financial system.

21. Employees Provident Fund (EPF)
The EPF is a social security institution formed according to the Laws of Malaysia, Employees Provident Fund Act (Act 452) which provides retirement benefits for members through management of their savings in an efficient and reliable manner.
The EPF also provides a convenient framework for employers to meet their statutory and moral obligations to their employees.
Vision - To be a world-class social security organisation providing the best retirement savings for Malaysians.
Mission - To provide the best Retirement Savings Scheme.

22. Provident and Pension Funds
The main aim of a pension or provident fund is to provide benefits for its members when they retire from employment. The fund also usually pays benefits when a member dies while still working, or is unable to work because of illness, or is retrenched.
The difference between a pension fund and a provident fund is that if a pension fund member retires, the member gets one third of the total benefit in a cash lump sum and the other two-thirds is paid out in the form of a pension over the rest of the member's life. On the other hand, a provident fund member can get the full benefit paid in a cash lump sum.

23. Among the payments that are liable for EPF contribution:
Salary
Payment for unutilised annual or medical leave
Bonus
Allowance
Commission
Incentive
Arrears of wages
Wages for maternity leave
Wages for study leave
Wages for half day leave
Other payments under services contract or otherwise

24. Thank You