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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. Izdihar Baharin @ Md Daud
Thank You!
Izdihar Md Daud
Post Graduate Centre
HP: