5 January 2021 (MY) – Bank Negara Malaysia has issued the Policy Document on Licensing Framework for Digital Banks (Policy Document) following a six-month public consultation. The Bank wishes to convey its appreciation on the feedback provided by various parties during the consultation period.
The licensing framework for digital banks aims to enable the innovative application of technology to uplift the financial well-being of individuals and businesses and foster sustainable growth. This includes expanding meaningful access to and promoting responsible usage of suitable financial solutions to unserved and underserved segments.
The framework adopts a balanced approach to enable admission of digital banks with strong value propositions whilst safeguarding the integrity and stability of the financial system as well as depositors’ interests. To achieve these outcomes, a simplified regulatory framework will be applied to digital banks during the initial stage of operations, commensurate with an asset threshold of not more than RM3 billion for three to five years. This functions as a foundational phase for the licensees to demonstrate their viability and sound operations, and for the Bank to observe the performance of the licensed digital banks and attendant risks that arises from their operations.
Digital banks will be required to comply with the requirements under the Financial Services Act 2013 (“FSA”) or Islamic Financial Services Act 2013 (“IFSA”), including standards on prudential, Shariah, business conduct and consumer protection, as well as on anti-money laundering and terrorism financing. During the foundational phase, licensed digital banks will be subjected to a more simplified regulatory requirement relating to capital adequacy, liquidity, stress testing, Shariah governance and public disclosure requirements.
Submission of applications to conduct digital banking business or Islamic digital banking business shall be made to the Bank no later than 30 June 2021. Applicants should be guided by the application procedures described in this Policy Document as well as the Application Procedures for New Licences under the FSA and IFSA, and the Application Procedures for Acquisition of Interest in Shares and to be a Financial Holding Company. Up to five licences may be issued to qualified applicants. Notification on the grant of licence will be made by the first quarter of 2022.