Banking and Insurance

(1) Which regulatory bodies regulate banking business and insurance business in Malaysia?

Banking business (conventional or Islamic), investment banking business, insurance business and Takaful business (i.e. Syariah-compliant insurance business) are regulated by BNM which is the central bank of Malaysia. BNM has broad powers of supervision and control over banks and insurers. The Minister of Finance of Malaysia (“Minister”) also plays an active role in the regulation of financial institutions and is the approving authority for applications for banking licences and insurance licences. Other powers of the Minister in relation to financial institutions include the power to revoke licences, impose restrictions or conditions on a licence. Further, BNM has the power to direct investigations in prescribed circumstances.

Investment banks which undertake capital market activities in addition to banking activities are also regulated by the Securities Commission Malaysia (“SC”), which is the primary regulatory authority for capital market activities in Malaysia.

The financial institutions are required to carry on their respective businesses through a company locally incorporated under the Malaysian Companies Act 1965(as amended from time to time, the latest version being the Companies Act 2016) and are therefore also subject to the regulatory supervision of the CCM. Currently, the Islamic Financial Services Act 2013 (“IFSA”) allows an international Islamic bank to be either a locally incorporated company or a branch registered with CCM.

(2) What are the primary legislations regulating the banking business and insurance business?

Banking business (conventional or Islamic), investment banking business, insurance business and Takaful business (i.e. Syariah-compliant insurance business) are primarily regulated under the Financial Services Act 2013 (“FSA”) and the IFSA, of Malaysia.

Capital market activities undertaken by investment banks are regulated under the Capital Markets and Services Act 2007.

Please note that financial institutions carrying on business in Labuan are subject to a separate regulatory regime, i.e. the Labuan Financial Services and Securities Act 2010 which is not discussed here.

(3) What are the approvals required to operate a banking or insurance business?

An applicant who intends to carry on a banking business or insurance business is required to obtain licenses from the Minister of Finance, on the recommendation of the BNM.

(4) Is foreign investment permissible?

Yes, and foreign investment is generally subject to foreign equity limits as announced by BNM on its website:

A list of current licensed banking institutions and licensed insurance companies and Takaful business in Malaysia is available on BNM’s website, at the following link:

(5) What are the approvals required to acquire an existing licensed bank or licensed insurer?

Above 5%: No person is allowed to enter into an agreement or arrangement, to acquire any “interest in shares” of a licensed person by which he would hold an aggregate interest of 5% or more in the shares of the licensed person except with prior written approval of BNM.

In practice, the approval-in-principle of BNM is to be obtained before any person enters into any negotiation and a second, formal statutory approval is required in respect of any such acquisition or disposal.

Above 50%: Where the acquisition will result in the acquirer holding more than 50% of interest in the shares of a licensed person, the prior written approval of the Minister is required, on the recommendation of BNM. The acquirer must also submit an application to BNM to in order to be approved as a ‘financial holding company’ (FHC) and it will be subject to the purview of BNM.

Control: Acquisition of “control” over the licensed person also would require theprior written approval of the Minister, on the recommendation of BNM. Control is defined to mean, inter alia, the power to make or cause decisions to be made in respect of the business or administration of the licensed person or corporation.

(6) What is the meaning of “interest in shares” under the Financial Services Act 2013 in the context of acquisition of interest in shares of a licensed bank or insurer?

Interest in shares is considered under Schedule 3 of the FSA by reference to legal, beneficial, direct and effective interests held by a person in the licensed person.

(7) Is there any website which one may look for more details and useful information on this subject?

Please visit the website of Bank Negara Malaysia (BNM) at