Malaysia | Bank Negara Malaysia issues Licensing Framework for Digital Banks

Bank Negara Malaysia issued its policy document on Licensing Framework for Digital Banks on 31 December 2020. It has indicated in its press release that up to five licences may be issued to qualified applicants and notification of the grant of licence will only be made by the first quarter of 2022.

The requirements include, among others:

  • the overall business plan has to include:
    • performance indicators that reflect the applicant’s value proposition in driving the financial inclusion objectives. These indicators must clearly demonstrate the proposed licensed digital bank’s progress in fulfilling the financial needs of the target segments.
    • where the financial services is intended to be offered through agent banking, at the minimum, (i) description of the unserved and/or underserved segments that would be served through the agent; (ii) description of prevailing conditions that inhibits the offering of financial services through digital/electronic means to these target segments; (iii) location where the agents are expected to operate in. The policy document on Agent Banking must be complied with.
      − description of the plans for deploying the technology and the minimum information to be included is set out in paragraph 10.3(j) of the policy document.
  • the limit for the total size of assets during the foundational phase is a maximum RM3 billion. Previously, the limit set out in the exposure draft was a maximum of RM2 billion.

In addition to the policy document, Bank Negara Malaysia has also issued a FAQ to assist the understanding of interested applicants.

Submission of applications to conduct digital banking business or Islamic digital banking business shall be made to the BNM no later than 30 June 2021.

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Christina S. C. Kow

Partner / Head, Financial Services / Head, Islamic Finance / Personal Data Protection & Privacy Law / Technology, Media & Telco
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Pamela Kung

Partner / Head, Capital Markets / Financial Services / Islamic Finance / Private Client & Family Business / China Desk
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