Chapter 6.pptx - Chapter 6 The Financial Sector and...

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Chapter 6 The Financial Sector and Monetary Policy
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Learning outcome By the end of this topic, you should be able to: 1) Describe the overview of Financial sector. 2) Understand the role of BASEL II & III. 3) Comprehend the e-payment system. 4) Explain BAFIA 1989. 5) Discuss the merging incentives. 6) Discuss restructuring process of the banking sector. 7) Analyse the benefits of merging program among the banks.
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Introduction Structural changes in Malaysian economy Primary commodity producer industrial base Contribution of the financial sector to economic growth (11.7% to GDP in 2009)
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The Evolution of The Malaysian Financial Sector Board of Commissioners of Currency, Malaya and British Borneo monetary authority in Federation of Malaya. Bank Negara Malaya opened on 24 January 1959 Set up as the instrument for the deliberate management of the money and credit situation. Objectives: Maintain a strong ringgit. Promote financial stability. Foster the growth of a sound financial structure.
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Branches of British banks Serve the well-being of Britain. Finance the supplies of raw materials. Mainly to ensure a captive market for British manufacturers. Tun Ismail bin Mohamed Ali (2 nd governor: 1962-1980) Strengthened domestic banks Initiated the establishment of the related financial institutions
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Building up the financial infrastructure during 1960s. Development of strong domestic commercial banks . Widespread branching of banking services. New financial markets and institutions: Kuala Lumpur Stock Exchange (KLSE). Discount houses to form the nucleus of the money market. Pilgrims Management and Fund Board (LUTH). PERNAS (The National Investment And Trading Corporation). Agricultural Bank. Capital Issues Committee. Malaysian Industrial Development Finance (the leading medium and long-term financing institution for the manufacturing industry).
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Finance companies were brought under the jurisdiction of the Bank Negara Malaysia (BNM) Banking Ordinance 1958 Banking Act 1973 Banking and Financial Institutions Act 1989 (BAFIA) October 1994, 14 foreign banks locally incorporated
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1970s - Breakdown of the fixed exchange rate system Emphasized on instilling integrity and professionalism in the bank management. Number of banks was restricted. Capital structure and branch network of the existing domestic banks were gradually strengthened.
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Credit Guarantee Corporation (CGC) was set up To help financing the SMEs. National Savings Bank ( Bank Simpanan Nasional ) to mobilize small savings. Kuala Lumpur Commodity Exchange (KLCE) was established. Well-diversified financial system. Foreign exchange market commodity exchange
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1980s - Great challenges in the financial system Severe global recession of 1985 and 1986 BNM: Ensured adequate monetary growth.
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