Central Bank of Malaysia

Last updated

Central Bank of Malaysia
Bank Negara Malaysia (BNM)
بڠک نݢارا مليسيا‎
Central Bank of Malaysia logo.svg
Bank Negara Malaysia (230715-0916).jpg
BNM headquarters in Kuala Lumpur
HeadquartersJalan Dato Onn, Kuala Lumpur, Malaysia
Coordinates 3°09′12″N101°41′35″E / 3.1534°N 101.6931°E / 3.1534; 101.6931
Established26 January 1959;65 years ago (1959-01-26)
Ownership Government of Malaysia
Governor Dato' Shaik Abdul Rasheed Abdul Ghaffour [1]
Central bank of Malaysia
Currency Malaysian ringgit
MYR (ISO 4217)
ReservesIncrease2.svg US$119.7 billion [2]
Bank rate 3.00% [3]
Website www.bnm.gov.my OOjs UI icon edit-ltr-progressive.svg

The Central Bank of Malaysia (BNM; Malay : Bank Negara Malaysia; Jawi: بڠک نݢارا مليسيا‎) is the Malaysian central bank. Established on 26 January 1959 as the Central Bank of Malaya (Bank Negara Tanah Melayu), its main purpose is to issue currency, act as the banker and advisor to the government of Malaysia, and to regulate the country's financial institutions, credit system and monetary policy. Its headquarters is located in Kuala Lumpur, the federal capital of Malaysia. [4]

Contents

The Bank is the only institution permitted to issue the Malaysian ringgit into circulation.

Powers of the Bank

The Central Bank is empowered through enactment of legislation by the Parliament of Malaysia. New legislation are created and current legislation is amended to reflect the needs of the time and future.

Development Financial Institutions Act 2002

Promotes the development of effective and efficient development financial institutions. [5]

Central Bank of Malaysia Act 2009

Provides the establishment, administration and powers of the bank. [5] This act repealed the Central Bank of Malaysia Act 1958.

Money Services Business Act 2011

Provides for regulation of money services business industry which consists of remittance, wholesale currency and currency exchange businesses. [5]

Financial Services Act 2013

Consolidates the regulatory and supervisory framework for Malaysia's banking industry, insurance industry, payment systems, and other relevant entities. The Act also includes money market oversight and foreign exchange administration matters. [6] This act repealed Banking and Financial Institutions Act 1989, Insurance Act 1996 (though sections 144, 147(4), 147(5), 150, 151 and 224 of the Insurance Act 1996 continue to remain in full force and effect by virtue of section 275 of FSA 2013), Payment Systems Act 2003 and Exchange Control Act. [5]

Islamic Financial Services Act 2013

Sets out the regulatory framework for Malaysia's Islamic financial sector with the principal regulatory objectives of promoting financial stability and compliance with Shariah. [5] This act repealed Islamic Banking Act 1983 and Takaful Act 1984.

Governors

No.GovernorPeriod
1Tan Sri William Howard Wilcock 26 January 1959 – July 1962
2Tun Ismail Mohd Ali July 1962 – July 1980
3Tan Sri Abdul Aziz Taha July 1980 – June 1985
4Tan Sri Dato' Jaffar Hussein June 1985 – May 1994
5Tan Sri Dato' Ahmad bin Mohd Don May 1994 – August 1998
6Tan Sri Dato' Seri Ali Abul Hassan Sulaiman 15 September 1998 – 30 April 2000
7Tan Sri Dato' Sri Dr. Zeti Akhtar Aziz 1 May 2000 – 30 April 2016
8Tan Sri Muhammad bin Ibrahim 1 May 2016 – 15 June 2018
9Tan Sri Nor Shamsiah Mohd Yunus 1 July 2018 – 30 June 2023
10Dato' Shaik Abdul Rasheed Abdul Ghaffour 1 July 2023 – present

Headquarters and branches

Bank Negara Malaysia. Bank Negara Malaysia.JPG
Bank Negara Malaysia.
Bank Negara Malaysia, Penang Bank Negara Malaysia Penang (I).jpg
Bank Negara Malaysia, Penang

The Central Bank headquarters are located at Jalan Sultan Salahuddin, off Jalan Kuching.

Landmarks located near the Central Bank building include Dataran Merdeka, St Mary's Cathedral, Kuala Lumpur City Hall building, Lake Gardens, Kuala Lumpur and the Tugu Negara.

The Central Bank had previously maintained branches in each of the state capitals. Most of them were closed in the 1990s when retail banks began taking over most of the counter services. There are still branches maintained in Penang, Johor Bahru, Kota Kinabalu, Kuching, Kuala Terengganu and Shah Alam. Some branches were converted into currency distribution and processing centres.

The Central Bank also retains representative offices in London, New York City, and Beijing. [7]

A new building for the Financial Services and Resources Center (FSRC) was constructed in 2004 to house the FSRC, SEACEN, IFSB and the FMAG (the museum arm of BNM). Located along Jalan Dato Onn, in front of the Tun Hussein Onn Memorial, the building was designed by renowned Malaysian architect firm, Hijjas Kasturi Associates. Officially declared opened in August 2011, the building is now known as Sasana Kijang.

History

In 1837 the Indian rupee was made the sole official currency in the Straits Settlements, but in 1867 silver dollars were again legal tender. In 1903 the Straits dollar, pegged at two shillings and fourpence (2s. 4d.), was introduced by the Board of Commissioners of Currency for the Straits Settlements and private banks were prevented from issuing notes. Since then, there were two lapses in the continuity of the currency, first by the Japanese occupation (1942–1945), and again by the devaluation of the Pound Sterling in 1967 when notes of the Board of Commissioners of Currency, Malaya and British Borneo lost 15% of their value.

On 12 June 1967, the Malaysian dollar, issued by the new central bank, Central Bank of Malaysia, replaced the Malaya and British Borneo dollar at par. The new currency retained all denominations of its predecessor except the $10,000 denomination, and also brought over the colour schemes of the old dollar.

In 1985, following the "Plaza meeting" of G-5 finance ministers in New York City, the US dollar fell sharply causing major losses in Central Bank's dollar reserves. The bank responded by starting a program of aggressive speculative trading to make up these losses. [8] Jaffar Hussein, the Central Bank Governor at the time, referred to this strategy as "honest-to-God trading" in a December 1988 speech in New Delhi.

In the late 1980s, Central Bank, under Governor Jaffar Hussein, was a major player in the forex market. Its activities caught the attention of many; initially, Asian markets came to realise the influence the Central Bank had on the direction of forex market. Alan Greenspan, the Federal Reserve's chairman, later realised BNM's massive speculation activities and requested the Malaysian central bank to cease those activities.

On 21 September 1990, BNM sold between $500 million to $1 billion worth of pound sterling in a short period of time, driving the pound down 4 cents to the dollar. [8] In response, bankers began front running the Central Bank's orders. Two years later on Black Wednesday, BNM attempted to defend the value of the British pound against attempts by George Soros and others to devalue the pound sterling. George Soros won and BNM reportedly suffered losses of more than US$4 billion. [9] The Central Bank lost an additional $2.2 billion in speculative trading a year later. By 1994, the bank became technically insolvent and was bailed out by the Malaysian Finance Ministry. [8]

Pegging of the ringgit and reserves

In 1998, Central Bank pegged RM3.80 ringgit to the US dollar after the ringgit substantially depreciated during the 1997 Asian financial crisis. In July 2005, the central bank abandoned fixed exchange rate regime in favour of managed floating exchange rate system an hour after China floated its own currency. This resulted in capital flight of more than US$10 billion, thought to be due to the repatriation of speculative funds that entered the country in anticipation of the abandonment of the peg: Central Bank's foreign exchange reserves increased by $24 billion in the one-year period between July 2004 and July 2005 (see table below). During this period there was widespread belief that the ringgit was undervalued and that if the peg was removed, the ringgit would appreciate.

The Central Bank continues to run a negative interest rate differential to the USD. The ringgit has appreciated gradually since the peg was abandoned and as at 28 May 2007, it traded at around RM3.40 to the US dollar. Malaysia's foreign exchange reserves have increased steadily since the initial capital flight, and as at 31 March 2007 the reserves stood at approximately US$88 billion, which is approximately $10 billion more than the reserves just prior to the peg being abandoned.

On 31 July 2007, the Malaysian reserves stood at approximately US$98.5 billion, which is equivalent to RM340.1 billion. The figure increased to US$101.3 billion on 31 December 2007, which is equivalent to RM335.7 billion. [10] Central Bank's international reserves increased further 15 days later to US$104.3 billion or RM345.4 billion. [11] [12]

Central Bank Foreign Exchange Reserves (Source: Central Bank, rounded to the nearest billion USD)
31 December 2004US$66 billion
31 July 2005US$78 billion
31 December 2007US$101 billion [10]
31 March 2008US$120 billion [13]
31 December 2010US$107 billion [14]
31 December 2012US$140 billion [15]
31 December 2014US$116 billion [16]
30 December 2016US$95 billion [17]
31 December 2018US$101 billion [18]
31 December 2019US$104 billion [19]
31 December 2020US$108 billion [20]
31 December 2021US$117 billion [21]
30 December 2022US$115 billion [22]
29 December 2023US$114 billion [23]
30 September 2024US$120 billion [24]

Project Nexus

The Bank for International Settlements signed an agreement with Central Bank of Malaysia, Bank of Thailand, Bangko Sentral ng Pilipinas, Monetary Authority of Singapore, and the Reserve Bank of India on 30 June 2024 as founding member of Project Nexus, a multilateral international initiative to enable retail cross-border payments. Bank Indonesia involved as a special observer. The platform, which is expected to go live by 2026, will interlink domestic fast payment systems of the member countries. [25]

See also

Related Research Articles

<span class="mw-page-title-main">Economy of Malaysia</span>

The economy of Malaysia is an emerging and developing, upper-middle income, highly industrialised, mixed economy. It ranks the 36th largest in the world in terms of nominal GDP, however, when measured by purchasing power parity, its GDP climbs to the 30th largest. Malaysia is forecasted to have a nominal GDP of nearly half a trillion US$ by the end of 2024. The labour productivity of Malaysian workers is the third highest in ASEAN and significantly higher than Indonesia, Vietnam, and the Philippines.

Special drawing rights are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund (IMF). SDRs are units of account for the IMF, and not a currency per se. They represent a claim to currency held by IMF member countries for which they may be exchanged. SDRs were created in 1969 to supplement a shortfall of preferred foreign exchange reserve assets, namely gold and U.S. dollars. The ISO 4217 currency code for special drawing rights is XDR and the numeric code is 960.

<span class="mw-page-title-main">Australian dollar</span> Official currency of Australia

The Australian dollar is the official currency and legal tender of Australia, including all of its external territories, and three independent sovereign Pacific Island states: Kiribati, Nauru, and Tuvalu. In April 2022, it was the sixth most-traded currency in the foreign exchange market and as of Q4 2023 the seventh most-held reserve currency in global reserves.

<span class="mw-page-title-main">1997 Asian financial crisis</span>

The 1997 Asian financial crisis was a period of financial crisis that gripped much of East and Southeast Asia during the late 1990s. The crisis began in Thailand in July 1997 before spreading to several other countries with a ripple effect, raising fears of a worldwide economic meltdown due to financial contagion. However, the recovery in 1998–1999 was rapid, and worries of a meltdown quickly subsided.

<span class="mw-page-title-main">Malaysian ringgit</span> Official currency of Malaysia

The Malaysian ringgit is the currency of Malaysia. Issued by the Central Bank of Malaysia, it is divided into 100 cents.

<span class="mw-page-title-main">Singapore dollar</span> Currency of Singapore

The Singapore dollar is the official currency of the Republic of Singapore. It is divided into 100 cents. It is normally abbreviated with the dollar sign $, or S$ to distinguish it from other dollar-denominated currencies. The Monetary Authority of Singapore (MAS) issues the banknotes and coins of the Singapore dollar.

<span class="mw-page-title-main">Central Bank of Russia</span> Central Bank of the Russian Federation

The Central Bank of the Russian Federation, which brands itself as Bank of Russia and is also commonly referred to in English as the Central Bank of Russia (CBR), is the central bank of the Russian Federation. The bank was established on 13 July 1990. It claims the legacy of the State Bank of the Russian Empire (1860-1920) and of the Soviet Gosbank (1921-1991), even though both institutions covered a significantly larger territorial scope.

<span class="mw-page-title-main">Bangko Sentral ng Pilipinas</span> Central bank of the Philippines

The Bangko Sentral ng Pilipinas is the central bank of the Philippines. It was established on January 3, 1949, and then re-established on July 3, 1993 pursuant to the provision of Republic Act 7653 or the New Central Bank Act of 1993 as amended by Republic Act 11211 or the New Central Bank Act of 2019. The principal author was Senator Franklin Drilon. It was signed by President Rodrigo Duterte.

<span class="mw-page-title-main">World currency</span> Currency that is widely used internationally

In international finance, a world currency, supranational currency, or global currency is a currency that would be transacted internationally, with no set borders.

<span class="mw-page-title-main">Securities Commission Malaysia</span> Malaysian statutory body

The Securities Commission Malaysia is a Malaysian statutory body with responsibility for the development and regulation of capital markets in the country. It is located in Bukit Kiara, near the National Science Centre of Kuala Lumpur.

Ringgit Operations Monitoring System (ROMS) is a large-value foreign exchange transaction reporting system owned and operated by Bank Negara Malaysia (BNM), the central bank of Malaysia. It automates a major part of compliance reporting between Authorised Dealers and Bank Negara Malaysia (BNM).

Bank Negara Monetary Notes (BNMN) are securities issued by Central Bank of Malaysia replacing the existing Bank Negara Bills (BNB) for purposes of managing liquidity in both the conventional and Islamic financial market. The maturity of these issuances has been lengthened from one year to three years however, this is not intended to signal any targeted level of long-term interest rates. The Overnight Policy Rate remains the sole indicator of the monetary policy stance while short-term and long-term interest rates at other maturities will continue to be market determined, reflecting overall demand and supply conditions as well as prevailing interest rate expectations in the financial market. New issuances of BNMN may be issued either on a discounted or a coupon-bearing basis depending on investors' demand. Discount-based BNMN will be traded using the same market convention as the existing BNB and Malaysian Treasury Bills (MTB) while the coupon-based BNMN will adopt the market convention of Malaysian Government Securities (MGS).The inaugural issuance was on 8 December 2006 with an issue size of RM1. billion.

The Swiss Mutual Fund, also known as Swiss Cash or Swisscash, is an offshore investment company headquartered in the Commonwealth of Dominica. It involved in operating an Internet-based investment scheme which offers returns of up to 300% within 15 months of investment and has been identified as one of the Ponzi schemes taking place in 2000s.

<span class="mw-page-title-main">Economic history of Malaysia</span>

Since its formation in 1963, Malaysia's economic performance has been one of Asia's best. Real gross domestic product (GDP) grew by an average of 6.5% per year from 1957 to 2005. Performance peaked in the early 1980s through the mid-1990s, as the economy experienced sustained rapid growth averaging almost 8% annually. Malaysia's economy was greatly impacted by the 1997 Asian financial crisis, but recovered.

<span class="mw-page-title-main">Asia School of Business</span> University in Bukit Tunku, Kuala Lumpur, Malaysia

Asia School of Business(ASB) is a graduate business school in Kuala Lumpur. ASB offers MBA, EMBA and Master in Central Banking programs.

Merchantrade Asia (Merchantrade) is a financial service company based in Malaysia. The company's business is centered on international money transfers, foreign currency exchange, wholesale banknotes, digital payment processing and mobile telecommunications. They also introduced microinsurance as part of their service offerings.

mBridge is a multiple central bank digital currency platform developed to support real-time, peer-to-peer, cross-border payments and foreign exchange transactions using CBDCs. Based on a blockchain called the mBridge Ledger, the platform is designed to ensure compliance with jurisdiction-specific policy and legal requirements, regulations, and governance needs.

<span class="mw-page-title-main">Payments Network Malaysia</span>

Payments Network Malaysia Sdn Bhd (PayNet) is the national payments network and shared central infrastructure for Malaysia’s financial markets. It was formed from the merger between the Malaysian Electronic Payment System (MEPS) and Malaysian Electronic Clearing Corporation Sdn Bhd (MyClear) on 1 August 2017. PayNet is Malaysia's premier payments network and central infrastructure for financial markets.

References

Citations

  1. ↑ "Governors". Bank Negara Malaysia. Retrieved 1 April 2024.
  2. ↑ "International Reserves of Bank Negara Malaysia as at 30 September 2024". bnm.gov.my. Retrieved 22 October 2024.
  3. ↑ "Monetary Policy Statement". www.bnm.gov.my/.
  4. ↑ "Introduction - Bank Negara Malaysia". www.bnm.gov.my. Retrieved 12 May 2022.
  5. 1 2 3 4 5 "BNM Administered Legislation". Bank Negara Malaysia. Retrieved 12 February 2021.
  6. ↑ Preamble, Financial Services Act 2013
  7. ↑ "Opening of Bank Negara Malaysia Beijing Representative Office and Initiatives to Promote Bilateral Trade and Investment - Bank Negara Malaysia". www.bnm.gov.my. Retrieved 12 May 2022.
  8. 1 2 3 Millman, Gregory J. (1995). Around the world on a trillion dollars a day. London: Bantam. pp. 226–229. ISBN   0-593-03623-9. OCLC   34723476.
  9. ↑ Sprague, Jonathan & Shameen, Assif (2001). "No Second Thoughts". Asiaweek . Archived from the original on 7 July 2001.
  10. 1 2 "BNM Press Statements". bnm.gov.my. Archived from the original on 25 January 2009. Retrieved 17 January 2008.
  11. ↑ "Malaysia Business & Finance News, Stock Updates". The Star .
  12. ↑ "Bank Negara reserves at RM345.4b". Business Times Online. 22 January 2008. Archived from the original on 24 December 2007. Retrieved 23 January 2008.
  13. ↑ "International Reserves of BNM as at 31 March 2008". Bank Negara Malaysia. Archived from the original on 14 April 2008. Retrieved 24 April 2008.
  14. ↑ www.bnm.gov.my https://www.bnm.gov.my/-/reserve-31122010 . Retrieved 23 October 2024.{{cite web}}: Missing or empty |title= (help)
  15. ↑ www.bnm.gov.my https://www.bnm.gov.my/-/reserve-31122012 . Retrieved 23 October 2024.{{cite web}}: Missing or empty |title= (help)
  16. ↑ www.bnm.gov.my https://www.bnm.gov.my/-/rizab-antarabangsa-bank-negara-malaysia-pada-31-disember-2014#:~:text=The%20international%20reserves%20of%20Bank,December%202014%20compared%20to%20RM441. Retrieved 23 October 2024.{{cite web}}: Missing or empty |title= (help)
  17. ↑ www.bnm.gov.my https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-30-december-2016 . Retrieved 23 October 2024.{{cite web}}: Missing or empty |title= (help)
  18. ↑ www.bnm.gov.my https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-31-december-2018 . Retrieved 23 October 2024.{{cite web}}: Missing or empty |title= (help)
  19. ↑ www.bnm.gov.my https://www.bnm.gov.my/-/rizab-antarabangsa-bank-negara-malaysia-pada-31-disember-2019 . Retrieved 23 October 2024.{{cite web}}: Missing or empty |title= (help)
  20. ↑ www.bnm.gov.my https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-31-december-2020 . Retrieved 23 October 2024.{{cite web}}: Missing or empty |title= (help)
  21. ↑ www.bnm.gov.my https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-31-december-2021 . Retrieved 23 October 2024.{{cite web}}: Missing or empty |title= (help)
  22. ↑ www.bnm.gov.my https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-30-december-2022 . Retrieved 23 October 2024.{{cite web}}: Missing or empty |title= (help)
  23. ↑ www.bnm.gov.my https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-29-december-2023 . Retrieved 23 October 2024.{{cite web}}: Missing or empty |title= (help)
  24. ↑ www.bnm.gov.my https://www.bnm.gov.my/-/international-reserves-of-bank-negara-malaysia-as-at-30-september-2024 . Retrieved 23 October 2024.{{cite web}}: Missing or empty |title= (help)
  25. ↑ Kawale, Ajinkya (1 July 2024). "RBI, four Asean countries tie up for cross-border payments platform". Business Standard. Retrieved 2 July 2024.

Bibliography

This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.