The banking system in Malaysia comprises commercial banks, investment banks, and Islamic banks overseen by Bank Negara Malaysia. The sector has 26 commercial banks, 16 Islamic banks, one international Islamic bank, and 11 investment banks. Local banks dominate the sector, controlling 80% of total sector assets, with Islamic banks spearheading growth in recent years. The banking industry’s total assets were reported to be $687.1 billion in 2020, driven by monetary and fiscal policy.
Banking services in Malaysia cater to both individual and business needs, providing credit, financing, and 24/7 online and mobile banking services. Islamic banking services, compliant with Shariah principles, offer savings, current, or fixed deposit accounts similar to conventional ones. Digital banking has emerged, with three entities receiving digital banking licenses under the Financial Services Act 2013.
Bank Negara Malaysia (BNM) regulates banking institutions under various acts, adopting a risk-based supervisory approach. Compliance policy requirements for financial institutions have been issued by BNM, focusing on the effective management of compliance risk. The Anti-Money Laundering Act (AMLA) established a unit within the Central Bank of Malaysia to oversee compliance in the financial sector concerning money laundering and terrorism financing.
Professionals like banking officers play critical roles in daily branch operations and policy adherence. Banking graduates entering the sector are compensated competitively to attract talent, indicating the sector’s competitive nature. The transformation of the banking industry through technology and innovation also highlights the importance of multidisciplinary teams, including tech support and legal teams, to ensure growth and compliance.
Banking in Malaysia operates under a dual banking system, both conventional and Islamic banking sectors.
Banking in Malaysia
Dual Banking System
Malaysia has a dual banking system, with conventional and Islamic banks operating alongside each other. Islamic banks, including international Islamic banks, offer a variety of Islamic financial products to residents and non-residents.
The dual banking system in Malaysia is unique and allows for the coexistence of conventional and Islamic banks. This framework facilitates a diversified range of financial services catering to the different needs of the population. Islamic banking is aligned with the principles of Sharia law, and it has grown significantly in Malaysia, offering various Islamic financial products to both residents and non-residents. The presence of international Islamic banks also signifies Malaysia’s position as a hub for Islamic finance in the ASEAN region.
Evolution Post-1997 Financial Crisis
The financial crisis of 1997 had substantially impacted the economies of many Asian countries, including Malaysia. In response to the crisis, the Malaysian government initiated measures to strengthen the banking system through the central bank, Bank Negara Malaysia (BNM). One of the key strategies was consolidating local banking institutions into ten anchor banks to create stronger and more resilient financial entities. This consolidation, completed in 2002, aimed at promoting stability and restoring confidence in the banking sector.
Digital Banking
Digital banking in Malaysia is extending financial services to underserved or unserved communities. Bank Negara Malaysia (BNM), the nation’s central bank, launched a digital bank licensing framework in 2020. The first digital bank in Malaysia, GXBank, received regulatory approval and was among the five digital banking licenses awarded by Malaysia in April 2022.
Digital banking in Malaysia focuses on less affluent segments like the B40 group (the bottom 40% income group) and the Micro, Small and Medium Enterprises (MSME) segments. It means that digital banking will catalyse greater financial inclusion in Malaysia. It offers cheaper banking alternatives and varied innovative financial solutions to consumers and Small and Medium Enterprises (SMEs). The new digital banks are expected to occupy niche market roles rather than disrupt the banking sector in the medium term.
This move will likely foster competition, enhance financial inclusion, and provide more diversified banking services to the public. The digital banks are expected to operate in a manner that complements traditional banks, providing a blend of services that meet the evolving needs of consumers​.
List of Banks in Malaysia
The banking sector in Malaysia is well-structured and diversified. It has various types of banks. Below are the segments of banks in Malaysia:
Central Bank
Bank Negara Malaysia (The Central Bank of Malaysia).
Top Largest Banks in Malaysia (by total assets as of 31 December 2022):
- Malayan Banking Berhad (Maybank)
- CIMB Group Holdings
- Public Bank Berhad
- RHB Bank
- Hong Leong Bank
- AmBank
- UOB Malaysia
- Bank Rakyat
- OCBC Bank Malaysia
- HSBC Bank Malaysia
- Bank Islam Malaysia
- Affin Bank
- Alliance Bank Malaysia Berhad
- Standard Chartered Bank Malaysia
- MBSB Bank Berhad
- Citibank Malaysia (sold to UOB Group Malaysia)
- Bank Simpanan Nasional (BSN)
- Bank Muamalat Malaysia Berhad
- Agrobank
- Al-Rajhi Malaysia
- Co-op Bank Pertama.
Malaysian National Nationwide Banks (Commercial)
- Affin Bank
- Alliance Bank
- AmBank
- CIMB
- Hong Leong Bank
- Maybank
- Public Bank
- RHB Bank
Foreign Banks (Commercial)
- BNP Paribas Malaysia Berhad
- Bangkok Bank Berhad
- Bank of America Malaysia Berhad
- Bank of China (Malaysia) Berhad
- Bank of Tokyo-Mitsubishi UFJ (Malaysia) Berhad
- China Construction Bank (Malaysia) Berhad
- Citibank Berhad (Sold to UOB Group Malaysia)
- Deutsche Bank (Malaysia) Berhad
- HSBC Bank Malaysia Berhad
- India International Bank (Malaysia) Berhad
- Industrial and Commercial Bank of China (Malaysia) Berhad
- J.P. Morgan Chase Bank Berhad
- Mizuho Bank (Malaysia)
- OCBC Bank (Malaysia) Berhad
- Standard Chartered Bank Malaysia Berhad
- Sumitomo Mitsui Banking Corporation Malaysia Berhad
- The Bank of Nova Scotia Berhad
- United Overseas Bank (Malaysia) Bhd
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