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Transcript of 1 Basic Central Banking Course May 2006 Basic Central Banking Course May 2006 Promoting Fair Market...
1
Basic Central Banking Course May 2006
Basic Central Banking Course May 2006
Promoting Fair Market Practices and Ensuring Equitable Treatment for
Consumers – [The Malaysian Perspective]
Promoting Fair Market Practices and Ensuring Equitable Treatment for
Consumers – [The Malaysian Perspective]
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Background – Malaysia (Selected Info)Background – Malaysia (Selected Info)
Population: 25.6 million
98% of Malaysians have savings account
Commercial Banks: [23]
Merchant Banks: [10]
Insurance companies: [42]
Others: Foreign rep. offices, discount houses, money brokers, DFIs, other non-bank financial institutions.
Banking system is the largest component in financial system:
• Accounting for 51% of assets of financial system
• Mobilising 78% of total deposits of financial system
Insurance penetration rate at 37.9%
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3 Pillars of the Central Bank 3 Pillars of the Central Bank
BNM is responsible for
Implementing monetary policy
Ensuring soundness and stability of the banking system
Ensuring efficient and stable functioning of the payment system
Lender of last resort
Managing the international reserves
Monetary
Stability
Financial
Stability
EfficientPaymen
tSystem
3 pillars of central banking
Social & Developmental Role
** no explicit mandate on consumer protection
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Financial Stability & Consumer Protection Financial Stability & Consumer Protection
Financial StabilityFinancial Stability(safe, sound and stable financial system)(safe, sound and stable financial system)
efficient, effective and robust financial institutions, strong prudential regulations and
supervision, and efficient and reliable infrastructure (more market driven environment)
efficient, effective and robust financial institutions, strong prudential regulations and
supervision, and efficient and reliable infrastructure (more market driven environment)
Active consumerism &
Consumer Protection
Active consumerism &
Consumer Protection
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Regulator’s DilemmaRegulator’s Dilemma
Regulator’s Regulator’s DilemmaDilemma
High dependency on the banking
systemMigration to e-
payment vs. state of consumer
readiness
Meeting Shariah requirements for Islamic financial
products and services
Pressure from a wide variety of stakeholders
Explicit vs. implicit mandate, should there be
separation of powers?
Untapped potential in the
insurance sector
Manage liberalisation and deregulation
process while ensuring orderly
market conditions
Balancing consumer
expectations & prudential
requirements
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Roadmap for the Financial SectorRoadmap for the Financial Sector
Building domestic capacity
Increase domestic competition
Increase the pace for integration with the international market
Phase 1 Phase 2 Phase 3
(deregulated and liberalised market)
Effective consumer
protection & fair market practices
Preconditions to greater deregulation and liberalisationPreconditions to greater deregulation and liberalisation
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Challenges Facing ConsumersChallenges Facing Consumers
Information asymmetries
and information
overload
Low financial literacy/ financial
skills
Level of transparency
Restructuring of fees and
charges
Fair and competitive
financial sector
Redress mechanism
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At the same time consumer has the has the responsibility for their responsibility for their own financial well-own financial well-beingbeing::
to understand T&C of products
and services purchased
know their rights and
responsibilities
exercise their rights when necessary
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Approach to Enhance Consumer Protection & Fair Market Practices Approach to Enhance Consumer Protection & Fair Market Practices
Open, competitive
& fair financial system
Open, competitive
& fair financial system
Speedy RedressSpeedy Redress
Good Information
Good Information
Avenue to seek help
Avenue to seek redress
Consumer education
Information on products and services must be accurate, easy to understand and accessible
Allows for best deal
promotes innovationenhances efficiency
ApproachApproach
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Consumer Protection FrameworkConsumer Protection Framework
Enhancing Financial Literacy
(consumer education programme, school
adoption programme)
Depositors Protection
(Malaysia Deposit Insurance Corporation)
Access to Financial
Products and Services
(access to basic banking services,
access to financing)
Fair Market Practices (anti trust, debt
collection, repossession
inequitable contract, role of intermediaries,
market abuse)
Avenue to seek help & redress(Complaint Unit @ FIs & BNM, FMB, CCDM)
Proper Disclosure(transparency &
disclosure requirement for banking & insurance
products)
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Enhancing Financial Literacy: Consumer Education ProgrammeEnhancing Financial Literacy: Consumer Education Programme
A more dynamic financial system requires financially savvy consumers who
Are able to make informed decision (choosing products and services that suit their financial needs)
Knows their rights and responsibilities
http://www.bankinginfo.com.my/
one-stop information centre about “money and banking” as well as on “insurance and takaful”
The objective is to make Malaysians more aware of their rights and responsibilities with regard to banking/insurance products and services.
Booklets are also available at FIs’ branches
http://www.insuranceinfo.com.my/
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Snapshots of BankingInfo & InsuranceInfo WebsitesSnapshots of BankingInfo & InsuranceInfo Websites
bankinginfo insuranceinfo
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Enhancing Financial Literacy: Financial Planning & Savings Outreach ProgrammeEnhancing Financial Literacy: Financial Planning & Savings Outreach Programme
Increasingly complex financial products &
services
Requires solid grasp of money matters
Develop fin capability from early age
BNM does:Road shows
Educate & inculcate smart fin mgmt habits among target groups
School Adoption programme - since 1997 (partnership with the Education Ministry)
7000+ schools adopted by BIs
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Access to Financial Products and ServicesAccess to Financial Products and Services
Objective:
To ensure that banking customers can enjoy a minimum level of banking services at reasonable costs
Initiatives:
All banking institutions (BIs) required to offer a basic savings account (BSA) and a basic current account (BCA) to all Malaysians that will provide a minimum level of services (e.g. deposit, withdrawals, fund transfer, etc) and transactions at minimal costs.
Measures introduced to ensure charges imposed on products offered to individuals and SMEs are appropriate and reasonable.
Floor rates on time deposits
Ensuring public access to branch network nationwide.
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Product Transparency and Disclosure (PTD)Product Transparency and Disclosure (PTD)
Objectives:
To give consumers the information they need about a product and its charges so that they can make informed decisions; and
To ensure that the information is presented in a clear and timely manner.
Banking
Disclosure requirements on fees & charges, as well as on changes to T&C have been introduced.
Disclosure requirement on credit card
Concept paper on PTD covering: Form, timing & items of disclosure as well as disclosure
requirement in advertisement
Insurance
Introduced PTD policies on: claims settlement practices the sale of general insurance products Proper Advice Practices for Life Insurance business with
primary purpose of ensuring intermediary obtains sufficient info about a prospective policy owner before rendering advice.
Medical and Health insurance business 15 days cooling off period for Life products
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Product Transparency and Disclosure (PTD)Product Transparency and Disclosure (PTD)
Objectives:
To provide end-users with up-to-date information on specific banking products and services that will allow them to do “comparison shopping” by reducing cost of information search.
Scope:
6 retail products have been identified for this purpose. There are:
Savings account
Current account
Fixed deposit account
Credit card facility
Hire-purchase facility
Housing loan facility
Comparative Tables
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Product Transparency and Disclosure (PTD)Product Transparency and Disclosure (PTD)
Loan Products*
Deposit Rates
* to be published in Dec 2005
Interactive with
filtering capability!
Interactive with
filtering capability!
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Redress MechanismsRedress Mechanisms
Avenue to seek redress and helpAvenue to seek
redress and help
Complaint Unit @ FIs &
BNM
Small Debt Small Debt Resolution Resolution
SchemeSchemeSME Special SME Special Units at BIs & Units at BIs & BNM – assist BNM – assist
viable SMEs on viable SMEs on financing issuesfinancing issues
19
Deposit InsuranceDeposit Insurance
An independent statutory body called Perbadanan Insurans Deposit Malaysia (PIDM) was established on 15 August 2005
Mandate; to provide:• insurance against loss of part or all
deposits• Incentives for sound risk management• promote & contribute to the stability of
the financial system
Members: Commercial banks, finance companies, Islamic banks
Eligible deposits will be covered up to the prescribed limit of RM60,000 per depositor, per member institution.
Covers 90% depositors, 30% deposits
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Benchmarking… a tool to improve performanceBenchmarking… a tool to improve performance
What has been done…
Financial and operating statistics
To drive banking institutions to understand their relative performance
Position compared to industry
Trends observed
Service quality indicators (turnaround & waiting time, handling of complaints, ATM services)
Performance gap with industry and foreign banks
Customer needs and satisfaction surveys
To understand the level of customers satisfaction with products and services offered, and service quality provided by financial institutions e.g efficiency, products, communication
To identify the critical success factors affecting quality of service
Requirement for BIs to be rated – at bank or holding level
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Future LandscapeFuture Landscape
Consumers
BNM
Active consumerism, more financially savvy consumers,
Well being, fair treatment and satisfaction of consumers embedded within business strategies
• Once, enabling environment is in place (effective consumer protection infrastructure and fair market practices)
• Greater reliance on market discipline & self regulation
Financial Institutions
Lessening of environment shaper and driver role (less regulatory intervention) as we move towards a more deregulated and liberalised environment.