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Malaysian Banking Law – Statutory Definitions of “Bank” and “Banking Business” in Malaysia
General Overview
In Malaysia, statutory definitions of “bank” and “banking business” are mainly provided under banking legislation. Unlike common law definitions, Malaysian statutes provide clearer and more structured explanations of what constitutes banking business.
Previously, the main legislation governing banking institutions was the Banking and Financial Institutions Act 1989 (‘BAFIA’). However, this Act was repealed and replaced by the Financial Services Act 2013 (‘FSA 2013’).
The statutory definitions under Malaysian law focus on:
Definition Under the Banking and Financial Institutions Act 1989 (BAFIA)
Definition of “Bank”
Section 2(1) of the Banking and Financial Institutions Act 1989 defined a “bank” as:
“A person who carries on banking business.”
The Act therefore linked the meaning of a bank directly to the carrying on of banking business.
Definition of “Banking Business”
Under BAFIA, “banking business” included:
(a) Receiving Deposits
This included receiving deposits through:
(b) Paying and Collecting Cheques
Banks were required to:
(c) Provision of Finance
Banks also provided:
(d) Other Prescribed Business
The Act also allowed Bank Negara Malaysia, with approval from the Minister, to prescribe additional banking activities.
This provided flexibility for the law to adapt to changing financial systems.
Definition Under the Financial Services Act 2013
The Financial Services Act 2013 retained largely the same definition of banking business.
Under the FSA 2013, “banking business” means:
(a) The Business of:
(i) Accepting Deposits
Banks may accept deposits through:
(ii) Paying and Collecting Cheques
Banks continue to:
(iii) Provision of Finance
Banks provide:
(b) Other Prescribed Business
Additional business activities may be prescribed under section 3 of the FSA 2013.
This allows banking regulation to adapt to:
Comparison With the Banking Act 1973
The earlier Banking Act 1973 also defined banking business as:
Banking and Finance Companies Under BAFIA
Amendments to BAFIA allowed finance company business to be carried on together with banking business.
Banking and Finance Company
Under BAFIA:
Requirement of Public Company Status
Under section 4(a) of BAFIA:
Definitions Under the Financial Services Act 2013
Licensed Bank
Under the Financial Services Act 2013, a “licensed bank” means:
“A person licensed under section 10 to carry on banking business.”
Authorised Person
Banks also fall within the definition of an “authorised person,” meaning:
Authorised Business
Authorised business includes:
Approved Businesses Under Schedule 1 of the FSA 2013
The FSA 2013 also recognises approved businesses requiring approval.
These include:
1. Operation of Payment Systems
This includes systems enabling:
2. Issuance of Designated Payment Instruments
Examples include:
3. Insurance Broking Business
Providing insurance intermediary services.
4. Money-Broking Business
Acting as intermediaries in money market transactions.
5. Financial Advisory Business
Providing:
Other Malaysian Statutory Definitions
Bankers’ Books (Evidence) Act 1949
The Bankers’ Books (Evidence) Act 1949 defines “bank” and “banker” as:
Bills of Exchange Act 1949
The Bills of Exchange Act 1949 defines “banker” as:
Note Form – Malaysian Statutory Definitions
Banking Business Under Malaysian Law Includes:
Financial Services Act 2013 Recognises:
Important Regulatory Role
Bank Negara Malaysia has authority to:
Application in a Case Scenario
Scenario
FinPay Malaysia Sdn Bhd operates a digital payment platform allowing customers to store money electronically, transfer funds between accounts, and obtain short-term financing facilities.
A legal issue arises regarding whether FinPay is carrying on banking business under the Financial Services Act 2013. Regulators may examine whether the company:
Critical Analysis
The Malaysian statutory approach provides clearer guidance compared to common law definitions because it specifically identifies banking activities and regulated businesses.
The FSA 2013 also reflects modern financial developments by recognising:
The broad powers granted to Bank Negara Malaysia help ensure regulatory flexibility, but they also increase the importance of proper supervision and consumer protection.
Unresolved Issues
Digital Banking and FinTech
Modern digital financial services continue to challenge traditional banking definitions.
Regulatory Classification
Determining whether certain FinTech businesses require banking licences may be difficult.
Consumer Protection
Customers may not fully understand whether digital financial platforms receive the same legal protections as licensed banks.
Conclusion
Malaysian banking law provides statutory definitions of “bank” and “banking business” mainly through the Financial Services Act 2013 and earlier legislation such as the Banking and Financial Institutions Act 1989. These definitions focus on deposit-taking, cheque services, financing activities, and other prescribed financial services. Malaysian law adopts a broader and more flexible approach to banking regulation, allowing the legal framework to adapt to modern financial systems and technological developments.
References (APA 7th Edition)
Banking Act 1973 (Act 102) (Malaysia).
Bankers’ Books (Evidence) Act 1949 (Act 33) (Malaysia).
Bills of Exchange Act 1949 (Act 204) (Malaysia).
Banking and Financial Institutions Act 1989 (Act 372) (Malaysia).
Financial Services Act 2013 (Act 758) (Malaysia).
Money Services Business Act 2011 (Malaysia).
Bank Negara Malaysia.
General Overview
In Malaysia, statutory definitions of “bank” and “banking business” are mainly provided under banking legislation. Unlike common law definitions, Malaysian statutes provide clearer and more structured explanations of what constitutes banking business.
Previously, the main legislation governing banking institutions was the Banking and Financial Institutions Act 1989 (‘BAFIA’). However, this Act was repealed and replaced by the Financial Services Act 2013 (‘FSA 2013’).
The statutory definitions under Malaysian law focus on:
- Deposit-taking activities,
- Payment and collection of cheques,
- Provision of finance,
- Other financial activities approved by the regulator.
Definition Under the Banking and Financial Institutions Act 1989 (BAFIA)
Definition of “Bank”
Section 2(1) of the Banking and Financial Institutions Act 1989 defined a “bank” as:
“A person who carries on banking business.”
The Act therefore linked the meaning of a bank directly to the carrying on of banking business.
Definition of “Banking Business”
Under BAFIA, “banking business” included:
(a) Receiving Deposits
This included receiving deposits through:
- Current accounts,
- Deposit accounts,
- Savings accounts,
- Other similar accounts.
(b) Paying and Collecting Cheques
Banks were required to:
- Pay cheques drawn by customers,
- Collect cheques deposited by customers.
(c) Provision of Finance
Banks also provided:
- Loans,
- Financing facilities,
- Credit arrangements,
- Other financial assistance.
(d) Other Prescribed Business
The Act also allowed Bank Negara Malaysia, with approval from the Minister, to prescribe additional banking activities.
This provided flexibility for the law to adapt to changing financial systems.
Definition Under the Financial Services Act 2013
The Financial Services Act 2013 retained largely the same definition of banking business.
Under the FSA 2013, “banking business” means:
(a) The Business of:
(i) Accepting Deposits
Banks may accept deposits through:
- Current accounts,
- Deposit accounts,
- Savings accounts,
- Similar accounts.
(ii) Paying and Collecting Cheques
Banks continue to:
- Honour customer cheques,
- Collect cheques deposited by customers.
(iii) Provision of Finance
Banks provide:
- Financing facilities,
- Loans,
- Credit arrangements,
- Other financial services.
(b) Other Prescribed Business
Additional business activities may be prescribed under section 3 of the FSA 2013.
This allows banking regulation to adapt to:
- Digital banking,
- Electronic payments,
- Modern financial services.
Comparison With the Banking Act 1973
The earlier Banking Act 1973 also defined banking business as:
- Receiving money on current or deposit accounts,
- Paying and collecting cheques,
- Making advances to customers.
- Use broader language,
- Include provision of finance,
- Allow additional prescribed financial activities.
Banking and Finance Companies Under BAFIA
Amendments to BAFIA allowed finance company business to be carried on together with banking business.
Banking and Finance Company
Under BAFIA:
- A licensed bank could include a banking and finance company.
- A banking and finance company held:
- A licence to carry on banking business, and
- A licence to carry on finance company business.
Requirement of Public Company Status
Under section 4(a) of BAFIA:
- All banks in Malaysia were required to be public companies.
- Transparency,
- Accountability,
- Financial stability.
Definitions Under the Financial Services Act 2013
Licensed Bank
Under the Financial Services Act 2013, a “licensed bank” means:
“A person licensed under section 10 to carry on banking business.”
Authorised Person
Banks also fall within the definition of an “authorised person,” meaning:
- A person licensed under section 10, or
- Approved under section 11 to carry on authorised business.
Authorised Business
Authorised business includes:
- Banking business,
- Insurance business,
- Investment banking business.
Approved Businesses Under Schedule 1 of the FSA 2013
The FSA 2013 also recognises approved businesses requiring approval.
These include:
1. Operation of Payment Systems
This includes systems enabling:
- Transfer of funds between bank accounts,
- Debit transfers,
- Credit transfers,
- Standing instructions,
- Payment instrument network operations.
2. Issuance of Designated Payment Instruments
Examples include:
- Debit cards,
- Electronic wallets,
- Digital payment instruments.
3. Insurance Broking Business
Providing insurance intermediary services.
4. Money-Broking Business
Acting as intermediaries in money market transactions.
5. Financial Advisory Business
Providing:
- Financial advice,
- Investment guidance,
- Financial planning services.
Other Malaysian Statutory Definitions
Bankers’ Books (Evidence) Act 1949
The Bankers’ Books (Evidence) Act 1949 defines “bank” and “banker” as:
- Companies carrying on banking business in Malaysia,
- Companies licensed under banking laws,
- Post Office Savings Banks established in Malaysia.
Bills of Exchange Act 1949
The Bills of Exchange Act 1949 defines “banker” as:
- A body of persons, incorporated or otherwise, carrying on banking business.
Note Form – Malaysian Statutory Definitions
Banking Business Under Malaysian Law Includes:
- Accepting deposits.
- Paying and collecting cheques.
- Providing finance.
- Other prescribed financial activities.
Financial Services Act 2013 Recognises:
- Licensed banks.
- Authorised persons.
- Approved businesses.
- Payment systems.
- Financial advisory businesses.
Important Regulatory Role
Bank Negara Malaysia has authority to:
- Approve additional banking activities,
- Supervise financial institutions,
- Regulate authorised businesses.
Application in a Case Scenario
Scenario
FinPay Malaysia Sdn Bhd operates a digital payment platform allowing customers to store money electronically, transfer funds between accounts, and obtain short-term financing facilities.
A legal issue arises regarding whether FinPay is carrying on banking business under the Financial Services Act 2013. Regulators may examine whether the company:
- Accepts deposits,
- Provides payment services,
- Offers financing,
- Requires licensing as a bank or approved business.
Critical Analysis
The Malaysian statutory approach provides clearer guidance compared to common law definitions because it specifically identifies banking activities and regulated businesses.
The FSA 2013 also reflects modern financial developments by recognising:
- Payment systems,
- Digital financial services,
- Financial advisory businesses.
The broad powers granted to Bank Negara Malaysia help ensure regulatory flexibility, but they also increase the importance of proper supervision and consumer protection.
Unresolved Issues
Digital Banking and FinTech
Modern digital financial services continue to challenge traditional banking definitions.
Regulatory Classification
Determining whether certain FinTech businesses require banking licences may be difficult.
Consumer Protection
Customers may not fully understand whether digital financial platforms receive the same legal protections as licensed banks.
Conclusion
Malaysian banking law provides statutory definitions of “bank” and “banking business” mainly through the Financial Services Act 2013 and earlier legislation such as the Banking and Financial Institutions Act 1989. These definitions focus on deposit-taking, cheque services, financing activities, and other prescribed financial services. Malaysian law adopts a broader and more flexible approach to banking regulation, allowing the legal framework to adapt to modern financial systems and technological developments.
References (APA 7th Edition)
Banking Act 1973 (Act 102) (Malaysia).
Bankers’ Books (Evidence) Act 1949 (Act 33) (Malaysia).
Bills of Exchange Act 1949 (Act 204) (Malaysia).
Banking and Financial Institutions Act 1989 (Act 372) (Malaysia).
Financial Services Act 2013 (Act 758) (Malaysia).
Money Services Business Act 2011 (Malaysia).
Bank Negara Malaysia.
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