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Malaysian Banking Law – Case Scenario on the Definite Definition of a Bank in the UK
Scenario
A company called AlphaPay Ltd operates in the United Kingdom. The company provides digital financial services through a mobile application. Customers may:
  • Open accounts with AlphaPay,
  • Deposit money into those accounts,
  • Transfer money to other users,
  • Pay bills electronically,
  • Receive salaries into their accounts.
AlphaPay also allows customers to withdraw money using debit cards linked to their accounts. However, the company does not issue traditional cheque books and does not physically operate as a traditional bank branch.
The company advertises itself as a “digital banking platform,” but it has not obtained formal recognition as a licensed bank.
A dispute arises when one customer claims that AlphaPay should legally be treated as a bank because it performs banking functions and should therefore owe the same legal duties as traditional banks.


Legal Issue
The court must determine whether AlphaPay Ltd is legally carrying on banking business and whether it qualifies as a bank under UK law.


Application of UK Legal Principles
Step 1 – Traditional Banking Characteristics
The court first considers the principles from United Dominions Trust Ltd v Kirkwood.
The court examines whether AlphaPay:
  • Accepts deposits from customers,
  • Maintains customer accounts,
  • Facilitates payment transactions,
  • Operates similarly to traditional banking institutions.
Although AlphaPay does not issue cheques, it performs modern electronic payment functions equivalent to traditional banking transactions.


Step 2 – Substance Over Form
The court then applies the broader approach from:
  • Bank of Chettinad Ltd of Colombo v IT Commissioners of Colombo,
  • Bank of New South Wales v Commonwealth.
The court focuses on:
  • The real substance of the activities,
  • The economic role performed by the company,
  • Whether the company acts as a financial intermediary.
The court observes that AlphaPay:
  • Holds customer money,
  • Facilitates transfers and payments,
  • Operates customer accounts continuously,
  • Performs functions similar to modern banking services.


Step 3 – Commercial Recognition
Following Lord Denning’s reasoning in United Dominions Trust Ltd v Kirkwood, the court also considers:
  • Whether AlphaPay is recognised commercially as a banking institution,
  • Whether customers reasonably regard the company as functioning like a bank.
Evidence shows that:
  • Customers use AlphaPay as their primary financial account,
  • Businesses accept AlphaPay payment services,
  • The company markets itself as a banking platform.


Court’s Decision
The court holds that although AlphaPay does not operate traditional cheque services, it substantially carries on banking activities because:
  • It accepts customer deposits,
  • Maintains customer accounts,
  • Facilitates payment systems,
  • Functions economically as a banking institution.
The court concludes that modern banking law must adapt to technological developments and that traditional cheque functions are no longer the sole determining factor.
Therefore, AlphaPay may legally be regarded as carrying on banking business under the modern UK approach.


Definite Definition Applied in This Case
The court effectively applies the following modern UK definition:
A bank is an institution whose principal business involves accepting deposits, maintaining customer accounts, facilitating payment transactions, and carrying on genuine financial intermediation recognised commercially and legally as banking business.


Critical Analysis
This scenario demonstrates how UK courts apply a flexible and practical approach in defining banking business.
Traditionally, cheque payment and collection were considered essential characteristics of banking. However, modern banking increasingly depends on:
  • Electronic transfers,
  • Mobile banking,
  • Digital wallets,
  • Instant payment systems.
The case also illustrates how courts focus on:
  • Substance rather than form,
  • Economic reality rather than traditional methods,
  • Consumer perception and commercial recognition.
This flexible approach helps the law adapt to financial innovation but may also create uncertainty regarding which digital financial institutions legally qualify as banks.


Unresolved Issues
Regulation of Digital Banks
Should companies like AlphaPay be regulated exactly like traditional banks?


Consumer Protection
Customers may assume digital financial platforms offer the same protection as licensed banks.


Future Banking Technology
Artificial intelligence, cryptocurrency, and decentralised finance systems may further challenge traditional banking definitions.


Conclusion
This case scenario shows how the modern UK definition of a bank may be applied in practice. Even without traditional cheque systems, an institution may still legally qualify as a bank if it substantially performs banking functions such as accepting deposits, operating customer accounts, and facilitating payment services. The UK approach therefore focuses on the real substance and commercial reality of banking activities rather than rigid traditional formalities.

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Malaysian Banking Law – Position of the Definition of a Bank in the United Kingdom
General Position in the United Kingdom
In the United Kingdom, there is no single exhaustive statutory definition of the word “bank” or “banker.” Instead, the legal position has mainly been developed through:
  • Judicial decisions,
  • Common law principles,
  • Commercial understanding,
  • Banking practice.
The UK courts recognise that banking evolves over time and differs according to economic and technological developments. Therefore, courts avoid giving a strict or rigid definition of banking.


Main Judicial Position
Bank of Chettinad Ltd v IT Commissioners of Colombo
In Bank of Chettinad Ltd of Colombo v IT Commissioners of Colombo, the Privy Council stated that:
  • The meaning of “bank” and “banking” changes over time,
  • Banking practices differ between countries,
  • No universal definition can fully cover all banking activities.
This case established that banking should be interpreted flexibly.


Bank of New South Wales v Commonwealth
In Bank of New South Wales v Commonwealth, Dixon J stated that:
  • Banking has a wide meaning,
  • Banking forms part of the commercial and economic structure of society,
  • It is impossible to provide a complete and inclusive definition of banking.
This supports the broad and flexible judicial approach.


Traditional Characteristics of Banking
The leading English case is United Dominions Trust Ltd v Kirkwood.
The Court of Appeal identified the traditional characteristics of banking as:
1. Conduct of Current Accounts
Banks maintain accounts where customers may deposit and withdraw money continuously.


2. Payment of Cheques
Banks honour cheques issued by customers.


3. Collection of Cheques
Banks collect cheques deposited by customers.


Lord Denning’s Position
Lord Denning explained that these are usually found characteristics of banking, but they are not an exhaustive definition.
He emphasised:
  • Stability,
  • Soundness,
  • Probity (honesty),
  • Commercial reputation.
He famously stated that:
“A banker is easier to recognise than to define.”
This means courts may examine the overall nature and reputation of the institution rather than rely only on technical requirements.


Modern UK Position
Modern UK law no longer strictly insists that every bank must:
  • Operate traditional cheque systems,
  • Maintain physical current accounts.
Courts now recognise that:
  • Banking methods evolve,
  • Electronic payment systems may replace cheques,
  • Modern financial services may still amount to banking business.
The focus is increasingly placed on:
  • Deposit-taking,
  • Payment services,
  • Financial intermediation,
  • Economic substance of the activities.


Statutory Position in the UK
The UK has several statutes referring to banks, such as:
  • Bills of Exchange Act 1882,
  • Bankers’ Books Evidence Act 1879,
  • Solicitors Act 1974.
However, these statutes do not provide a complete universal definition of a bank. Most statutes simply identify authorised banking institutions for specific legal purposes.


Definite Position in the UK
Final Position
The legal position in the UK is that:
A bank is generally an institution whose principal business involves accepting deposits, facilitating payments, operating customer accounts, and carrying on genuine banking activities recognised commercially and legally as banking business.
However:
  • No single characteristic is absolutely decisive,
  • Courts adopt a flexible approach,
  • The substance of the activities is more important than strict formalities.


Note Form – UK Position
No Single Definition
  • No exhaustive statutory definition exists.
  • Banking is mainly defined through case law.


Traditional Characteristics
  • Current accounts.
  • Payment of cheques.
  • Collection of cheques.


Modern Judicial Approach
  • Flexible interpretation.
  • Focus on substance over form.
  • Electronic payments may replace cheque systems.


Important Judicial Principle
A bank is:
  • Easier to recognise than to define.
  • Determined by overall business activities and reputation.


Critical Analysis
The UK position allows banking law to adapt to changing financial systems and technological developments. This flexibility is useful because modern banking now includes:
  • Internet banking,
  • Mobile banking,
  • Digital wallets,
  • Electronic transfers,
  • FinTech services.
However, the absence of a precise definition may also create legal uncertainty. Financial technology companies may perform banking-like activities without clearly qualifying as banks under traditional concepts.
Courts and regulators therefore face continuing challenges in balancing:
  • Financial innovation,
  • Consumer protection,
  • Regulatory certainty,
  • Commercial flexibility.


Unresolved Issues
FinTech Companies
Whether digital financial platforms should legally be treated as banks remains uncertain.


Declining Role of Cheques
Traditional cheque functions are becoming less important in modern banking systems.


Regulatory Classification
Modern financial services may not fit neatly within traditional banking definitions.


Conclusion
The position in the United Kingdom is that there is no single exhaustive legal definition of a bank. Instead, UK law adopts a flexible judicial approach based on the actual nature of banking activities, commercial understanding, and regulatory recognition. Traditional banking characteristics include current accounts, payment of cheques, and collection of cheques, but modern courts increasingly focus on the substance of financial activities rather than strict traditional methods.

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Malaysian Banking Law – Definite Definition of a Bank in the UK and Malaysia
General Overview
Based on all the judicial decisions, statutory provisions, and legal writings discussed earlier, there is actually no single universal or exhaustive definition of the word “bank” in either the United Kingdom or Malaysia.
Instead, the meaning of “bank” is determined by:
  • The nature of the activities carried out,
  • Statutory definitions,
  • Judicial interpretations,
  • Commercial understanding,
  • Regulatory recognition.
However, certain core characteristics consistently appear in both UK and Malaysian law.


Definite Position in the United Kingdom
No Single Exhaustive Definition
In the UK, courts repeatedly stated that banking is difficult to define precisely because banking evolves over time and differs according to commercial and technological developments.
This principle was recognised in:
  • Bank of Chettinad Ltd of Colombo v IT Commissioners of Colombo
  • Bank of New South Wales v Commonwealth
The courts explained that banking has a wide meaning connected to the economic and commercial organisation of society.


Traditional UK Definition of a Bank
The traditional judicial definition mainly comes from:
  • United Dominions Trust Ltd v Kirkwood,
  • Halsbury’s Laws of England,
  • Dr HL Hart.


Traditional Characteristics of a Bank in UK Law
A bank generally:
  • Accepts deposits from customers,
  • Maintains current accounts,
  • Pays cheques drawn by customers,
  • Collects cheques for customers,
  • Facilitates financial transactions,
  • Carries on banking as its main business.


Modern UK Position
Modern courts also recognise that:
  • Banking methods evolve,
  • Cheques may no longer be essential,
  • Digital payment systems may replace traditional cheque functions.
Therefore, modern UK law focuses more on:
  • The substance of financial activities,
  • Deposit-taking,
  • Payment services,
  • Financial intermediation,
  • Public and commercial recognition.


Simplified Definite UK Definition
Definition
A bank in UK law is generally:
A person or institution whose main business involves accepting deposits, operating customer accounts, facilitating payment transactions, and carrying on genuine banking activities recognised commercially and legally as banking business.


Definite Position in Malaysia
Statutory Definition Under Malaysian Law
Malaysia adopts a more structured statutory approach compared to the UK.
Under section 2(1) of the repealed Banking and Financial Institutions Act 1989 and presently under the Financial Services Act 2013, a bank is defined as:
A person licensed to carry on banking business.


Definition of Banking Business in Malaysia
Under the Financial Services Act 2013, banking business includes:
  • Accepting deposits,
  • Paying and collecting cheques,
  • Providing finance,
  • Other prescribed financial business.


Malaysian Regulatory Approach
Malaysia places strong emphasis on:
  • Licensing,
  • Regulatory approval,
  • Supervision by Bank Negara Malaysia.
This means an institution may not legally operate as a bank unless:
  • It is licensed under Malaysian banking law,
  • It carries on authorised banking business.


Modern Malaysian Position
Modern Malaysian banking law also recognises:
  • Digital payment systems,
  • Electronic banking,
  • Financial advisory business,
  • Payment instrument operations,
  • Other approved financial services.
Therefore, Malaysian law adopts a broader and more flexible regulatory approach compared to older traditional banking concepts.


Simplified Definite Malaysian Definition
Definition
A bank in Malaysian law is generally:
A licensed financial institution that carries on banking business by accepting deposits, facilitating payments, providing finance, and conducting other authorised financial activities regulated under the Financial Services Act 2013.


Key Difference Between UK and Malaysia
United Kingdom
  • Mainly based on judicial interpretation and commercial understanding.
  • No single statutory definition.
  • Courts focus on characteristics of banking.


Malaysia
  • Mainly based on statutory and regulatory definitions.
  • Strong emphasis on licensing and authorisation.
  • Banking business clearly regulated by legislation.


Note Form – Final Definition
United Kingdom
A bank generally:
  • Accepts deposits,
  • Operates customer accounts,
  • Processes payments,
  • Carries on banking as its main business,
  • Is recognised commercially as a banker.


Malaysia
A bank generally:
  • Is licensed under the Financial Services Act 2013,
  • Accepts deposits,
  • Pays and collects cheques,
  • Provides financing,
  • Carries on authorised banking business regulated by Bank Negara Malaysia.


Critical Analysis
The absence of a universal definition demonstrates that banking constantly evolves with commercial and technological developments.
Traditional definitions focused heavily on:
  • Current accounts,
  • Cheque payments,
  • Physical banking services.
Modern banking increasingly involves:
  • Internet banking,
  • Mobile payments,
  • Digital wallets,
  • Electronic fund transfers,
  • FinTech services.
As a result, modern courts and regulators focus more on the substance and economic reality of banking activities rather than strict traditional characteristics.


Unresolved Issues
Digital Banking
Whether digital financial platforms should legally be classified as banks remains a major issue.


Declining Importance of Cheques
Cheque-related functions may no longer accurately represent modern banking systems.


FinTech Regulation
Modern financial technology companies continue to challenge traditional legal definitions of banking.


Conclusion
There is no single universal definition of “bank” in either the UK or Malaysia. However, both systems recognise that a bank generally performs deposit-taking, payment, and financing functions. The UK relies more on judicial interpretation and commercial understanding, while Malaysia adopts a more structured statutory and regulatory approach under the Financial Services Act 2013. Despite technological developments and changing financial systems, the core concept of banking remains centred on accepting money, facilitating payments, and supporting economic activity through financial intermediation.

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Malaysian Banking Law – Judicial Interpretation of Banking Business
General Overview
Courts have played an important role in interpreting the meaning of “bank,” “banker,” and “carrying on banking business.” Since legislation does not always provide complete definitions, judges have developed legal principles through case law to determine the essential characteristics of banking.
One of the most important cases is United Dominions Trust Ltd v Kirkwood, where the court identified several characteristics commonly associated with banking business. However, judicial opinions have not always been consistent, especially regarding whether operating current accounts and paying cheques are essential requirements for banking business.


Traditional Judicial Interpretation
United Dominions Trust Ltd v Kirkwood
In United Dominions Trust Ltd v Kirkwood, the Court of Appeal stated that the business of banking generally involves:
1. Conduct of Current Accounts
Banks usually maintain current accounts for customers where money may be deposited and withdrawn continuously.


2. Payment of Cheques Drawn on the Bank
Banks honour cheques issued by customers from their accounts.


3. Collection of Cheques for Customers
Banks collect cheques deposited by customers and credit the proceeds into their accounts.


Earlier Traditional View
Even before Kirkwood, courts generally adopted the traditional view that a person could not be regarded as a banker unless the institution:
  • Paid cheques drawn upon itself,
  • Operated current accounts,
  • Performed cheque-related services.
Several cases supporting this traditional approach include:
  • Re District Savings Bank Ltd, ex parte Coe
  • Halifax Union v Wheelwright
  • Re Birkbeck Permanent Benefit Building Society
  • Sinclair v Brougham
These cases reflected the older understanding that cheque payment functions were essential characteristics of banking business.


Rejection of Strict Traditional View
Over time, some judges rejected the strict requirement that a banker must operate current accounts or issue cheques.


R v Industrial Disputes Tribunal, ex parte East Anglian Trustee Savings Bank
In R v Industrial Disputes Tribunal, ex parte East Anglian Trustee Savings Bank, Lord Goddard held that the East Anglian Trustee Savings Bank was still carrying on banking business even though it did not issue cheque books to customers.
This decision demonstrated that:
  • Cheque facilities may not always be essential,
  • Banking business may still exist without traditional cheque operations.


Other Cases Supporting Flexible Interpretation
Other cases also supported the view that operating current accounts is not strictly necessary for banking business:
  • Re Bottomgate Industrial Co-operative Society
  • State Savings Bank of Victoria, Commissioners v Permewan, Wright & Co Ltd
  • Re Shield’s Estate
  • Commercial Banking Co Ltd v Hartigan & Ors
These decisions reflected a broader and more flexible understanding of banking business.


Lord Denning’s Summary in United Dominions Trust Ltd v Kirkwood
Lord Denning MR summarised the common characteristics of bankers as follows:


First Characteristic
Banks:
  • Accept money from customers,
  • Collect cheques for customers,
  • Credit customer accounts accordingly.


Second Characteristic
Banks:
  • Honour cheques or payment orders drawn by customers,
  • Debit customer accounts after payment.


Third Characteristic
Banks:
  • Maintain current accounts or similar accounting arrangements,
  • Record credits and debits within those accounts.


Note Form – Judicial Interpretation of Banking Business
Traditional Characteristics of Banking
  • Conducting current accounts.
  • Paying customer cheques.
  • Collecting cheques for customers.
  • Accepting deposits from customers.


Traditional Judicial View
A person was generally not regarded as a banker unless:
  • Cheques were paid,
  • Current accounts were maintained,
  • Banking functions resembled traditional commercial banking.


Flexible Modern Judicial View
Some judges later accepted that:
  • Cheque facilities may not always be essential,
  • Banking business may still exist without traditional current accounts,
  • Courts should examine the substance of the activities carried out.


Important Cases
Traditional Approach
  • Re District Savings Bank Ltd, ex parte Coe
  • Halifax Union v Wheelwright
  • Re Birkbeck Permanent Benefit Building Society
  • Sinclair v Brougham
Flexible Approach
  • R v Industrial Disputes Tribunal, ex parte East Anglian Trustee Savings Bank
  • State Savings Bank of Victoria, Commissioners v Permewan, Wright & Co Ltd


Malaysian Judicial Interpretation
The Malaysian courts have also attempted to interpret:
  • The meaning of “bank,”
  • The phrase “carrying on banking business,”
  • The legal characteristics of banking activities.
Malaysian courts generally consider:
  • Statutory definitions,
  • Common law principles,
  • The actual nature of the financial activities carried out.


Application in a Case Scenario
Scenario
DigitalBank Malaysia allows customers to:
  • Deposit funds electronically,
  • Transfer money through mobile applications,
  • Make digital payments,
  • Store money in online accounts.
However, the company does not issue physical cheque books.
A legal issue arises regarding whether DigitalBank Malaysia is carrying on banking business. A court may consider:
  • Whether the institution accepts deposits,
  • Whether it facilitates payments,
  • Whether it performs functions similar to traditional banks,
  • Whether cheque services remain essential in modern banking.
The court may adopt the broader judicial approach recognising that modern banking systems increasingly rely on electronic payment methods rather than traditional cheques.


Critical Analysis
Judicial interpretations demonstrate that the concept of banking evolves with commercial and technological developments. Earlier courts focused heavily on cheque payment and current account operations because these functions were central to traditional banking systems.
However, modern financial systems increasingly depend on:
  • Electronic banking,
  • Online transfers,
  • Digital wallets,
  • Instant payment systems.
As a result, strict traditional definitions may no longer accurately reflect modern banking practices.
The flexible judicial approach allows courts to adapt banking law to changing financial realities. However, this flexibility may also create legal uncertainty because there is no universally accepted definition of banking business.
Courts and regulators must therefore balance:
  • Legal certainty,
  • Consumer protection,
  • Financial innovation,
  • Effective regulation.


Unresolved Issues
Decline of Cheque Usage
Modern banking increasingly relies on electronic transactions instead of cheque systems.


Digital Banking and FinTech
Digital financial institutions may perform banking functions without maintaining traditional current accounts or cheque services.


Legal Classification
Determining whether modern digital financial companies legally qualify as banks remains challenging.


Conclusion
Judicial interpretation has played a major role in defining banking business. Cases such as United Dominions Trust Ltd v Kirkwood established traditional banking characteristics including current accounts, cheque payment, and cheque collection. However, later cases recognised that strict adherence to cheque-related functions may not always be necessary. Modern courts increasingly focus on the substance of the activities carried out rather than purely traditional banking methods. This flexible judicial approach remains important in addressing modern banking technology and evolving financial systems in Malaysian banking law.


References (APA 7th Edition)
Commercial Banking Co Ltd v Hartigan & Ors.
Halifax Union v Wheelwright.
R v Industrial Disputes Tribunal, ex parte East Anglian Trustee Savings Bank.
Re Birkbeck Permanent Benefit Building Society.
Re Bottomgate Industrial Co-operative Society.
Re District Savings Bank Ltd, ex parte Coe.
Re Shield’s Estate.
Sinclair v Brougham.
State Savings Bank of Victoria, Commissioners v Permewan, Wright & Co Ltd.
United Dominions Trust Ltd v Kirkwood.

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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:
  • Deposit-taking activities,
  • Payment and collection of cheques,
  • Provision of finance,
  • Other financial activities approved by the regulator.
These statutory definitions are broader and more modern compared to earlier banking legislation.


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.
This reflected the traditional payment functions of banks.


(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.
However, the later definitions under BAFIA and the FSA 2013 are wider because they:
  • 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.
This expanded the scope of banking operations in Malaysia.


Requirement of Public Company Status
Under section 4(a) of BAFIA:
  • All banks in Malaysia were required to be public companies.
This requirement aimed to ensure:
  • 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.
However, this excludes remittance systems approved under the Money Services Business Act 2011.


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.
However, the Act does not define the phrase “business of banking.”


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.
This scenario demonstrates how Malaysian statutory definitions apply to modern digital financial services.


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.
However, challenges remain because financial technology continues to evolve rapidly. Some digital platforms may perform banking-like functions without fitting neatly within traditional legal categories.
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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Malaysian Banking Law – Statutory Definitions of “Bank” and “Banker”
General Overview
There is no single complete statutory definition of the terms “bank” or “banker” in the United Kingdom. Different statutes use these expressions for specific legal purposes, but many do not provide a full explanation of what banking business actually means. Instead, statutes usually identify certain institutions that are recognised as banks under the relevant legislation.
This demonstrates that the legal meaning of “bank” and “banker” often depends on the context and purpose of the particular statute. As banking activities continue to evolve, legislatures have preferred to adopt flexible and functional approaches rather than one rigid definition.


Statutory Definitions Under English Law
1. Bills of Exchange Act 1882
Section 2 of the Bills of Exchange Act 1882 provides:
“Banker includes a body of persons whether incorporated or not who carry on the business of banking.”
This provision does not comprehensively define banking business. However, it recognises that:
  • A banker may be incorporated or unincorporated,
  • Banking may be carried out by individuals, partnerships, or corporations,
  • The important factor is carrying on the business of banking.
The statute therefore focuses more on the existence of banking activities rather than explaining the precise meaning of banking.


2. Bankers’ Books Evidence Act 1879
Section 9(1) of the Bankers’ Books Evidence Act 1879 defines “bank” and “banker” to include:
  • Institutions authorised under the Banking Act 1987,
  • Municipal banks,
  • The National Savings Bank,
  • The Post Office when exercising banking powers.
This provision adopts an institutional approach by identifying recognised banking institutions for evidential purposes under the Act.


3. Agricultural Credits Act 1928
Section 5(7) of the Agricultural Credits Act 1928 states that “bank” includes:
  • The Bank of England,
  • Institutions authorised under the Banking Act 1987,
  • The Post Office providing banking services.
Again, the statute identifies recognised financial institutions rather than providing a detailed legal definition of banking.


4. Solicitors Act 1974
Section 87(1) of the Solicitors Act 1974 provides that “bank” includes:
  • The Bank of England,
  • The Post Office when exercising banking powers,
  • Institutions authorised under the Banking Act 1987.
The purpose of this definition is mainly regulatory and administrative.


Other Statutes Referring to Bankers
Several additional English statutes refer to banks and bankers, including:
  • Companies Act 1985
  • Insolvency Act 1986
  • Building Societies Act 1986
  • Financial Services Act 1986
These statutes generally refer to authorised banking institutions under the Banking Act 1987 instead of providing independent definitions of banking business.


Note Form – Statutory Definitions
Important Principle
  • No single exhaustive statutory definition of “bank” or “banker” exists in English law.
  • Definitions differ according to the purpose of each statute.


Bills of Exchange Act 1882
  • Banker includes incorporated or unincorporated bodies.
  • Focuses on carrying on banking business.


Bankers’ Books Evidence Act 1879
Includes:
  • Authorised institutions,
  • Municipal banks,
  • National Savings Bank,
  • Post Office banking services.


Agricultural Credits Act 1928
Includes:
  • Bank of England,
  • Authorised banking institutions,
  • Post Office banking services.


Solicitors Act 1974
Defines bank as including:
  • Bank of England,
  • Post Office banking services,
  • Authorised institutions.


Other Relevant Statutes
  • Companies Act 1985.
  • Insolvency Act 1986.
  • Building Societies Act 1986.
  • Financial Services Act 1986.


Importance of Statutory Definitions
Statutory definitions are important because they:
  • Determine which institutions fall within banking regulation,
  • Clarify which entities enjoy legal protections and privileges,
  • Identify institutions subject to financial supervision and compliance obligations.
However, many statutory definitions focus more on recognising authorised institutions than defining the actual nature of banking business itself.


Application in a Case Scenario
Scenario
DigitalPay Ltd provides online payment services and accepts customer funds through digital accounts. The company argues that it should legally qualify as a bank because it performs banking-like activities.
A dispute arises regarding whether DigitalPay Ltd falls within statutory banking definitions. Regulators may examine:
  • Whether the company is authorised under banking legislation,
  • Whether it falls within statutory definitions under relevant Acts,
  • Whether it genuinely carries on banking business.
This scenario illustrates the importance of statutory recognition and licensing in determining banking status.


Critical Analysis
The statutory definitions found in English legislation mainly adopt an institutional approach rather than a functional approach. Most statutes identify recognised banking institutions instead of explaining the true legal characteristics of banking business.
This approach provides flexibility because Parliament may recognise different institutions for different legal purposes. However, it also creates uncertainty because there is no universal statutory definition applicable to all situations.
Modern financial technology creates additional challenges. Many digital financial companies provide banking-like services without clearly fitting within traditional statutory categories. This raises legal and regulatory issues concerning:
  • Consumer protection,
  • Licensing,
  • Financial supervision,
  • Legal classification of financial institutions.
As financial systems continue to evolve, statutory definitions may require further reform to address digital banking and modern payment systems.


Unresolved Issues
Lack of Uniform Definition
Different statutes define “bank” and “banker” differently, leading to inconsistency and legal uncertainty.


Digital Financial Technology
Modern financial platforms may carry out banking activities without fitting neatly into traditional statutory definitions.


Regulatory Classification
Authorities continue to face difficulties in deciding whether modern financial service providers should legally be classified as banks.


Conclusion
English statutory law does not provide a single comprehensive definition of “bank” or “banker.” Instead, different statutes recognise particular institutions as banks for specific legal purposes. Statutes such as the Bills of Exchange Act 1882, Bankers’ Books Evidence Act 1879, Agricultural Credits Act 1928, and Solicitors Act 1974 demonstrate that statutory definitions depend largely on legislative context and purpose. While this flexible approach allows the law to adapt to changing financial systems, it also creates continuing legal and regulatory challenges in modern banking law.


References (APA 7th Edition)
Bills of Exchange Act 1882 (UK).
Bankers’ Books Evidence Act 1879 (UK).
Agricultural Credits Act 1928 (UK).
Solicitors Act 1974 (UK).
Companies Act 1985 (UK).
Insolvency Act 1986 (UK).
Building Societies Act 1986 (UK).
Financial Services Act 1986 (UK).
Halsbury’s Laws of England.
Paget’s Law of Banking.

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Equity and Trust – Mixing of Trust Funds and Trustee’s Funds
Introduction
A common issue in equitable tracing arises where a trustee wrongfully mixes trust money with personal funds in a bank account or uses the mixed fund to purchase assets. Equity recognises that beneficiaries should not lose their proprietary rights merely because trust money has been combined with the trustee’s own money. As a result, the beneficiaries may continue tracing into the mixed fund or into substitute assets purchased with it.
The law in this area aims to protect beneficiaries while preventing trustees from benefiting from their own wrongdoing. Equity therefore provides beneficiaries with several powerful proprietary remedies, including the right to claim a charge over the mixed fund or asset, or alternatively to claim ownership of the asset itself or a proportional share in it.


The Basic Rule
The general rule is that where a trustee mixes trust funds with personal money, the beneficiary may trace:
  • into the mixed fund itself;
  • or into any asset purchased using the mixed fund.
This principle was established in Re Hallett’s Estate.
The claimant may obtain:
✅ an equitable charge over the fund or asset
for the amount of trust money used.
This gives the beneficiary security over the property and allows enforcement against the asset itself.


Case Scenario
Assume Daniel is trustee of the Carter Family Trust.
Daniel wrongfully removes:
£200,000
from the trust and mixes it with:
£300,000
of his own personal money in a bank account.
The mixed fund totals:
£500,000.
Daniel then uses the mixed money to purchase shares worth:
£500,000.
The shares later increase in value and become worth:
£1 million.
The beneficiaries seek recovery.


The Beneficiary’s Proprietary Rights
Equity allows the beneficiaries to trace their trust money into the purchased shares because the shares represent substitute property acquired using the mixed fund.
The beneficiaries may therefore seek proprietary remedies against the shares.


Equitable Charge
One possible remedy is an:
equitable charge
(or equitable lien).
This secures repayment of the trust money used in acquiring the asset.


Example
Trust Money Used
£200,000.


Shares Purchased
£500,000.


Shares Later Worth
£1 million.


Result
The beneficiaries may obtain:
✅ a charge securing repayment of £200,000,
plus potentially interest.
The beneficiaries become:
✅ secured creditors
to the extent of the charge.


Importance of the Charge
The equitable charge gives the beneficiaries significant advantages.
They may:
  • force sale of the asset;
  • recover directly from sale proceeds;
  • and obtain priority over unsecured creditors.
This becomes particularly important if the trustee becomes insolvent or bankrupt.
Because the beneficiaries possess a proprietary security interest, they rank ahead of ordinary unsecured creditors.


Taking the Asset Itself
An alternative remedy is that the beneficiaries may elect to take:
✅ the asset itself;
or
✅ a proportionate share in the asset.
This principle was recognised in:
  • Re Tilley’s Will Trusts
  • Foskett v McKeown
This remedy is particularly attractive where the asset has increased significantly in value.


Proportionate Share of the Asset
If the beneficiaries contributed only part of the purchase price, they may claim a proportional ownership share corresponding to the amount of trust money used.


Example
Trust Contribution
£200,000.


Total Purchase Price
£500,000.


Beneficial Share
The trust money funded:
40%
of the purchase.


Asset Value Later
£1 million.


Result
The beneficiaries may claim:
✅ 40% ownership of the shares
worth:
£400,000.
This may be far more valuable than merely recovering the original:
£200,000.


Foskett v McKeown
The leading authority is Foskett v McKeown.
In that case, the trustee wrongfully used trust money to pay premiums on a life insurance policy benefiting his children. After the trustee’s death, the policy paid out approximately:
£1 million.
The House of Lords held that the beneficiaries could trace into the insurance proceeds proportionately according to the amount of trust money used to pay the premiums.
Lord Millett explained that where trust money contributes to the acquisition of an asset, the beneficiary may choose either:
  • a proportionate share of the asset;
    or
  • an equitable lien securing repayment.


Backward Tracing
An important modern development occurred in Brazil v Durant International Corporation.
The Privy Council suggested that:
✅ backward tracing
may be possible.


Meaning of Backward Tracing
Traditional tracing usually requires:
  • trust money to move first;
  • followed by acquisition of the asset.
Backward tracing allows tracing even where:
  • the debit appears before the credit;
  • provided the transactions formed part of a coordinated scheme.


Why This Matters
Modern banking systems allow rapid and complex movement of funds. Criminals can deliberately manipulate account timing to disguise the connection between transactions.
The Privy Council recognised that tracing should not fail merely because:
  • banking transactions occur non-chronologically.


Example of Backward Tracing
Suppose Daniel contracts to purchase property using temporary borrowing.
One day later, he transfers misappropriated trust money into the account to repay the borrowing.
Under traditional tracing rules, tracing may fail because the property purchase occurred before receipt of the trust money.
However, under backward tracing principles, the court may still permit tracing if the transactions formed part of one coordinated scheme.


Importance of Brazil v Durant
The case reflects the courts’ increasing willingness to adapt equitable tracing principles to modern financial realities and sophisticated fraud structures.
Although the decision came from the Privy Council and is therefore not formally binding in England, it remains highly persuasive and influential.


Relationship With Other Tracing Rules
This area operates alongside several important tracing doctrines.


Re Hallett
Presumes trustees spend personal money first.


Re Oatway
Allows beneficiaries to trace into investments purchased from mixed funds where the remaining balance has been dissipated.


Roscoe v Winder
Limits tracing claims to the lowest intermediate balance remaining in an account.


Foskett v McKeown
Allows proportional proprietary ownership of substitute assets and increases in value.


Practical Importance
These principles are highly important in cases involving:
  • fraud;
  • mixed bank accounts;
  • investment assets;
  • insolvency;
  • fiduciary wrongdoing;
  • and asset recovery litigation.
They ensure that trustees cannot defeat proprietary claims merely by mixing trust money with personal funds.


Key SQE Principles
Where trust funds are mixed with the trustee’s own funds:
✅ beneficiaries may trace into the mixed fund or substitute asset.
They may choose between:
  • an equitable charge securing repayment;
    or
  • a proportional ownership share in the asset itself.
If the asset increases in value, beneficiaries may share proportionately in the increase.


Conclusion
Where trustees mix trust funds with personal money, equity protects beneficiaries by allowing tracing into the mixed fund and substitute assets purchased from it. Beneficiaries may obtain either an equitable charge securing repayment or a proportionate proprietary share of the asset itself, including any increase in value. Modern developments such as backward tracing further demonstrate equity’s willingness to adapt tracing principles to contemporary financial realities and sophisticated fraud structures. Together, these doctrines form a central part of modern equitable proprietary remedies and tracing law.
Sources of Reference
Foskett v McKeown [2001] 1 AC 102 (HL).
Brazil v Durant International Corporation [2015] 3 WLR 599 (PC).
Re Hallett’s Estate (1880) 13 Ch D 696 (CA).
Re Tilley’s Will Trusts [1967] Ch 1179.
Alastair Hudson, Equity and Trusts (11th edn, Routledge 2022).
James Penner, The Law of Trusts (12th edn, OUP 2020).
Graham Virgo, The Principles of Equity and Trusts (5th edn, OUP 2024).
John McGhee (ed), Snell’s Equity (35th edn, Sweet & Maxwell 2024).

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Malaysian Banking Law – Characteristics of Banking in
United Dominions Trust Ltd v Kirkwood
General Overview
In England, the Court of Appeal in United Dominions Trust Ltd v Kirkwood discussed the essential characteristics of banking business. The court attempted to identify the features commonly associated with a banker and the business of banking.
The case is important because it explains that although banking may be difficult to define precisely, certain core characteristics are commonly found in banking activities. The court also recognised that reputation within banking and commercial circles may help determine whether a person or institution is regarded as a banker.


Essential Characteristics of Banking
According to the Court of Appeal in United Dominions Trust Ltd v Kirkwood, the usual characteristics of banking include:
1. Conduct of Current Accounts
A banker usually maintains current accounts for customers. Customers may deposit money into these accounts and withdraw funds when needed.
Current accounts generally allow:
  • Frequent transactions,
  • Deposits and withdrawals,
  • Payment instructions, and
  • Business and commercial banking activities.
Diplock LJ explained that it is essential for banking business that money is accepted into a running account where customers may continuously deposit and withdraw funds.


2. Payment of Cheques
Another important characteristic of banking is the payment of cheques drawn by customers.
Banks usually:
  • Honour customer cheques,
  • Process payment instructions, and
  • Facilitate commercial transactions through cheque payments.
This function reflects the bank’s role in the payment system and commercial activities.


3. Collection of Cheques
Banks also collect cheques on behalf of customers.
This includes:
  • Receiving cheques from customers,
  • Processing cheque payments,
  • Crediting customer accounts after collection.
Cheque collection services support business and commercial transactions within the financial system.


Reputation as a Banker
The court also recognised that reputation may help determine whether a person or institution is considered a banker.
Diplock LJ stated that where there is insufficient evidence regarding banking characteristics, the court may consider whether the institution is recognised in banking and commercial circles as a banker.
This means that:
  • Public reputation,
  • Commercial recognition, and
  • Industry perception
may assist in identifying banking status.


Difference Between “Usual” and “Essential” Characteristics
Lord Denning MR explained that the usual characteristics of banking are not necessarily the only characteristics of a banker. A list of usual features does not provide a complete legal definition.
He stated that other important qualities include:
  • Stability,
  • Soundness,
  • Honesty,
  • Financial reliability, and
  • Commercial trustworthiness.
Lord Denning famously observed that a banker is often easier to recognise than to define.
This means the courts may examine the overall nature and reputation of the institution rather than relying solely on strict technical definitions.


Note Form – Characteristics of Banking
Essential Characteristics Mentioned in the Case
  • Conducting current accounts.
  • Paying customer cheques.
  • Collecting cheques for customers.
  • Accepting money into running accounts.
  • Allowing deposits and withdrawals.


Additional Qualities of a Banker
  • Stability.
  • Soundness.
  • Probity (honesty and integrity).
  • Commercial reputation.
  • Public confidence.


Important Legal Principle
A strict definition of banking is difficult. Courts may examine:
  • The actual activities performed,
  • The reputation of the institution,
  • Commercial understanding within the industry.


Application in a Case Scenario
Scenario
A company called QuickFinance accepts customer funds through digital accounts and allows customers to make electronic payments. However, it does not maintain traditional current accounts or provide cheque collection services.
A dispute arises regarding whether QuickFinance should legally be regarded as a bank. The court may apply the principles from United Dominions Trust Ltd v Kirkwood to examine:
  • Whether the company performs essential banking functions,
  • Whether it conducts running accounts,
  • Whether it is recognised commercially as a banker.
Even if certain traditional banking characteristics are absent, the company’s reputation and overall business activities may still be relevant.


Critical Analysis
The decision in United Dominions Trust Ltd v Kirkwood highlights the difficulty of defining banking in precise legal terms. Banking evolves continuously, and strict definitions may not suit modern financial systems.
The case also demonstrates the importance of commercial reputation. A company may be recognised as a banker because of how it operates and how it is viewed within the financial industry.
However, modern technology raises new challenges. Digital banks and financial technology companies may not provide traditional cheque services or current accounts, yet they perform banking-like functions through electronic systems.
This creates uncertainty regarding:
  • Licensing requirements,
  • Consumer protection,
  • Regulatory supervision,
  • Legal classification of digital financial institutions.
The case therefore remains relevant because it supports a flexible and practical approach in determining whether a business carries on banking activities.


Unresolved Issues
Digital Banking Services
Modern online banks may not use traditional cheque systems, raising questions about whether cheque-related functions remain essential characteristics of banking.


FinTech and E-Wallet Platforms
Digital payment platforms may provide banking-like services without formally operating as banks.


Reputation Versus Legal Status
An institution may appear to function like a bank commercially but may not legally qualify as a bank under statutory regulations.


Conclusion
The case of United Dominions Trust Ltd v Kirkwood identifies important characteristics commonly associated with banking, including the conduct of current accounts, payment of cheques, and collection of cheques for customers. However, the court recognised that these are not the only factors relevant in defining a banker. Reputation, stability, and commercial recognition may also assist in determining whether an institution carries on banking business. The case continues to influence modern banking law, especially in dealing with new financial technologies and evolving banking practices.

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Malaysian Banking Law – Essential Characteristics of Banking Business
General Overview
The courts have recognised that banking is not limited to traditional activities such as collecting cheques or operating current accounts. Instead, the true nature of banking depends on the essential functions carried out by the institution. One important case explaining this principle is State Savings Bank of Victoria, Commissioners v Permewan, Wright & Co Ltd.
In this case, the High Court of Australia explained that a bank acts as a “financial reservoir.” A bank receives money from customers and uses those funds to support commercial, industrial, and other economic activities through lending and financing.
The court further stated that the essential business of banking involves:
  • Receiving money through deposits,
  • Holding money repayable according to agreement, and
  • Using the collected funds by lending them to others.
Therefore, the core function of banking is the collection and utilisation of money rather than the specific methods used to conduct banking transactions.


Essential Characteristics of Banking
Collection of Money Through Deposits
One of the main characteristics of banking is the acceptance of deposits from customers. Customers place money with the bank either for safekeeping or investment purposes.
These deposits may include:
  • Savings accounts,
  • Fixed deposit accounts,
  • Deposit accounts repayable at call, or
  • Other agreed forms of deposits.
The court emphasised that banks are not legally required to maintain current accounts only. Banks may operate using various types of deposit arrangements.


Repayment of Deposits
Banks receive money on the understanding that the funds will be repaid according to the agreement between the bank and customer. Repayment may occur:
  • On demand,
  • At a fixed date,
  • In part, or
  • According to agreed conditions.
This repayment obligation forms an important legal aspect of the banker–customer relationship.


Utilisation of Deposits Through Lending
Banks do not merely store money. They also utilise deposited funds by lending money to businesses, individuals, and commercial enterprises.
Examples include:
  • Housing loans,
  • Business financing,
  • Personal loans,
  • Trade financing, and
  • Investment financing.
The court recognised lending as a fundamental banking activity because it supports economic and commercial growth.


Methods of Banking Are Auxiliary
The court explained that many banking methods are merely auxiliary or incidental to the banking business. These methods may differ depending on business needs and technological developments.
Examples include:
  • Current accounts,
  • Cheques,
  • Deposit accounts,
  • Secured loans,
  • Discounting bills,
  • Letters of credit,
  • Telegraphic transfers,
  • Internet banking,
  • Mobile banking,
  • Digital payments.
The court stated that the existence or absence of these services does not necessarily determine whether an institution is legally carrying on banking business.


Meaning of “Financial Reservoir”
The court described a bank as a “financial reservoir” because banks collect money from many customers and redistribute those funds into the economy through lending and financing activities.
This process:
  • Supports trade and commerce,
  • Encourages industrial development,
  • Promotes investments, and
  • Contributes to economic growth.
Banks therefore play an essential role in the modern financial system.


Note Form – Essential Characteristics of Banking
Banking Business Includes:
  • Receiving deposits from customers.
  • Holding money repayable under agreement.
  • Lending money to individuals and businesses.
  • Supporting economic and commercial activities.
  • Acting as a financial intermediary.


Banking Methods May Include:
  • Current accounts.
  • Savings accounts.
  • Fixed deposits.
  • Cheques.
  • Loans and financing.
  • Letters of credit.
  • Telegraphic transfers.
  • Internet banking.
  • Digital and mobile payments.


Important Principle
The method used by the institution is not the most important factor. The real test is whether the institution substantially carries on the business of receiving deposits and utilising those funds through lending activities.


Application in a Case Scenario
Scenario
A company called FinServe accepts deposits from customers through digital accounts and later uses the money to provide financing to small businesses. However, the company does not issue cheques or maintain traditional current accounts.
A legal dispute arises regarding whether FinServe is carrying on banking business. The court may apply the principles from State Savings Bank of Victoria, Commissioners v Permewan, Wright & Co Ltd to determine whether the company’s essential activities amount to banking.
Even though FinServe does not provide traditional banking methods such as cheques, it may still legally qualify as carrying on banking business because it receives deposits and lends money.


Critical Analysis
The case demonstrates that banking law focuses on the substance of banking activities rather than the form or method used. This flexible approach allows courts to adapt banking law to changing financial practices and technological developments.
However, modern financial technology creates new legal challenges. Many digital platforms now perform functions similar to banks without operating as traditional banking institutions. This creates uncertainty regarding licensing, regulation, and customer protection.
Another issue is that financial companies may attempt to avoid strict banking regulations by arguing that they do not provide traditional banking services such as current accounts or cheque facilities. Courts must therefore examine the true nature of the business activities carried out.
The decision also highlights the importance of regulation by Bank Negara Malaysia to ensure that institutions engaging in banking-like activities comply with legal and financial requirements.


Unresolved Issues
Digital Banking and FinTech
Modern digital finance companies may perform deposit-taking and lending activities without clearly falling within traditional banking definitions.


Regulatory Gaps
Some financial institutions may carry on banking-like activities without being subject to the same strict regulations imposed on licensed banks.


Consumer Protection
Customers may not fully understand whether their funds are protected when dealing with digital financial institutions that are not licensed banks.


Conclusion
The case of State Savings Bank of Victoria, Commissioners v Permewan, Wright & Co Ltd establishes that the essential characteristics of banking are the receipt of deposits and the utilisation of those funds through lending and financing activities. The methods used by banks, such as cheques or current accounts, are only auxiliary features. This flexible interpretation allows banking law to adapt to changing financial systems while ensuring that institutions performing true banking functions are properly recognised and regulated.

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Malaysian Banking Law – Difference Between a Bank and a Financial Service Provider
General Overview
Modern financial systems include both banks and financial service providers. Although both offer financial-related services, they are not legally the same. A bank performs core banking activities such as accepting deposits and granting loans, while a financial service provider usually offers specialised financial services without operating fully as a licensed bank.
Technological development and digital finance have blurred the distinction between these institutions. Therefore, understanding the differences between a bank and a financial service provider is important in Malaysian banking law.


Bank
Definition
A bank is a licensed financial institution that carries on banking business. Its traditional functions include accepting deposits, honouring cheques, and granting loans.


Main Functions
  • Accepts deposits from the public.
  • Provides loans and financing facilities.
  • Operates savings and current accounts.
  • Facilitates payments and money transfers.
  • Provides trade finance and investment services.


Legal Status
A bank is legally recognised as carrying on banking business and is subject to strict banking laws and financial regulations.


Regulation
Banks in Malaysia are supervised and regulated by Bank Negara Malaysia under laws such as the Financial Services Act 2013.


Examples of Banks
Examples of banks in Malaysia include:
  • Malayan Banking Berhad
  • CIMB Bank Berhad
  • Public Bank Berhad
  • RHB Bank Berhad


Financial Service Provider
Definition
A financial service provider is a company that offers financial-related services but may not legally qualify as a bank because it does not perform the full range of banking activities.


Main Functions
  • Provides specialised financial services.
  • May offer insurance, investments, remittance, or digital payment services.
  • Usually does not accept public deposits like traditional banks.
  • May provide electronic wallets or online financial platforms.


Legal Status
A financial service provider may carry out financial activities without being legally classified as a bank.


Regulation
These institutions are regulated according to the type of financial service they provide. Some may still fall under the supervision of Bank Negara Malaysia or other regulatory authorities.


Examples of Financial Service Providers
Examples include:
  • Boost – digital wallet and e-payment services.
  • Touch ’n Go eWallet – mobile and digital payment services.
  • AIA Malaysia – insurance and financial protection services.
  • Western Union – remittance and money transfer services.
  • Rakuten Trade – investment and share trading services.


Key Differences in Note Form
Bank
  • Accepts public deposits.
  • Provides loans and financing.
  • Maintains customer savings and current accounts.
  • Forms part of the official banking system.
  • Subject to strict banking regulation.
  • Provides full banking services.


Financial Service Provider
  • Provides selected financial services only.
  • Usually does not accept deposits from the public.
  • May focus on digital payments, insurance, investments, or remittance.
  • May not legally qualify as a bank.
  • Regulation depends on the type of service provided.
  • Often operates through financial technology platforms.


Application in a Case Scenario
Scenario
A company called PayLink offers mobile payment services, online money transfers, and digital wallets through a smartphone application. Customers can store electronic money and make digital payments using the application. However, PayLink does not accept savings deposits or provide traditional banking accounts.
A legal issue arises regarding whether PayLink should legally be considered a bank. The court may examine whether the company performs core banking activities such as accepting public deposits and lending money. Even though PayLink provides financial services, it may still be classified only as a financial service provider rather than a bank.
This situation shows that not all financial institutions automatically qualify as banks under banking law.


Critical Analysis
The distinction between banks and financial service providers has become increasingly unclear because of technological advancements. Many financial technology companies now provide services similar to banks, including digital payments and financing facilities.
This creates regulatory challenges because some companies may perform banking-like activities without being subject to the same strict legal requirements as licensed banks. As a result, customers may face greater risks when using unregulated or lightly regulated financial platforms.
Another concern is customer confusion. Consumers may assume that all financial institutions provide equal legal protection, even though licensed banks generally offer stronger financial safeguards and regulatory supervision.
The law must therefore balance innovation with consumer protection. Regulators such as Bank Negara Malaysia play an important role in ensuring that financial institutions operate safely and responsibly.


Unresolved Issues
Regulation of FinTech Companies
Many digital financial companies provide banking-like services, but uncertainty remains regarding whether they should legally be treated as banks.


Consumer Protection
Customers may not fully understand the legal differences between banks and financial service providers, especially concerning deposit protection and financial security.


Cryptocurrency and Digital Finance
Cryptocurrency platforms and decentralised finance systems continue to challenge traditional banking concepts and legal regulations.


Conclusion
Banks and financial service providers both contribute to the financial system, but they are legally different institutions. Banks perform core banking activities such as deposit-taking and lending, while financial service providers usually focus on specialised financial services. As technology continues to transform the financial industry, the distinction between these institutions becomes increasingly complex, making legal regulation and interpretation essential in Malaysian banking law.

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