Week 6 @ The Malaysia Financial System

Six weeks gone and I am now more familiar with how the financial system within the country works and how Bank Negara comes into the picture. I must say, the more I learn, the more I am falling in love with the Bank and I am ever motivated to do my part to contribute to the Bank (the nation).

Bank Negara objectives are simple, promoting socio-economic development and preserving financial soundness and stability.

Prior to NEP, I always think that Bank Negara is the only organization that controls monetary matters within the country. I know nothing about the Security Commissions or even the LFSA. All I know is SC is a government body and that LFSA is a body that regulates the offshore financial matters. After the class with Shireen, I learn that Bank Negara manages components with regards to money as well as insurance, while SC deals with stocks, bonds, derivaties, etc, and LFSA manages everything under the sun in Labuan. Of course, there are some overlapping between SC and the Bank such as the capital market services.

Of course, I am not going to share what we can read from the slides.

When George Soros flexed his muscles in 1997, I was still in Form One back then. I was told that the 1USD is equivalent to RM4.20 instead of RM2.50 the day before. I asked my mum what happened. All she said was, some guy in the states bought a lot of Ringgit and decided to short them to make profit. Malaysia paid the price with the declination and volatility of the market and downgrading of our sovereign rating. Questions start popping up in my mind, wondering whether George was capable of outsmarting us all. After 13 years of asking, I finally got my answer from this class. We had strong fundamentals, but wasn’t able to avoid the crisis.

Since then, the financial system underwent a comprehensive transformation. Our banks now are capable of competing in international levels and that our financial sector is capable of meeting the evolving economic demands. The Bank has tested also strengthen the resilience of financial sector against and shocks while ensuring that consumer protections are not marginalized. The transformation has so far proven successful as Malaysia has gone through the worldwide financial crisis in 2008 without being heavily affected.

I would now say, I am proud that the Bank is capable to learn and grow from previous crises and we are still learning. Not only that we have now a strong conventional financial market, we have also reinforced ourselves as the international hub for Islamic financial services.