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BNM: Regulatory Framework for Digital Banks

Bank Negara Malaysia (BNM) has issued an updated Exposure Draft on the Licensing Framework for Digital Banks that incorporates the proposed simplified regulatory framework for digital banks applicable during the foundational phase. The simplifications aim to reduce regulatory burden for new entrants that have strong value propositions for the development of the Malaysian economy, whilst safeguarding the integrity and stability of the financial system.

Key features of the simplified regulatory framework include:

  1. Capital adequacy requirement: The risk categories to calculate the credit and market risk components for risk-weighted assets under Basel II capital framework have been rationalised into simpler categories; and
  2. Liquidity requirement: 25% of the digital bank’s on-balance sheet liabilities must be held in high quality liquid assets.

Digital banks will be required to comply with all equivalent regulatory requirements applicable to incumbent banks after the foundational phase.

Bank Negara Malaysia is extending the consultation period for the Exposure Draft until 30 April 2020. All feedback on the Exposure Draft should be submitted to the Bank by 30 April 2020.

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