General Supervisory Framework

Bank Negara Malaysia (BNM) regulates all financial institutions. BNM has issued codes of conduct and rules to ensure the smooth functioning of the bond market.

The Securities Commission (SC) is the primary authority that regulates and develops Malaysia's bond market. SC reports to the Minister of Finance and regulates the capital markets through the following laws: Securities Industry Act 1983, Securities Commission Act 1993, Securities Industry (Central Depositories) Act 1991, and Futures Industry Act 1993. In July 2000, SC became the single approval authority for all corporate bond issues including asset-backed securities. SC's Private Debt Securities Department processes applications for issuing private debt securities that require prior approval from SC. These are lodged with the Companies Commission of Malaysia (formerly the Registrar of Companies). To increase efficiency of the capital markets, SC has adopted a disclosure-based regulation framework, which can be accessed through the "Securities Commission—Market Readiness for Disclosure-Based Regulation" link provided below.

Bursa Malaysia (formerly the Kuala Lumpur Stock Exchange) is now a holding company following demutualization in 2004. Bursa Malaysia is a self-regulatory organization that governs its members' conduct and member companies in securities dealings. It is also responsible for marketplace surveillance. Bursa Malaysia, on behalf of SC, supervises and enforces disclosure standards for listed companies.

The Malaysian Accounting Standards Board and the Financial Reporting Foundation, both created by the Financial Reporting Act of 1997, oversee accounting and corporate governance standards.

The Treasury Department at the Ministry of Finance supervises tax matters.

The Shari’a Advisory Council advises SC on issues relating to market compliance with shari’a principles in the Islamic capital market.

Malaysia's Offshore Companies Act 1990 provides additional guidelines for bond issuance of offshore companies established and registered under the Act and operating in the Labuan International Offshore Financial Centre (LFX).

Guiding Principle for Capital Market Supervision

Price Stability

In April 2004, Bank Negara Malaysia (BNM) introduced a New Interest Rate Framework, which represented a change in the system of implementing monetary policy. The new framework facilitates the transmission of changes in the policy rate to the other market rates and, ultimately, key macroeconomic objectives. 

Financial Stability

BNM's interest rate framework also targets greater efficiency in the operation of the financial markets and facilitate more effective and efficient pricing of financial products. The proliferation of structured and customized products has called for differentiated pricing. It is no longer feasible to prescribe standard pricing across the entire spectrum of banking products. Systems and guidelines have been introduced to provide an environment that would ensure fair and just pricing.

Overnight policy rate—Malaysia uses its overnight policy rate (OPR) to indicate its monetary stance and as a target rate for the day-to-day liquidity operations of Bank Negara Malaysia (BNM). The OPR is the primary reference rate for determining other market rates, allowing a plus-or-minus 25 basis point range.

Base lending rates— banks are free to determine their own base lending rates by taking into account the OPR and their own cost structure and business strategies.

Deposit rates—to promote longer-term savings, minimum rates for fixed deposits under MYR1 million are below the OPR for 1-month deposits and above the OPR for 12-month deposits.

Kuala Lumpur Interbank Offer Rate (KLIBOR) —KLIBOR is the average quoted interest rates of 11 contributor banks, set daily at 11am local time. These benchmark rates range from overnight to 1 year. Some banks use the KLIBOR as a benchmark for pricing loans to corporate bodies and for the pricing of other money market instruments. Contributor banks are Southern Bank, Standard Chartered, OCBC Bank, Bumiputra Commerce Bank, Citibank, RHB bank, HSBC, Maybank, Affin Bank, Public Bank, and UOB Bank.

Regulatory Agencies

In July 2000, the Securities Commission (SC) became the single approval authority for all corporate bond issues including asset-backed securities. SC's Private Debt Securities Department processes applications for issuing private debt securities that require prior approval from SC. These are lodged with the Companies Commission of Malaysia (formerly the Registrar of Companies). To increase efficiency in the capital markets, SC has adopted a disclosure-based regulation framework, which can be accessed through the the "Securities Commission—Market Readiness for Disclosure-Based Regulation" link below.

Under the Capital Markets and Services Act of 2007, the Securities Commission (SC) strengthened the capital market regulatory framework. The Act empowers SC to take civil and administrative actions for a market misconduct and manipulation