Financial Consumer Protection Malaysia s Approach Conference on Promoting Financial Capability and Consumer Protection -A Step Forward towards Financial Inclusion in Africa Accra, Ghana Ms Ooi See Eim Consumer and Market Conduct Department 9 September 2009 CENTRAL BANK OF MALAYSIA 1
Outline Growing importance of Financial Consumer Protection Financial Consumers Protection Initiatives Market conduct regulation Market conduct supervision Enhancing financial capability Avenues to seek redress and help Deposit insurance Credit information database Moving forward CENTRAL BANK OF MALAYSIA 2
Growing Importance of Financial Consumer Protection Easy access to credit Information asymmetry & level of transparency Innovative & complex financial products Financial scams Low level of financial literacy Challenges Facing Consumers Changing delivery channels Ageing population & increased life expectancy Young generation & attitude to credit Growing consumer debt & reduced household savings Promotion of sound market conduct practices supported by appropriate consumer protection and education policies is increasingly on the agenda of financial regulators CENTRAL BANK OF MALAYSIA 3
Malaysia s Approach Strategic Goals Public confidence in financial sector Well-informed and empowered consumer Regulatory Objectives Foster sound business practices by financial service providers and intermediaries Greater transparency and improved disclosure More comprehensive consumer protection framework Regulatory Approach Legislation & principle-based regulation Supervisory & enforcement powers Consumer education programme Enhance redress mechanism Promote selfregulation in industries CENTRAL BANK OF MALAYSIA 4
TEXT Financial Consumers Protection Initiatives Market conduct regulation Market conduct supervision Robust Financial System Enhancing financial capability Avenues to seek redress & help Market Confidence Deposit insurance Credit information database CENTRAL BANK OF MALAYSIA 5
Market Conduct Regulation and Supervision - Bank Negara Malaysia s Role Objectives: Strengthening market conduct practices Ensuring fair treatment of financial consumers Enhancing financial capability of consumers Scope of Mandate: 1. Conventional banks 2. Islamic banks 3. Insurers 4. Takaful Operators 5. Payment Instrument Issuers Regulatory Policy Market Conduct Supervision Financial Capability Intermediaries & Operations Formulate policies & regulations on conduct of financial service providers Conduct surveillance & enforcement for breach of market conduct requirements Enhancing financial capability of consumers Oversee & ensure orderly development of financial intermediaries CENTRAL BANK OF MALAYSIA 6
Market Conduct Regulation and Supervision - Fair Treatment of Consumers & Market Integrity Strengthen Market Conduct Regulatory Regime Enhance legislative framework for market conduct Surveillance & Enforcement Market conduct examination Incognito visits Consumer complaints Name & Shame Reprimand & Penalties Fair Treatment of Consumers & Market Integrity Market Conduct Regulation Enhance product disclosures Fair contract terms review Fair debt collection Marketing of credit cards Rationalize fees & charges Fair & equitable market practices by Intermediaries Licensing & regulation of: Money brokers Insurance brokers Adjusters Financial advisers CENTRAL BANK OF MALAYSIA 7
Market Conduct Regulation - Product Transparency & Disclosure Objectives: To provide consumers with relevant information for making informed financial decisions To facilitate comparison of financial products and services by consumers Effective product disclosure is necessary to: Address information asymmetries between consumers and financial services providers Enhance consumers understanding of financial products and services, thereby reducing mis-selling Promote consumer participation in the financial services industry Improve standards of transparency in the financial industry Maintain long-term market confidence financial markets in CENTRAL BANK OF MALAYSIA 8
Market Conduct Regulation - Rationalise Fees and Charges LAYER 1 LAYER 2 LAYER 3 Market Driven Fees and Charges Guiding Principles on Imposition of Fees and Charges Basic Banking Services Framework A balanced approach is adopted between market driven and setting regulatory control Allow BIs to impose charges in accordance to guiding principles BNM reserves the right to moderate charges that are deemed excessive This approach is complemented by other market conduct initiatives CENTRAL BANK OF MALAYSIA 9
Market Conduct Regulation - Access to Financial Products & Services Objective: Measures: To ensure that customers can enjoy a minimum level of banking services at reasonable costs All BIs are required to offer a basic savings account (BSA) and a basic current account (BCA) to all Malaysians SMEs are also eligible to open BCAs Provides a minimum level of services and transactions at minimal costs To ensure charges imposed on individuals and SMEs are reasonable Effective 23 March 2009, the minimum interest rate payable on BSA shall not be lower than 0.25% per annum CENTRAL BANK OF MALAYSIA 10
Market Conduct Supervision - Surveillance and Enforcement Framework Market Conduct Supervision Surveillance to determine compliance with consumer protection laws, regulations, guidelines and circulars Enforcement action against non-compliant financial service providers Work Process Identify areas of focus Conduct surveillance Consultation Enforcement Monitor corrective actions Sources Method Method Method Method Complaints Media Allegations Market Intelligence Data review Selfassessment Thematic examination Incognito visits Media watch Surveys Investigations Active consultation with relevant parties Reprimand letter Compliance agreement Notice of violation Fine/penalty Restraining order Name & Shame Monitor & verify action taken by financial service providers CENTRAL BANK OF MALAYSIA 11
Enhancing Financial Capability Objective: To raise consumer activism through a structured consumer education programme Develop and disseminate information materials on financial products and money management Selected materials are available in Braille Provision of Information General Public Launched 2 consumer education programme in 2003: bankinginfo Insuranceinfo Promote money management through school adoption programme in collaboration with Ministry of Education Three-pronged approach School Programme Primary and secondary Students (>10,000 schools) Outreach Programme Rural folks, women, university students, person with disability Briefing and workshop sessions, financial exhibitions CENTRAL BANK OF MALAYSIA 12
Enhancing Financial Capability - www.bankinginfo.com.my & www.insuranceinfo.com.my A progressive financial system requires financially savvy consumers who: are able to make informed financial decisions know their rights and responsibilities bankinginfo - 24 materials published insuranceinfo - 25 materials published CENTRAL BANK OF MALAYSIA 13
Enhancing Financial Capability - Pocket Money Book & duitsaku website. Pocket Money Book A learning tool to inculcate the culture & habit of smart personal money management among students at a young age. duitsaku.com An interactive financial education tool to enhance financial literacy among students. Other Tools & Resources Students Financial Clubs Lesson Plan for teachers Workshop for teachers and students CENTRAL BANK OF MALAYSIA 14
Avenues for Redress & Assistance Contact details on BNM website Financial Mediation Bureau www.fmb.org.my Integrated Contact Centre BNMLINK BNMTELELINK Complaints Management & Advisory Complaints Unit @ FSPs & BNM Avenue to seek redress and help ABM Connect The Association of Banks in Malaysia www.abm.org.my SME Special Units at FSPs & BNM assist SMEs on financing Small Debt Resolution Scheme www.smeinfo.com.my Credit Counseling And Debt Management Agency www.akpk.org.my CENTRAL BANK OF MALAYSIA 15
Deposit Insurance System Malaysia Deposit Insurance Corporation (MDIC) Deposit insurance A system established by the Government to protect depositors against the loss of their insured deposits placed with banks Depositors will be reimbursed promptly on their insured deposits in the unlikely event of a bank failure The deposit insurance system in Malaysia is managed by MDIC (locally known as PIDM) Objectives of MDIC Provide protection for depositors on their deposits placed with banks Reimburse depositors on their deposits in the unlikely event of a bank failure Provide incentives for sound risk management in the financial system Promote and contribute to the stability of the financial system CENTRAL BANK OF MALAYSIA 16
Deposit Insurance System (cont d) Malaysia Deposit Insurance Corporation (MDIC) Coverage With effect from 16 October 2008, all deposits held in member banks and certain financial institutions are fully protected until 31 December 2010 under the Government Deposit Guarantee. Current plans are to revert to an explicit and limited coverage deposit insurance system when the Government Deposit Guarantee expires. Member banks Commercial banks Islamic banks Other guaranteed financial institutions Investment banks International Islamic banks Deposit-taking DFIs regulated by BNM For more information Visit MDIC s website at www.pidm.gov.my CENTRAL BANK OF MALAYSIA 17
Credit Information Database The Central Credit Reference Information System - CCRIS A real-time on-line database system Processes & collates credit information Credit reports for borrowers / fin. institutions Provide credit information to fin. institutions to: Facilitate credit assessment of customers Facilitate credit risk management Promote more efficient credit process Objectives of CCRIS Provide credit information to BNM to: Facilitate regulation & supervision Analytical purposes financial surveillance Inculcate good credit culture CENTRAL BANK OF MALAYSIA 18
Moving forward To strengthen the legislative framework to support a comprehensive and effective regulatory and supervisory market conduct regime Amendments to relevant legislations to empower BNM to prescribe and enforce standards of fair and equitable market practices in the banking and insurance industry Greater role for market discipline and self-regulation in ensuring sound market conduct practices More efficient regulatory framework for intermediaries to balance the cost of regulation with its risks Introduction of Ombudsman law Provide consumers with an enhanced alternative avenue for redress in their dealing with financial service providers Intensify market conduct surveillance activities CENTRAL BANK OF MALAYSIA 19
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