Malaysia - Country Commercial Guide
Trade Financing

Includes special features of this country’s banking system and rules/laws that might impact U.S. business.

Last published date: 2021-11-06

The international reserves of BNM amounted to $111 billion of June 15, 2021. The reserves position is sufficient to finance 8.2 months of retained imports and is 1.1 times total short-term external debt.

Methods of Payment

Exports to Malaysia may be financed through cash in advance, open account, or letters of credit issued to importers by banks in Malaysia. Financing is readily available in the domestic market to Malaysian importers. Exporters requiring credit ratings can obtain them from two local credit rating institutions, the RAM, and the Malaysian Rating Corp. Berhad (MARC).

For more information about the methods of payment or other trade finance options, please read the available Trade Finance Guide.

Banking Systems

The structure of the Malaysian financial system has evolved to become less fragmented through consolidation and rationalization. BNM, the country’s central bank, directed the merger of Malaysia’s local banking institutions into ten anchor banks, which was completed in 2002. The government encouraged further mergers among the local banking institutions to ensure competitiveness with international banks. As of 2021, there are eight local banks in the country. BNM licenses and regulates businesses such as commercial banking, investment banking, Islamic banking, and money brokering.

Malaysia’s Islamic finance industry has been in existence for over 30 years and is governed by the Islamic Banking Act 1983. In 2020, Malaysia’s Islamic banking assets reached $65.6 billion, with an average growth rate of 18-20 percent annually.

Malaysia has a significant number of full-fledged Islamic banks, including several foreign-owned entities, conventional institutions that have established Islamic subsidiaries, and entities that are conducting foreign currency business. All financial institutions are permitted to conduct national currency Malaysian Ringgit (RM) and non-RM businesses. As of July 2021, there are 16 Islamic local and foreign banks operating in Malaysia. Foreign banks with operations in Malaysia are allowed 100 percent equity participation.

Foreign Exchange Controls

Malaysian FEC is governed by the Exchange Control Act, 1953. The Controller of Foreign Exchange is the Governor of BNM, who also acts as the foreign exchange dealings regulator in Malaysia. The Bank is committed to ensuring the Foreign Exchange Administration rules continue to support and enhance the competitiveness of the economy through the creation of a more supportive and facilitative environment for trade, business and investment activities.

The Act imposes general restrictions on foreign exchange dealings by residents and non-residents. There are no restrictions for non-residents to invest in Malaysia to purchase RM assets, such as land property and securities. There is also no restriction for non-residents to transfer abroad, in foreign currency, all profits, returns and divestment proceeds from their investments in Malaysia.

Foreign Investment Committee (FIC) guidelines before June 30, 2009, states that any acquisition of property by foreign interest requires FIC approvals. Since the FIC guidelines liberalization, the approval for property acquisition will be needed from the Economic Planning Unit of the Prime Minister’s Department if the acquisition dilutes Bumiputra or government interest for properties exceeding RM20 million (approximately $5.62 million). This acquisition encompasses direct or indirect via shares.

Restrictions apply for residents of Malaysia. No person is allowed, among other conditions, to buy or borrow foreign currency from, or sell or lend foreign currency to any person, to make any payment in Malaysian Ringgit to a non-resident in and outside Malaysia, or to deal in ringgit assets in Malaysia without the prior permission of the Controller.

U.S. Banks and Local Correspondent Banks

Currently, three U.S. banks have operations in Malaysia: Bank of America, Citibank, and J.P. Morgan Chase Bank. Bank of New York Mellon and the Northern Trust Company have representative offices in Kuala Lumpur. The island of Labuan is Malaysia’s offshore banking center.

Local banks in Malaysia have correspondent relationships with banks in the United States.

Affin Bank

Bank Muamalat

Hong Leong Bank

Standard Chartered Bank

Agro Bank

CIMB

Maybank

UOB

Alliance Bank

Exim Bank

Public Bank

 

AmBank

HSBC Bank 

RHB

 

 

Digital Banking License 2021: In July 2021, BNM announced it received 29 applications for a digital bank license under the Financial and the Islamic Financial Services Acts 2013, following a six-month application period that ended on June 30, 2021. A diverse range of parties have submitted applications for the digital bank license, ranging from banks, industry conglomerates, technology firms, e-commerce operators, FinTech players, cooperatives, and state governments.

Successful applicants that meet all prudential criteria will be expected to contribute towards greater financial inclusion by offering products and services to address market gaps in the underserved and unserved segments. This includes promoting suitable and affordable financial solutions by leveraging on innovative application of technology. Up to five licenses may be issued, and notification of successful applications will be made in the first quarter of 2022.

BNM is expected to issue five licenses by the first quarter of 2023 with an asset threshold of no more than $7.23 million for the first three to five years of operations. Following the initial phase, the limit will be removed, and the digital banks will be subject to similar regulations as conventional banks.

For more information: 

Licensing Framework for Digital Banks 

List of Digital Banking Contenders 2021