Includes special features of this country’s banking system and rules/laws that might impact U.S. business.
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 Rating Agency Malaysia Berhad (RAM),) and the Malaysian Rating Corp. Berhad (MARC).
The structure of the Malaysian financial system has evolved to become less fragmented through consolidation and rationalization. Bank Negara Malaysia (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 2020, 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 US$65.6 billion, with an average growth rate of 18-20% annually.
Malaysia has a significant number of full-fledged Islamic banks, including several foreign-owned entities, conventional institutions that have established Islamic subsidiaries, and also entities that are conducting foreign currency business. All financial institutions are permitted to conduct both ringgit and non-ringgit businesses. As of April 2020, there are 16 Islamic local and foreign banks operating in Malaysia. Foreign banks with operations in Malaysia are allowed 100 percent equity participation.
For more information: Islamic Finance
Foreign Exchange Controls
Foreign Exchange Controls (FEC) in Malaysia is governed by the Exchange Control Act, 1953. The Controller of Foreign Exchange is the Governor of Bank Negara of Malaysia (BNM), who also acts as the foreign exchange dealings regulator in Malaysia. The Bank is committed to ensuring the Foreign Exchange Administration (FEA) 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 ringgit 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 liberalization of FIC guidelines, the approval for property acquisition will be needed from the Economic Planning Unit (EPU) of the Prime Minister’s Department if the acquisition dilutes Bumiputra (Ethnic Malay) or government interest for properties exceeding RM20 million (approximately US$5.62 million). This acquisition encompasses direct or indirect (via shares).
Restrictions apply for residents of Malaysia. No person is allowed, among others, 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.
For more information on FEC: Foreign Exchange Control Guideline by BNM.
US Banks & 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
- Hong Leong Bank
- HSBC Bank
- Standard Chartered Bank
- Public Bank
- Alliance Bank
- Agro Bank
- Bank Muamalat
- OCBC Bank
- Exim Bank
U.S. Commercial Service Malaysia: Exporter Portal