Domestic Systemically Important Banks Framework

The Malaysian financial landscape has undergone significant transformation in recent years, resulting in deeper interconnections between the domestic banking system and other intermediaries in the financial system. Financial groups are also expanding regionally across a broad range of activities and markets.

These developments emphasize the need to continuously enhance the existing regulatory framework and policy tools to address the risks that the banking system may pose to the stability of the Malaysian financial system and the wider economy.

In particular, there is an increased need to identify and manage risks associated with systemically important financial institutions. These institutions, hereafter referred to as D-SIBs, are financial institutions whose distress or disorderly failure could cause significant disruption and lead to spillovers in the domestic financial system and the wider economy.

Against this backdrop, the Bank’s D-SIB policy framework, developed in line with the principles outlined by the BCBS, aims to strengthen the resilience of the Malaysian banking system and address the following elements –
(a) regulatory requirements and policy measures that may be applicable to D-SIBs, such as the HLA requirement;
(b) intensity of supervisory oversight by the Bank; and
(c) macroprudential surveillance activities of the Bank.

This policy document sets out the HLA and reporting requirements applicable to financial institutions, along with the assessment methodology employed to identify D-SIBs in Malaysia. The Bank, at its discretion, may impose additional requirements and policy measures as deemed appropriate to manage the risks posed by D-SIBs.

This document belongs to Bank Negara Malaysia (BNM). Full access to the original source is available here: https://www.bnm.gov.my/banking-islamic-banking