Liquidity Facility to Licensed Insurers and Takaful Operators

Liquidity management is a critical element for financial institutions’ safety and soundness and the overall stability of the financial system. While both liquidity and capital management are essential for a financial institution which is a going concern, liquidity management has an additional dimension which relates to time and is key in informing the potential matches or mismatches between liquidity sources and needs during a particular time. Insufficient liquidity can cause undue stress to a financial institution that is otherwise well-capitalised. Licensed insurers and takaful operators must maintain adequate liquidity to meet their payment obligations when they fall due, regardless of the state of the operating environment.

Given the importance of liquidity and recognising the role of the Bank as a lender of last resort, the Bank is extending a liquidity facility, to all licensed insurers including professional reinsurers under the Financial Services Act 2013 (FSA) and all licensed takaful operators including professional retakaful operators under the Islamic Financial Services Act 2013 (IFSA).

The extension of this liquidity facility provides an additional liquidity management tool to the insurance and takaful industry that will further enhance their resilience and efficiency, with adherence to the conditions of accessing the liquidity facility.

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