KUALA LUMPUR (May 3): Bank Negara Malaysia has removed the reserve fund requirements for banking institutions effective today, and has put in place minimum capital funds requirements.
 
The central bank states this in its policy document on capital funds, which sets out the minimum capital funds that must be maintained by a banking institution and the components of capital funds for licensed banks and investment banks.
 
Under the new requirements, a licensed locally incorporated foreign bank is required to have a minimum of RM300 million in capital funds, which is the sum of paid-up ordinary shares, preference shares, irredeemable convertible unsecured loan stock, retained earnings and other disclosed reserves.
 
Meanwhile, a licensed foreign bank which is not locally incorporated must have at least RM2 billion in capital funds, either by the bank itself or in aggregation with the capital funds of its related corporation that is a licensed investment bank.
 
For licensed investment banks that are not related to any licensed bank, a minimum of RM500 million is required in capital funds.
 
“In addition to the minimum capital funds requirement, a banking institution must also comply with the minimum regulatory capital requirement as set out in the Capital Adequacy Framework (Capital Components) and Capital Adequacy Framework (Basel II — Risk-Weighted Assets),” said the central bank.