BANKING ACT 1973

This Act shall apply throughout Malaysia.

A corporation which desires authority to carry on banking business in the Federation shall apply in writing through the Central Bank to the Minister for a licence under this section and shall supply—

Upon receiving an application under subsection (2) the Central Bank shall consider the application and make a recommendation to the Minister stating whether a licence should be granted or not and the conditions (if any) to be attached to the licence.

Upon receiving an application under subsection (2) and the recommendation of the Central Bank under subsection (3), the Minister may, subject to the provisions of section 4, grant a licence, with or without conditions, or refuse a licence.

Any person who contravenes the provisions of this section shall be guilty of an offence and shall on conviction be liable to a fine not exceeding five thousand dollars or to imprisonment for a term not exceeding three years or to both such fine and imprisonment.

The Minister shall, prior to any action under subsection (1), notify his intention in writing to take such action to the licensed bank concerned and shall give the licensed bank an opportunity to submit within such period, being not less than fourteen days, as may be specified in the notification reasons why the condition of the licence should not be so varied or revoked.

Where a licence is subject to conditions, the licensed bank shall comply with those conditions.

10

Any licensed bank which fails to comply with any condition of its licence shall be guilty of an offence and shall on conviction be liable to a fine not exceeding five thousand dollars.

its capital funds unimpaired by losses or otherwise is less than five million Malaysian dollars; and

in the case of a bank incorporated in the Federation, its capital funds unimpaired by losses or otherwise is less than two million Malaysian dollars;

in the case of a bank incorporated outside the Federation—

For the purposes of this section—

"capital funds" means paid-up capital and reserves;

"net working funds" in relation to a bank incorporated outside the Federation means the net liabilities of its branches and offices in the Federation to its branches and offices outside the Federation computed in such a manner as may be prescribed by notice in writing from time to time by the Central Bank.

...

Where the Minister is satisfied that a licensed bank has become owned or controlled by a foreign government, the Minister may continue to allow the bank to hold its licence for such temporary period or periods and subject to such condition or conditions as the Minister may determine for the purposes of winding up its business in the Federation or of enabling the foreign government to divest itself of the ownership or control of the bank.

For the purposes of this section, a bank shall be deemed to be owned or controlled by a foreign government if fifty per centum or more of its capital issued and paid-up

BANKING is owned by or on behalf of the government of any country other than the Federation or of an agency of such government, or if a majority of the persons having the direction, control or management of the bank are appointed by or on behalf of such government or agency.

no licensed bank may open a new branch, agency or office in any part of the Federation; and

no licensed bank incorporated in the Federation may open a new branch, agency or office in any place outside the Federation.

The Minister may prescribe different licence fees for different banks varied according to the size or location of banks or to both, size being measured in relation to number of branches, deposit liabilities or capital or any combination thereof.

a person or body of persons not being a licensed bank shall not assume or use in relation to the business or any part of the business carried on by the person or body of persons the word "bank" or any of its derivatives or any word indicating the carrying on of banking business, either in National Language or in English or in any other language;

no bank shall hereafter be licensed by a name which includes any of the words "Central", "Commonwealth", "Federal", "Federation", "Malaysia", "Malaysian", "National", "Reserve" or "State" either in National Language or in English or in any other language.

Any person who acts in contravention of paragraph (a) of subsection (1) shall be guilty of an offence and shall on conviction be liable to a fine not exceeding five thousand dollars or to imprisonment for a term not exceeding three years or to both such fine and imprisonment.

Nothing in this section shall apply to any association of banks or of employees of banks formed for the promotion of their mutual interests.

12

is carrying on its business in a manner detrimental to the interest of its depositors and other creditors;

has insufficient assets to cover its liabilities to the public;

is contravening any provision of this Act or of the Central Bank of Malaysia Ordinance, 1958; or

has ceased to carry on banking business in the Federation, the Minister may, on the recommendation of the Central Bank, revoke any licence issued to such bank:

Provided that the Minister shall prior to any such revocation notify his intention to take such action to the bank concerned and shall give the licensed bank an opportunity to submit within such period, being not less than twenty one days as may be specified in the notification reasons why the licence should not be revoked.

Where the licence of a bank has been revoked under subsection (1), the bank may, within thirty days of the revocation appeal against the revocation to the High Court, which may make such order thereon as it thinks proper, including any direction as to the costs of the appeal.

The Central Bank shall be entitled to be heard on any such appeal.

The making of an appeal under this section shall in no way affect the exercise of the powers and duties of the Central Bank under sections 39, 41 and 42.

notice of the revocation shall be published in the Gazette; and

the bank shall as from the date of the notice cease to transact any banking business in the Federation except as may be approved by the Minister on the recommendation of the Central Bank for the purposes of winding up of its banking business.

The provisions of paragraph (b) of subsection (1) shall not prejudice the enforcement by any person of any right or claim against the bank or by the bank of any right or claim against any person.

For the purposes of this section, the expressions "capital funds" and "net working funds" shall have the meanings assigned to them by subsection (2) of section 5.

shall maintain a reserve fund; and

before any dividend is declared shall transfer to the reserve fund out of the net profits of each year, after due provision has been made for taxation—

so long as the amount of the reserve fund is less than fifty per centum of the paid-up capital, a sum equal to not less than fifty per centum of the net profits;

If the Minister is satisfied that the aggregate reserve fund of a licensed bank incorporated outside the Federation is adequate for its business he may by order in writing exempt the bank from the provisions of subsection (1).

The minimum amount or amounts of the assets so prescribed to be held shall be expressed in the form of a percentage or percentages which such assets shall bear to the sight, savings account, time and other deposit liabilities of each licensed bank, either jointly or separately, and such percentage or percentages may be varied by the Central Bank from time to time by notice in writing to the bank.

Whenever the Central Bank issues a notice under subsection (1) each licensed bank shall be allowed such uniform period of grace, being not less than one week, as may be specified in that notice in which to comply with the provisions thereof.

A licensed bank shall not, during any period in which it has failed to comply with any notice under subsection (1), without the approval of the Central Bank, advance any money to any person.

For the purpose of computing the minimum amount or amounts of liquid assets under this section and assets specified under section 17 and the sight, savings account, time and other deposit liabilities of a bank carrying on business in the Federation and elsewhere, the offices and branches of such bank in the Federation shall be deemed to constitute a separate bank carrying on business in the Federation.

For the purposes of this section liquid assets shall be—

The Central Bank may by notice in writing require each licensed bank to render such return or returns as the Central Bank deems necessary for the implementation of this section and of section 17.

Any bank which fails to comply with any of the provisions of this section shall be liable to pay, on being called upon to do so by the Central Bank, a penalty interest charge of not more than one-tenth of one per centum of the amount of the deficiency for every day during which the deficiency continues.

Any licensed bank which fails or refuses to pay a penalty interest charge under subsection (8) shall be guilty of an offence under this Act.

For the purposes of subsection (1) the specified assets shall be—

Any licensed bank which fails to comply with the requirements of subsection (1) shall be guilty of an offence and shall on conviction be liable to a fine not exceeding one thousand dollars for every day during which the default continues.

The Minister on the recommendation of the Central Bank may appoint an auditor—

The duties of the auditor appointed under subsections (1) and (2) shall be—

No person having an interest in a licensed bank otherwise than as a shareholder, and no director or officer of that bank shall be eligible for appointment as an auditor for that bank; and any person appointed as auditor to a licensed bank who shall after such appointment acquire such interest or become a director or an officer of that bank shall forthwith cease to be the auditor.

The duties, powers and liabilities imposed and conferred by section 35 in relation to an investigation by the Central Bank of the affairs of a licensed bank under section 33 or 34 are hereby imposed and conferred in relation to auditors appointed under this section.

Any licensed bank which fails to comply with the requirements of subsection (4) shall be guilty of an offence and shall on conviction be liable to a fine not exceeding five thousand dollars.

18

exhibit in a conspicuous position in every office or place of business in the Federation—

a copy each of its latest audited annual balance sheet, profit and loss account, together with any note thereon, and the report of the auditor;

publish within fourteen days of the laying of its accounts at its annual general meeting in at least two daily newspapers published in the Federation and approved by the Central Bank, one in the National Language and one in English a copy each of its latest audited annual balance sheet, profit and loss account, together with any note thereon, and the report of the auditor; and

within six months after the close of each financial year or such further period as the Central Bank may approve, forward to the Central Bank—

two copies each of its latest audited annual balance sheet, profit and loss account, together with any note thereon, and the reports of the auditor and the directors;

The form and content of the balance sheet, profit and loss account and the report of the directors shall be as approved by the Central Bank:

Provided that this subsection shall not apply to those documents referred to—

The Central Bank may require any licensed bank to submit such further or additional information as it may deem necessary either by way of explanation, amplification or otherwise with regard to the balance sheets and profit and loss accounts forwarded by that bank under paragraph (c) of subsection (1) and that information shall be submitted within such period and in such manner as the Central Bank may require.

Any licensed bank which fails to comply with the provisions of this section shall be guilty of an offence and shall on conviction be liable to a fine not exceeding five thousand dollars.

not later than fifteen days after the last day of each month a statement showing the liabilities and assets of its banking offices and branches in the Federation at the close of business on the last business day of the preceding month;

a statement giving an analysis of loans and advances of its banking offices and branches in the Federation as at such intervals and within such period as may be prescribed by notice from time to time by the Central Bank;

not later than six months after the close of its financial year a statement showing the income and expenditure in respect of its business in the Federation; and

(ca)...

any such statistical information as may be requested by the Central Bank.

Any licensed bank which fails to comply with any requirement set out in subsection (1) shall be guilty of an offence and shall on conviction be liable to a fine not exceeding one thousand dollars for every day during which the default continues.

Any information received from a bank under this section shall be regarded as secret between that bank and the Central Bank.

It shall be the responsibility of the Central Bank to prepare and publish consolidated statements aggregating the figures in the returns furnished under paragraphs (a) and (b) of subsection (1).

The reports under subsections (1) and (2) shall be in addition to any report which may be required pursuant to the provisions of any other written law.

For the purposes of this section, the expression "control" in relation to a bank means the possession directly or indirectly of the power to direct or cause the direction of the management and policy of the bank.

Any licensed bank which fails to comply with the provisions of subsection (1) or (2) shall be guilty of an offence and shall on conviction be liable to a fine not exceeding five thousand dollars.

23A, 23B, 23C, 23D, 23E, 23F and 23G . . . .

arrangement or agreement—

for the sale or disposal of its shares or business; or

The Minister on the recommendation of the Central Bank may approve or refuse to allow the proposed arrangement, agreement or scheme:

Provided that the approval of the Minister shall not be unreasonably withheld.

if he becomes a bankrupt, suspends payment or compounds with his creditors; or

if he is convicted of an offence involving dishonesty or fraud.

No person who has been a director of, or directly concerned in the management of, a licensed bank which has been wound up by a court shall without the express authority of the Minister act or continue to act as a director of, or be directly concerned in the management of, any bank.

Any person who acts in contravention of subsection (1) or (2) shall be guilty of an offence and shall on conviction be liable to a fine not exceeding five thousand dollars or to imprisonment for a term not exceeding three years or to both such fine and imprisonment.

pay any dividend on its shares until all its capitalised expenditure (including preliminary expenses, organization expenses, share selling commission, brokerage, amounts of losses incurred and any other item of expenditure not represented by tangible assets) has been completely written off;

grant an advance, loan or credit facility against the security of its own shares;

grant unsecured advances, unsecured loans or unsecured credit facilities in excess of, in the aggregate and outstanding at any one time, ten thousand dollars to—

any of its directors

except in special circumstances as the Central Bank may allow, grant to its officers, employees or other persons being persons receiving remuneration from the licensed bank (other than accountants, advocates and solicitors, architects, estate agents, doctors and any other persons receiving remuneration from a

BANKING bank in respect of their professional services) unsecured advances, unsecured loans or unsecured credit facilities which in the aggregate and outstanding at any one time exceed six months' remuneration of that officer, employee or person.

All the directors of the bank shall be liable jointly and severally to indemnify the bank against any loss arising from the making of any unsecured advance, unsecured loan or unsecured credit facility under subparagraphs (i) and (ii) of paragraph (c) of subsection (1)

For the purposes of this section—

"director" includes the wife, husband, father, mother, son or daughter of a director;

"unsecured advances", "unsecured loans" and "unsecured credit facilities" mean respectively advances, loans and credit facilities made without security or in respect of any advance, loan and credit facility made with security, any portion thereof which at any time exceeds the market value of the assets constituting the security, or where the Central Bank is satisfied that there is no established market value, the value made on the basis of a valuation approved by the Central Bank.

2EA...

to any of its directors (as defined in subsection (3) of section 26);

to any firm or corporation of which any of its directors (as defined in subsection (3) of section 26) is a partner, director, manager or agent or to any corporation in which shares any of its directors (as so defined) has interest; or

to any individual, firm or corporation of whom or of which any of its directors (as defined in subsection (3) of section 26) is a guarantor, unless the following conditions are satisfied—

that the advance, loan or credit facility meets the standards of credit-worthiness required of other applicant borrowers;

that the terms of the advance, loan or credit facility are not less favourable to the bank than those offered to others;

that the grant of the advance, loan or credit facility will serve the best interest of the bank; and

that the advance, loan or credit facility has been approved by the votes of not less than two-thirds of all the other directors of the bank and the approval has been recorded in the minutes of the meeting of the directors.

For the purposes of subsection (1), a person shall be deemed to have interest in the shares of a corporation if—

The requirements of subsection (1) shall not apply in any case where the interest of the director consists only of being a member or creditor of a corporation, which is interested in an advance, loan or credit facility or proposed advance, loan or credit facility from that licensed bank if the interest of the director may properly be regarded as not being a material interest.

For the purposes of subsection (1), a general notice given to the board of directors of a licensed bank by a director to the effect that he is an officer or member of a specified firm or a member of a specified corporation and he is to be regarded as interested in any advance, loan or credit facility which may, after the date of the notice, be made to that firm or corporation shall be deemed to be a sufficient declaration of interest in relation to any advance, loan or credit facility so made if—

Every director of a licensed bank who holds any office or possesses any property whereby whether directly or indirectly duties or interest might be created in conflict with his duties or interest as a director shall declare at a meeting of the directors of the licensed bank the fact and the nature, character and extent of the conflict.

The declaration referred to in subsection (4) shall be made at the first meeting of the directors held—

The secretary of the licensed bank shall cause to be brought up and read any declaration made under subsection (1) or (4) at the next meeting of the directors after it is given, and shall record any declaration made under this section in the minutes of the meeting at which it was made or at which it was brought up and read.

Any director who acts in contravention of subsection (1) or (4) shall be guilty of an offence and shall on conviction be liable to a fine not exceeding five thousand dollars or to imprisonment for a term not exceeding three years or to both such fine and imprisonment.

An overdraft or other credit facility granted under this section to any person shall be accounted for in an account separate from that kept for any other credit facility granted to him.

The Central Bank may give direction in writing to any licensed bank in respect of the following matters, that is to say—

Any licensed bank which acts in contravention of the provisions of this section or any direction given under this section shall be guilty of an offence under this Act.

A loan or advance secured solely by a charge, deed of trust or other instrument upon immovable property or by notes or by other obligations which are so secured shall, for the purposes of this section, be a loan or advance secured by immovable property; a loan or advance secured in part by charge, deed of trust, or other instrument upon immovable property, or by notes or other obligations which are so secured or by any other form of security, shall for the purposes of this section be a loan or advance secured by immovable property to the extent, but only to the extent, of the value of that immovable property as a security as determined by the Central Bank.

Nothing in this section shall be construed to prohibit any bank from accepting as security for a loan or advance made in good faith without security or upon security subsequently found to be inadequate, a charge, deed of trust or other instrument upon immovable property or notes or other obligations which are so secured.

Any licensed bank which acts in contravention of the provisions of subsection (1) shall be guilty of an offence under this Act.

Any licensed bank which acts in contravention of this section shall be guilty of an offence under this Act.

The provisions of this section shall not apply to the purchasing or selling of gold by any licensed bank.