Bank Negara Releases Long-Awaited Licensing Guidelines For Digital Banks

Bank Negara Malaysia (BNM) has unveiled its long-awaited guidelines on the licensing of digital banks in Malaysia. Following the release of the Policy Document on Licensing Framework for Digital Banks on 31 December 2020, potential candidates will have until 30 June 2021 to apply to operate a digital banking business or Islamic digital banking business.

The central bank stated it will grant up to five licenses to qualified applicants. Furthermore, the announcement of these license grants will be made by the first quarter of 2022. In December 2019, BNM had initially signalled that it would open the application process for digital banks within the first half of 2020. 

As a refresher, a digital bank would deliver all or most of the services offered by a traditional bank but exclusively online through apps accessible by phones, tablets, and PCs. Many industry observers see digital banks as potential competitors to their traditional counterparts in the long term.

This latest announcement from BNM comes after Singapore awarded four digital bank licenses to non-bank entities in December last year. Competition for a digital banking license in Malaysia is expected to be intense with interested parties including big names like Grab, Razer, and AirAsia.  

According to BNM, successful applicants would have to adhere to a simplified regulatory framework during their initial stage of operations (called a “foundational stage”). During that stage, lasting three to five years, they would have their assets limited to RM3 billion. They would also have to “maintain at all times a minimum amount of capital funds of RM100 million unimpaired by losses.” 

Obviously, there are many more conditions listed by BNM. Read them here in full [pdf] if you’re interested.