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1. Bank NegaraMalaysia& The Organization and Structure of Banking and the Financial-Services Industry Chapter 2
2. Bank Negara Malaysia officially – January 24, 1959. Endowed with comprehensive power under various Acts and Ordinance : The Central Bank of Malaysia Ordinance 1958 The Islamic Banking Act 1983, The Banking and Financial Institutions Act (BAFIA) 1989 The Essential (Protection of Depositors) Regulations 1986 under Section 2 of the Emergency (Essential Power) Act 1979 The Insurance Act 1963 The Takaful Act 1984 Labuan Offshore Business Activity Tax Act 1990 Offshore Companies Act 1990 Offshore Insurance Act 1990 Offshore Insurance Act 1990 Labuan Trust Companies Act 1990.
3. Bank Negara Malaysia (BNM) Section 4 of the Central Bank of Malaysia Ordinance 1958 listed the principal objectives of Bank Negara Malaysia as follows: To issue currency and keep reserves safeguarding the value of the currency; To act as banker and financial adviser/agent to the Government; To promote monetary stability and a sound financial structure; and To influence the credit situation to the advantages of the country
4. To issue currency Bank Negara Malaysia (BNM) shall: Arrange for the printing of currency notes and the minting of coins, Issue, re-issue and exchange notes and coins at its office and at such agencies as it may, from time to time, establish or appoint, Arrange for the safe custody of unissued stocks of currency and for the preparation, safe custody and destruction of plates and paper for the printing of notes and of dies for the minting of coins.
5. To hold/keep the country’s official external reserves and to safeguard the value of the ringgit Holdings are generally held in the form of gold, reserves position in the International monetary Fund (IMF), Special Drawing Rights. Also a well managed and diversified portfolio of foreign exchange assets and investments denominated in the major international currencies, e.g bank balances, T-Bills, Bonds and other securuities
6. To act as banker and financial adviser/agent to the government BNM acts as banker to the government, state governments and statutory bodies. As fiscal agent and financial adviser, it manage the national debt and the raising of government loans, (local and international), through well-managed loan programs, favorable terms and right timing of floatation of loan bonds and related securities.
7. To act as banker to the commercial banks, merchant banks, finance companies and discount houses The financial institutions maintain various type of account with BNM, for example statutory reserve accounts for maintenance of the required statutory reserves, and clearing accounts for inter-bank settlements, transfer of funds, clearing of cheques under the National Automatic Clearing System (or SistemPenjelasanAutomatikNasional (SPAN), trading in government securities and banker’s acceptances, and funding the Export Credit Refinancing facilities, etc. BNM also performs the functions of a lender.
8. To promote monetary stability and a sound financial structure BNM has been vested with comprehensive legal power under various legislations, for e.g, the Central Bank of Malaysia Ordinance 1958, the BAFIA 1989, the Islamic Banking Act 1983, the Insurance Act 1963, etc which it judiciously and prudently exercise to ensure the orderly and proper conduct and growth of banking, finance company, merchant banking, discount house, money brokering and insurance businesses in the country.
9. To influence the credit situation and a sound financial structure Ensure that money supply is flexible and sufficient to sustain economic growth and demands of domestic economy. To adopt various measurement to regulate volume of money and the generation of credit to ensure price stability, to combat inflationary pressures, to promote savings and to provide availability of fund for financing productive activities. E.g : impose statutory reserve requirements, liquid asset requirements, discount operations, open market operations, interest rate regulation its organizational chart under the various department respective advisers, such as Banking Department, Bank Regulation Dept.,Balanceof Payment Dept., Currency unit Dept., etc.
10. Banking and Financial Institutions act 1989 (BAFIA 1989) Repealed the Finance Companies Act 1969 AND THE Banking Act 1973. BAFIA Act 1989 provide new law for : the licensing and supervision/ regulation of institutions carrying on banking, finance company, merchant banking, discount house and money broking businesses; the supervision/ regulation of institutions carrying on financial business, for e.g building credit, credit token, development finance, factoring and leasing businesses; and the supervision/regulation of representative offices in Malaysia of banks and merchant banks operating outside Malaysia.
11. BAFIA Act 1989
12. BAFIA Act 1989

13. The Organization and Structure of Banking and the Financial-Services Industry

14. Assets Held by U.S. FDIC-insured Commercial Banks, 2005
15. Number of U.S. FDIC-insured Commercial Banks, 2005
16. Community Banks ‘Typical’ Size is $250 Million Organizational Chart is Not Complicated Significantly Affected by Health of Local Economy Limited Opportunities for Advancement Generally Know their Customers Well
17. Money Center or Wholesale Banks Generally Multi-Billion Dollar Company Organizational Chart is Much More Complex Serve Many Different Markets with Many Different Services Better Able to Withstand Risks of Fluctuating Economy Able to Raise Large Amounts of Capital at Relatively Low Costs
18. Common Classifications of U.S. Banks, 2005
19. Deposits Held By Banks in 2005
20. Unit Banks Offer All Services From One Office One of the Oldest Kinds of Banks New Banks are Generally Unit Banks
21. Branch Banks Offer Full Range of Services from Several Locations Senior Management at the Home Office Each Branch has its Own Management Team with Limited Decision Making Ability Some Functions are Highly Centralized, While Others are Decentralized
22. Reasons for Growth of Branching Exodus of Population to Suburban Communities Increased Bank Failures in Recent Years Business Growth
23. Electronic Branches Internet Banking Services Automated Teller Machines (ATMs) Point of Sale (POS) Terminals
24. Virtual Banks Provides their services Exclusively Through the Web Can Generate Cost Savings Over Traditional Brick and Mortar Banks Have Not Yet Demonstrated They Can Be Consistently Profitable
25. Bank Holding Companies (BHC) A Corporation Chartered for the Purpose of Holding the Stock of One or More Banks Control of a bank is Assumed When 25% or More of the Stock is Owned Must Get Approval from Federal Reserve Board to Control a Bank
26. Finance Companies Mortgage Companies Data Processing Companies Factoring Companies Security Brokerage Firms Financial Advising Credit Insurance Underwriters Merchant Banking Investment Banking Firms Trust Companies Credit Card Companies Leasing Companies Insurance Companies and Agencies Real Estate Services Savings Associations Nonbank Businesses of BHCs
27. Reasons for the Growth of BHCs Geographic Diversification Product Line Diversification Tax Sheltering Double Leveraging Source of Strength A Way Around Regulatory Restrictions
28. Reasons for Full-Service Interstate Banking Need to Bring New Capital to Revive Struggling Local Economies The Expansion by Non Bank Financial Institutions with Fewer Restrictions A Strong Desire by Large Banks to Expand Geographically Belief Among Regulators that Large Banks are More Efficient and Less Prone to Failure Advances in Technology
29. Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 Allows BHCs to Acquire Banks Anywhere in the U.S. Allows BHCs to Convert Banks to Branches – June 1997 States Can ‘Opt Out’ and Not Allow BHCs to Convert to Branches States Can ‘Opt In’ Early Limits Deposits of One BHC to 10% Nationwide and 30% Within One State
30. Proponents Efficient Use of Scarce Resources Lower Prices for Services Geographic Diversification Efficient Flow of Credit in the System Opponents Increased Bank Concentration Less Competition Higher Prices for Services Drain Resources from Community Proponents and Opponents of Interstate Banking
31. Financial Holding Companies Special Type of Holding Company Offers the Broadest Range of Services List of Activities Offered May Expand as Regulators Decide What Services are ‘Compatible’ with Banking Each Affiliated Financial Firm has its Own Capital and Management and its Own Profit or Loss
32. Bank Subsidiaries Bank Controls One or More Subsidiaries Subsidiaries Offer Other Services Such as Insurance and Security Brokerage Services Profits and Losses of Each Subsidiary Impact Parent Bank
33. Structure and Organization of Banks in Europe Germany – Largest European Banking Industry Private Sector Banks Public Sector Banks France – Second in Number of Banks Belgium – Dominated by Five Large Banks Great Britain – Dominated by a Half Dozen Banking Firms Switzerland – Credit Suisse and UBS and Many Smaller Firms Italy Privatized Banking in the 1990’s
34. Structure and Organization of Banks in Asia China – Large Dominating Government Sector, Although Private Banks are Expanding Japan – Dominated by the Big Four Financial Group with More than One Hundred Smaller Domestic Banks and Seventy Foreign Banks
35. Efficiency Economies of Scale As Output Doubles Economies of Scale Mean Less Than the Doubling of Production Costs Producing Multiple Units of the Same Package Costs Less Because of Efficiencies Economies of Scope A Financial Services Provider can Save Operating Costs When it Expands the Mix of Products it Offers Resources are Used More Efficiently in Jointly Producing Multiple Services
36. Banking and Financial Firm Goals Expense Preference Behavior Managers Value Fringe Benefits Over Pursuit of Maximizing Return for Shareholders Agency Theory Explores Whether Mechanisms Exist to Compel Management to Act to Maximize the Return to Shareholders Corporate Governance Relationships Among Managers, the Board of Directors, the Stockholders and Other Stakeholders of a Corporation