29 January 2021

On 31 December 2020, Bank Negara Malaysia (“BNM”) issued a policy document and a corresponding FAQ on the licensing framework for digital banks (“Licensing Framework”), aimed to enable the innovative application of technology to uplift the financial well-being of individuals and businesses and to foster sustainable growth. Under the Licensing Framework, applicants intending to carry out digital bank businesses must, generally, comply with the requirements under the Financial Services Act 2013 or the Islamic Financial Services Act 2013 (as applicable) and standards on prudential, Shariah, business conduct, consumer protection, anti-money laundering and terrorism financing.

Applicants successful in obtaining the requisite license to operate digital banking businesses will benefit from a deliberate simplified regulatory framework by the BNM during the first three to five years of operation (“Foundational Period”) of the licensed digital bank. This is to assist BNM to observe the viability and the attendant risks of the licensed digital banks during the Foundational Period.

Apart from that, the Licensing Framework also sets out, among other things, (i) the eligibility requirements and application procedures that must be complied with by an applicant intending to carry out digital banking businesses, (ii) the business limitations and the regulatory framework applicable to licensed digital banks during the Foundational Period, and (iii) the business activities to be undertaken and the physical access points that may be established by the licensed digital banks.