Professional Documents
Culture Documents
OUTLINES:
The roles of BNM
Monetary Instruments
tools
Financial System
INTRODUCTION
Was established on Jan 26, 1959.
Was set up due to the need for the management
of the countrys money and credit situation.
BNM also as the controller and supervisor of the
institutions under the banking system
OBJECTIVES of BNM
The objectives of the central bank are defined as:
government
Provides banking services & management of government accounts
check facilities, accepts funds, make payments, foreign
exchange business.
Source of funds to government.
- Temporary advances to cover deficit in the budget.
- Legal limitations to the amount and duration of the loans.
Management of national debt
- Advises about the term & timing of loans & issue of new types of
securities.
the country.
Regulates and allocates credit in accordance with what it perceives to be the
requirements of the economy.
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MONE
MONETARY POLICY
Management of money supply.
Substantial changes in money supply will give
impact to the economic conditions.
In order to promote monetary stability, BNM will
influence the money supply level through the
employment of monetary tools.
MONETARY POLICY
Central Bank of Malaysia ordinance (CBO) 1958: BNM is
empowered to regulate the supply of money & credit
creation through:
Qualitative measures
Interest rate Ceiling
Selected Credit Control
Moral Suasion
Quantitative measures
Statutory reserved requirement (SRQ)
Minimum Liquidity Requirement (MLR)
Money Market Operation (MMO)
QUALITATIVE MEASURES
Selected Credit
Control
Interest Rate
Ceiling
Eg. Involved in
setting the
minimum lending
rates for bank
loans.
These measure
are used in
regulating the
volume and
direction of credit
Qualitati
ve
Measure
s
Moral Suasion
Inducing a
voluntary
response from the
financial system
to its policy
initiatives
Qualitative Measures
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vehicles
Guidelines on Credit Card Operations
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3) Moral Suasion
Refers to a traditional central bank technique of
informally inducing a voluntary response from the
financial system to its policy initiatives
Examples:
Discourage financial institutions to lend excessively for
speculation activity
Encourage to extend more longer-term financing loans
Encourage to step up lending to priority areas such as
Bumiputera community & small borrowers
Urged to limit lending secured by shares
QUANTITATIVE MEASURES
Liquidity
Requirement
The banking
institutions
required to
observed min
liquidity ratio.
Statutory
Reserve
Requirement
(SSR)
SSR = Eligible
liabilities which
comprise REPOs +
NCDs + Interbank
Monetary
Market
Operations
Influence the
liquidity situation
in a system
Quanitat
ive
Measure
s
Discount
Operation
Centralization
of Gov & EPF
Deposit with
The Central
Banks
Quantitative measures
1) Statutory Reserve Requirements (SRR)
Sec 37 (1)(c) of CBO
All banking institutions required to place certain % of EL as
cash reserves with BNM
Banks eligible liabilities (EL): deposits & net interbank
borrowings
Powerful monetary instrument; affects level of deposits &
loans of a bank
Higher % of SRR, reduce amount of deposits & loans
SRR immobilized in CB & do not earn interest; cost
passed on to customers thru higher lending rate