KUALA LUMPUR, March 31 — Malaysia’s financial system remained resilient in 2025, supported by a prudent and robust regulatory environment, said Bank Negara Malaysia (BNM).

The central bank said it has focused on four key areas, namely aligning Malaysia’s regulatory framework with global standards while adapting them to local needs, and strengthening financial institutions’ ability to manage operational disruptions in an increasingly digitised and interconnected environment.

To help financial institutions stay strong and well-prepared for shocks, BNM has continued its efforts to align its regulatory framework with the Basel III standards.

“This in turn protects depositors and supports confidence in the financial system,” BNM said in its Annual Report 2025.

In 2025, the central bank issued three Exposure Drafts, namely the Capital Adequacy Framework (Internal Ratings-Based Approach for Credit Risk) (IRB), Capital Adequacy Framework (Counterparty Credit Risk) (CCR) and Interest Rate Risk in the Banking Book (IRRBB), as these policies improve how banks measure and manage risks.

Due to a greater use of digital technology and shared systems, BNM also updated the Risk Management in Technology (RMiT) requirements in line with heightened risks, such as disruptions from cyber incidents and technical failures.

BNM intensified efforts to strengthen trust between financial service providers and consumers with the revised policy, where financial service providers could no longer use a flat rate and/ or the Rule of 78 method for calculating interest or profit for personal financing.

“This means consumers pay interest or profit only on the amount they still owe and are not subject to excess charges for making early repayments,” it said.

Similar restrictions on the use of a flat rate and/or the Rule of 78 method would also apply to hire-purchase financing, once the recently enacted Hire-Purchase (Amendment) Act 2026 takes effect on June 1, 2026.

In the digital payments space, BNM updated the payment card rules, which include stronger authentication methods and new self-service security toggles, allowing cardholders to customise the safety features of their payment card.

“We also plan to set stronger rules on how financial institutions respond to fraud, focusing on proper communication with account holders, to help improve coordination and speed up action across the industry,” said BNM.

Additionally, the passing of the Consumer Credit Act 2025 (CCA) marked a key legislative reform aimed at strengthening consumer protection and harmonising consumer credit regulation.

On ensuring crisis preparedness, it said banks need to conduct a deeper analysis of the practicality of their recovery options and more detailed scenario planning to reflect real-world stress events.

Meanwhile, BNM undertook 284 supervisory and enforcement actions in 2025, including imposing monetary penalties totalling RM15.9 million, mainly related to anti-money laundering, technology risk management, prudential standards and foreign exchange policies.

“We acted against nine banks that failed to meet the regulatory expectations we set, including imposing a total penalty of RM5.6 million,” said BNM.

BNM continues to uphold transparency through the publication of enforcement actions on its website to deter future misconduct, demonstrating its zero tolerance for serious non-compliances.

Looking ahead to 2026 and beyond, BNM will continue to align prudential standards with global best practices, while tailoring them to Malaysia’s unique financial environment. — Bernama