Malaysia’s Financial System Remains Resilient Under Strong Regulatory Framework, Says BNM
Malaysia’s financial system remained resilient in 2025, supported by a prudent regulatory environment and ongoing supervisory oversight, according to Bank Negara Malaysia (BNM). In its Annual Report 2025, the central bank outlined how regulatory alignment with global standards, stronger operational resilience and improved consumer protection measures helped sustain confidence in the banking and financial sector despite rising digitalisation and evolving risks.
BNM said its supervisory approach has focused on strengthening financial institutions’ capacity to manage disruptions in an increasingly interconnected financial ecosystem. This includes updates to regulatory frameworks, enhanced risk management requirements and reforms aimed at protecting financial consumers.
Aligning Banking Regulation With Global Standards
A key priority has been aligning Malaysia’s regulatory framework with the Basel III standards while adapting them to domestic conditions. According to BNM, these measures help ensure that banks maintain sufficient capital buffers and risk management capabilities.
“This in turn protects depositors and supports confidence in the financial system,” — Bank Negara Malaysia
During 2025, BNM issued three exposure drafts designed to strengthen banks’ risk measurement and management practices. These include the Capital Adequacy Framework for the Internal Ratings-Based Approach (IRB) for credit risk, the Capital Adequacy Framework for Counterparty Credit Risk (CCR), and policies addressing Interest Rate Risk in the Banking Book (IRRBB).
Strengthening Technology Risk and Digital Resilience
With financial services increasingly dependent on digital infrastructure and shared technology platforms, BNM also updated its Risk Management in Technology (RMiT) policy requirements. The revisions address emerging threats such as cyber incidents and system failures that could disrupt financial services.
These measures complement broader efforts to ensure secure digital financial infrastructure, including policies aimed at strengthening payment resilience. Previous initiatives highlighted in Malaysia’s new risk policy for digital payment resilience reflect similar regulatory priorities across the financial sector.
BNM also updated payment card rules to introduce stronger authentication requirements and new security features. These include self-service security toggles that allow cardholders to customise card safety settings, providing greater control over payment security.
The central bank said it is also planning additional requirements governing how financial institutions respond to fraud cases, particularly around communication with account holders and coordination across the banking industry.
New Measures to Improve Consumer Protection
BNM introduced updated rules to strengthen trust between financial institutions and consumers. Under the revised policy, financial service providers are no longer permitted to apply flat-rate calculations or the Rule of 78 method when determining 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,” — Bank Negara Malaysia
Similar restrictions will also apply to hire-purchase financing once the Hire-Purchase (Amendment) Act 2026 comes into effect on 1 June 2026. In addition, the Consumer Credit Act 2025 introduces broader reforms designed to harmonise consumer credit regulation and strengthen protection for borrowers.
These developments sit alongside wider policy efforts to build a secure and inclusive digital financial ecosystem, such as initiatives supporting secure and inclusive digital payment innovation in Malaysia.
Supervisory Enforcement and Crisis Preparedness
To maintain regulatory discipline, BNM carried out 284 supervisory and enforcement actions during 2025. Monetary penalties totalling RM15.9 million were imposed, primarily relating to breaches involving anti-money laundering requirements, technology risk management, prudential standards and foreign exchange rules.
“We acted against nine banks that failed to meet the regulatory expectations we set, including imposing a total penalty of RM5.6 million,” — Bank Negara Malaysia
The central bank said it continues to publish enforcement actions on its website to improve transparency and deter misconduct, reflecting what it described as zero tolerance for serious regulatory non-compliance.
Looking ahead, BNM said it will continue aligning prudential standards with international best practices while ensuring they remain suited to Malaysia’s financial environment. The regulator also expects banks to undertake deeper scenario planning and practical assessments of recovery strategies to prepare for potential stress events.
