The Full Wiki

Bank Negara Malaysia: Wikis


Note: Many of our articles have direct quotes from sources you can cite, within the Wikipedia article! This article doesn't yet, but we're working on it! See more info or our list of citable articles.


From Wikipedia, the free encyclopedia

Central Bank of Malaysia logo.png
Central Bank of Malaysia

Bank Negara Malaysia (Malay)
The Central Bank of Malaysia headquarters in Kuala Lumpur.
The Central Bank of Malaysia headquarters in Kuala Lumpur.
Headquarters Kuala Lumpur, Malaysia
Established January 26, 1959
Governor Zeti Akhtar Aziz
Central Bank of  Malaysia
Currency Malaysian ringgit
ISO 4217 Code MYR

Bank Negara Malaysia or BNM is the Malaysian central bank. Its headquarters is located in Kuala Lumpur, the capital of Malaysia, and it was established on January 26, 1959 (as the Central Bank of Malaya or Bank Negara Tanah Melayu) to issue currency, act as banker and adviser to the Government and regulate the country's credit situation.

Governor Year
Tan Sri W H Wilcock January 1959 - July 1962
Ismail bin Mohamed Ali July 1962 - July 1980
Tan Sri Abdul Aziz bin Taha July 1980 - June 1985
Tan Sri Dato' Jaffar bin Hussein June 1985 - May 1994
Tan Sri Dato' Ahmad bin Mohd Don May 1994 - August 1998
Tan Sri Dato' Seri Ali Abul Hassan bin Sulaiman September 1998 - April 2000
Tan Sri Dato' Sri Dr. Zeti Akhtar Aziz May 2000 - Current



Bank Negara Malaysia was established on 26 January 1959 under Central Bank of Malaya Ordinance, 1958.[1] With it founding, it was to meet 5 objectives:-

  • To issue currency, the Malaysian Ringgit and keep reserves safeguarding the value of the currency;
  • To act as a banker and financial adviser to the Government;
  • To promote monetary stability and a sound financial structure;
  • To promote the reliable, efficient and smooth operation of national payment and settlement systems and to ensure that the national payment and settlement systems policy is directed to the advantage of Malaysia
  • To influence the credit situation to the advantage of the country.

Hence, with the following objective, the bank was created to safe guard the economy of Malaysia. The bank's broader goals are promoting economic growth in Malaysia, a high level of employment, maintaining price stability and a reasonable balance in the country's international payments position, eradicating poverty and restructuring society.[1]

Recent history

In 1985, following the "Plaza meeting" of G-5 finance ministers in New York City, the US dollar fell sharply causing major losses in Bank Negara's dollar reserves. The bank responded by starting a program of aggressive speculative trading to make up these losses (Millman, p. 226). Jaffar Hussein, the Bank Negara Governor at the time, referred to this strategy as "honest-to-God trading" in a December 1988 speech in New Delhi.

In the late 1980s, Bank Negara under Governor Jaffar Hussein, was a major player in the forex market. Its activities caught the attention of many; initially, Asian markets came to realize the influence Bank Negara had on the direction of forex market. Alan Greenspan acting the Federal Reserve chairman later realized Bank Negara's massive speculation activities and requested the Malaysian central bank to stop it.

BNM sold between $500 million on September 21, 1990 - $1 billion worth of pound sterlings in a short period, driving the pound down 4 cents on the dollar (Millman, p. 228). In response, bankers began front running Bank Negara's orders. Two years later, Bank Negara attempted to defend the value of the British pound against attempts by George Soros and others to devalue the pound sterling. George Soros won and Bank Negara reportedly suffered losses of more than USD $4 billion. [1] Bank Negara lost an additional $2.2 billion in speculative trading a year later (Millman, p. 229). By 1994, the bank became technically insolvent and was bailed out by the Malaysian Finance Ministry (Millman, p. 229).

In 1998, Bank Negara pegged 3.80 ringgit to a US dollar after the ringgit substantially depreciated during the 1997 Asian financial crisis. In July 2005, the central bank abandoned fixed exchange rate regime in favor of managed floating exchange rate system an hour after China floated its own currency. This resulted in capital flight of more than USD 10 billion, thought to be due to the repatriation of speculative funds that entered the country in anticipation of the abandonment of the peg: - Bank Negara's foreign exchange reserves increased by USD24 billion in the one year period between July 2004 and July 2005 (see table below). During this period there was widespread believe that the ringgit was undervalued and that if the peg was removed, the ringgit would appreciate.

Bank Negara Foreign Exchange Reserves (Source: Bank Negara, rounded to the nearest billion USD)
31 July 2004 USD 54 billion
31 December 2004 USD 66 billion
31 July 2005 USD 78 billion
31 March 2007 USD 88 billion
31 July 2007 USD 99 billion
31 December 2007 USD 101 billion[2]
31 March 2008 USD 120 billion[3]
30 December 2008 USD 92 billion

Bank Negara continues to run negative interest rate differential to USD. The ringgit has appreciated gradually since the peg was abandoned and as at 28 May 2007, it traded at around 3.40 to the US dollar. Malaysia's foreign exchange reserves have increased steadily since the initial capital flight, and as at 31 March 2007 the reserves stood at approximately USD88 billion, which is approximately USD10 billion more than the reserves just prior to the peg being abandoned.

On 31 July 2007 the Malaysian reserves stood at approximately USD98.5 billion which is equivalent to RM340.1 billion. The figure increase to USD 101.3 billion in 31 December 2007 which is equivalent to RM335.7 billion[2]. Bank Negara's international reserves increase further 15 days later to USD 104.3 billion or MYR 345.4 billion[4][5].


Bank Negara Malaysia.

Bank Negara's headquarters is located at Jalan Dato' Onn in Kuala Lumpur. A KTM Komuter station with the same name is located next door. An overhead crossing over Jalan Kuching and the Gombak River allows pedestrians access to the Bandaraya LRT station and the rest of downtown Kuala Lumpur.

Bank Negara had previously maintained branches in each of the country's state capitals. Most of them were closed in the 1990s when retail banks began taking over most of the counter services. There are still branches in Penang, Johor Bahru, Kota Kinabalu, Kuching and Kuala Terengganu, while the Shah Alam branch was converted into a currency distribution and processing centre. Bank Negara also retains representative offices in London and New York City, and a personnel training centre in Petaling Jaya, Malaysia.

Powers of the bank

The bank is endowed with certain powers through establishment of legal Acts by the Parliament of Malaysia to help fulfill its objectives. New legislation are created and current legislation is amended to reflect the needs of the time and future.


Exchange Control Act 1953

Allows the bank to confer powers, and impose duties and restrictions in relation to gold, currency, payments, securities, debts, and the import, export, transfer and settlement of property, and for purposes connected with the matters aforesaid.[6]

Central Bank of Malaysia Act 1958

Provides the establishment, administration and powers of the bank.[6] This act has been repelled with Central Bank of Malaysia Act 2009 starting on 25 November 2009.[7]

Central Bank of Malaysia Act 2009

Redefined the central bank roles which was not covered in the previous act. The central bank can now define monetary policy autonomously through Monetary Policy Committee. The bank also now have greater regulatory reach and oversight than before. The act also give recognition that conventional and Islamic Banking is running in parallel in Malaysia. [7]

Islamic Banking Act 1983

Provides licensing and regulations of Islamic banking in Malaysia[6]

Banking and Financial Institutions Act 1989

Provides laws regarding licensing and regulation of banking institutions in Malaysia.[6]

Takaful Act 1984

Provides regulation for takaful business in Malaysia[6]

Insurance Act 1996

Provides licensing and regulations for insurance business and financial advisory business. [6]

Money-Changing Act 1998

Gives the bank the power to license and regulate money changing business in Malaysia.[6]

Anti-Money Laundering and Anti-Terrorism Financing Act 2001

This act is actually renamed from a previous act. The act provides powers to the bank to prevent money laundering and terrorism financing. [6]

Development Financial Institutions Act 2002

Promotes the development of effective and efficient development financial institutions.[6]

Payment Systems Act 2003

Regulations of payment systems.[6]


  • Gregory J. Millman, Around the World on a Trillion Dollars a Day, Bantam Press, London and New York, 1995.

See also

External links


Got something to say? Make a comment.
Your name
Your email address