Banking sector is developing rapidly in Malaysia and commercial banks
are become the most important part of the financial institutions. Malaysian
banking system consisted of monetary and non-monetary institution. The monetary
institution are the central bank which known as Bank Negara Malaysia (BNM), and
the commercial banks included Bank Islam. However, the non-monetary
institutions comprised into two categories; the first group is supervised by
Bank Negara Malaysia (BNM); comprises commercial banking institutions
(including Islamic), investment banks and development financial institutions.
The second is under the supervision of several government agencies and
departments (IMF, 2014).
Bank Negara Malaysia or known as Central Bank of Malaysia is a
statutory body which established on 1959 (BNM, 2016). BNM is governed by the
Central Bank of Malaysia Act 2009. The role of BNM is to promote monetary and
financial stability. This is aimed at providing a conducive environment for the
development of Malaysian economy (BNM, 2016). According to ASEAN +3 Bond Market
Guide, Malaysia (2016), BNM focuses on three important elements of central
banking which are monetary stability, financial stability and payment system.
Furthermore, importance has given to the development of BNM align to economic
management, institution building and strengthening of financial system.
The primary functions of BNM are as below:
Formulate and implement monetary
policy in Malaysia
Issues currency in Malaysia
Regulate and monitor financial institutions
Hold and manage the foreign reserve of Malaysia
Act as financial advisor, banker and financial agent of government.
Provide foreign exchange market
Source : ASEAN +3 Bond Market Guide 2016, Malaysia
banking services considered as one of the largest and important industry in
Malaysia. This industry encourages the development of new infrastructure which
provide new income opportunities (Productivity Report 2010/2011). Banking is
one of the sector that experiencing major challenges due to globalization.
According to Panatik & Noordin (2015), banking industries in Malaysia have
to cope with technological changes, managerial changes and global