Bank Negara Malaysia (BNM) has just gotten stricter. I think they want to prevent the potential for a future financial crisis due twosome irresponsible behaviours of some ‘too large to fail’ banks. Like those in DEVELOPED nations. Reported in thestar.com.my was the below new measures that will be effective immediately. I think these measures are good and is on paris not better than many developed nations in the world today. If you want, you can read the full article in The Star here. Else, summary as below:
It strives to achieve the following: Increase transparency, reduce risk arising from opaque oversight, dampen leverage and overall risk-taking for the bank. The first thing which makes sense totally and something which I hope ALL Central Banks in the developed world would do. STAGGER the variable bonuses of senior employees and deal-makers over a period of time instead of rewarding them immediately. This is necessary because any deals closed, should it go bad would leave the bank to carry all the risks. With this new measure, these employees would definitely be more careful before closing any potentially bad deals.
One more which would affect quite a number of banks would be that there is now a cooling period of 5 years for the chief executives of banks before they can be appointed as chairman of the financial institution. All other points include the following: (As per thestar.com.my)
• substantial shareholders cannot hold senior management positions;
• the board must approve and oversee a plan to weather a crisis when the financial system comes under stress; and
• boards cannot have more than one executive director unless there are special circumstances.
• individuals must be able to raise concerns about illegal, unethical or questionable practices in confidence and without the risk of reprisal
• the boards of banks should comprise of a majority of independent directors. The independent directors should not be sitting in the post for more than nine years.
I love these new measures. Hoping for more and this is the reason why I think the new bank governor is a good appointment. He is definitely working for Malaysia.
written on 6 Aug 2016
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