MALAYSIA POLYTECHNICS

MINISTRY OF EDUCATION

MODULE P2112
BANKING IN MALAYSIA

NOR AZIZAH HUSSIN (PUO) NUR RIANA ABDUL RAHIM (PUO)

BIODATA OF MODULE WRITERS P2112 BANKING IN MALAYSIA

Name Address

: :

Telephone No. : e-mail : Qualifications : Position :

Nor Azizah bt. Hussin Commerce Department Politeknik Ungku Omar Jalan Raja Musa Mahadi 31400 Ipoh Perak. 05-5457622 ext.2206 zieza@yahoo.com Master Education (UTM) Bachelor in Business Administration (Hons) Polytechnic Lecturer

Name Address

: :

Telephone No. : e-mail : Qualifications : Position :

Nur Riana bt Abdul Rahim Commerce Department Politeknik Ungku Omar Jalan Raja Musa Mahadi 31400 Ipoh Perak. 05-5457622 ext.2219 nriana2@ yahoo.com Master Education (UTM) Bachelor in Business Administration (Hons) Polytechnic Lecturer

What Do You Think Of This Module?

Title of Module: _______________________ Students Name: _______________________ Module Code : ___________

Registration No. : ___________

Course: ____________________________________ Module Writers: ______________________________ Please use the following scale for your evaluation:
4 3 2 1 Strongly Agree Agree Disagree Strongly Disagree

Instruction : Please on the space provided. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 How much do you agree with the following statements? A. FORMAT The pages are organized in an interesting manner. The font size makes it easy for me to read the module. The size and types of pictures and charts used are suitable for the input. The pictures and charts are easy to read and understand. The tables used are well-organised and easy to understand. The arrangement of the Input makes it easy for me to follow. All the instructions are displayed clearly. B. CONTENTS I understand all the objectives clearly. I understand the ideas conveyed. The ideas are presented in an interesting manner. All the instructions are easy to understand. I can carry out the instructions in this module. I can answer the questions in the activities easily. I can answer the questions in the self-assessment. The feedback section can help me identify my mistakes. The language used is easy to understand. The way the module is written makes it interesting to read. I can follow this module easily. Each unit helps me understand the topic better. I have become more interested in the subject after using this module. 1 SCALE 2 3 4

CURRICULUM GRID
The curriculum grid of this module is based on the curriculum used by Malaysian polytechnics. TOTAL HOURS No TOPIC 1 Financial Structure 2 3 4 Central Bank Commercial Bank Finance Company, Merchant Bank and Discount House Non-bank Financial Intermediaries Islamic Banking in Malaysia Financial Market and Foreign Exchange Market UNIT 1 (4 h) 4 (4 h) 6 (4 h) 7 (4 h) 9 (4 h) 10 (4 h) 12 (4 h) 2 (4 h ) 5 (4 h) 3 (4h) 12 Hours 8 Hours 4 Hours 8 Hours 4 Hours 8 Hours 14 (4 h) 12 Hours

8 (4 h)

5 6 7

11 (4 h) 13 (4 h)

UNIT 1 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 UNIT 2 2.0 2.1 2.2 2.3 2.4 2.5 UNIT 3 3.0 3.1 3.2 3.3 UNIT 4 4.0 4.1 4.2 4.3

THE FINANCIAL STRUCTURE Evolutions, roles and structure of the financial system Roles of financial institution and financial intermediaries Assets, sources and uses of fund and steps taken to develop the system Flow of funds and direction of credits Latest monetary policies Acts that regulate financial institutions Role and purpose of regulatory body Characteristics, role and objective of IOFC Factors that contribute to the successful operation of the IOFC Financial services which is offered by IOFC and incentives given to the participants Challenges of the financial sector in global economy THE CENTRAL BANK Formation and the roles of BNM Objectives and functions of BNM Organizational structure of BNM, two-tier regulatory system, international relationship and credit guidelines Objective and monetary policy instruments Techniques used to influence the funds supply, credit and interest Banking industries development THE COMMERCIAL BANK Roles and responsible Sources and uses of funds Credit direction, statutory requirements and banks liquidity Banking services and facilities THE FINANCE COMPANY, MERCHANT BANK AND DISCOUNT HOUSE Introduction and history Roles and functions Sources and uses of funds, statutory requirements, structure of assets and liabilities and direction of lending Services and activities

UNIT 5 5.0 5.1 5.2 UNIT 6 6.0 6.1 6.2 6.3 6.4 UNIT 7 7.0 7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8

NON-BANK FINANCIAL INTERMEDIARIES Roles and functions Sources and uses of funds Structure of assets and liabilities ISLAMIC BANKING IN MALAYSIA The concept of Islamic banking The need for Islamic banking Islamic banking instruments Comparison between Islamic banking system and conventional banking system Implementation of Islamic banking in Malaysia FINANCIAL MARKET AND FOREIGN EXCHANGE MARKET Concept and characteristic Reason of the BNMs intervention in market Money market and capital market instruments Market operations and parties involved Roles in economic development Basic terminologies in foreign exchange market Calculation and factors influencing the foreign exchange rate The Exchange Control Policy Risks involved and how to minimize the risks

MODULE GUIDELINES To achieve maximum benefits in using this module, students must follow the instructions carefully and complete all the activities. 1. 2. This module is divided into 7 units. Each page is numbered according to the subject code, unit and page number. P2112 / UNIT 1 / 5

Subject Unit 1 3. 4.

Page Number 5

The general and specific objectives are given at the beginning of each unit. The activities in each unit are arranged in a sequential order and the following symbols are given:

OBJECTIVES The general and specific objectives for each learning topic are stated in this section.

INPUT This section introduces the subject matter that you are going to learn.

ACTIVITIES The activities in this section test your understanding of the subject matter. You have to complete this section by following the instructions carefully.

FEEDBACK Answers to the questions in the activity section are given here

SELF-ASSESSMENT Self-assessment evaluates your understanding of each unit.

FEEDBACK OF SELF-ASSESSMENT This section contains answers to the activities in the self-assessment. .

5. 6.

You have to follow the units in sequence. You may proceed to the next unit after successfully completing the unit and you are confident of your achievement.

GENERAL AIMS This module is prepared for students in the second semester who are following the Diploma programmes in Malaysian Polytechnics. It aims to expose students to the structure and functions of financial institutions in Malaysian banking system. It is also to generalize the knowledge and understanding of students in banking management field. Finally, it is to expose students the relations between financial institutions and the roles of Malaysian financial system.

PREREQUISITE SKILLS AND KNOWLEDGE The prerequisite skills and knowledge prior to this module is at least a pass in the first semester.
GENERAL OBJECTIVES

At the end of this module, students should be able to: 1. understand the Malaysian financial structure. 2. understand the roles and objectives of BNM. 3. understand the roles of commercial banks and explain the banking services and facilities. 4. distinguish between a finance company, merchant bank and discount house from the aspect of roles and services. 5. understand the roles of non-bank financial intermediaries in economic development. 6. understand the Islamic Banking System in Malaysia from the aspect of Islamic financial instruments and be able to differentiate the Islamic Banking System with the Conventional Banking System. 7. understand the concepts, characteristics and operations of financial market and the foreign exchange market. TEACHING AIDS AND RESOURCES NEEDED 1. The Central Bank and the Financial System in Malaysia A Decade of Change 1989 1999; BNM

2.

Monetary Economics and the Malaysian Financial System IBBM

REFERENCES 1. Bank Negara Malaysia 1st (1999). The Central Bank and Financial System; Kuala Lumpur: Sales Publication Counter 2. Aziz bin Anuar (1999). Monetary Economics and the Malaysian Financial System; Kuala Lumpur: Institut Bank-bank Malaysia Cheah Kooi Guan (1995).Money Supply and Financial Markets in Malaysia; Kuala Lumpur: Institut Bank-bank Malaysia Cheah Kooi Guan (1995).Financial Institutions in Malaysia; Kuala Lumpur: Institut Bank-bank Malaysia Simon Tan (1998). Treasury; Kuala Lumpur: Institut Bank-bank Malaysia Johnson Pang (1995). Banking & Finance in Malaysia; Sdn. Bhd : Shah Alam Federal Publication

3.

4.

5. 6.

7.

Bank Negara Malaysia (Latest Edition). Annual Report and Quarterly Buletin; Kuala Lumpur Woo Kin Fin (1999). Introduction to Monetary Economics and the Malaysian Financial System; Kuala Lumpur: Institut Bank-bank Malaysia Bank Negara Malaysia (2001). Financial Sector Stability; Kuala Lumpur: Bank Negara Malaysia

8.

9.