Friday November 27, 2009
New banking laws for swift action during future economic crisis
PETALING JAYA: The new Central Bank of Malaysia Act 2009, which repeals one of the oldest laws in Malaysia, the Central Bank of Malaysia Act 1958, is to strengthen Malaysia’s resilience to financial crises in a globalised environment.
According to a Bank Negara statement, the new Act provides comprehensive provisions to ensure swift and orderly resolution in the event of an imminent financial crisis to reduce its impact and costs to the domestic economy and to sustain public confidence.
“Provisions have been made for heightened surveillance, pre-emptive actions and resolution powers including the extension of liquidity assistance to entities not regulated by the central bank but which pose risks to the overall financial stability,” it said.
The new Act also provides for Bank Negara to have oversight over the money and foreign exchange markets, payment systems and for enhanced arrangements for cooperation with other supervisory authorities.
The exercise of the powers for the purposes of achieving financial stability shall be decided by the Financial Stability Executive Committee (FSEC) established under the Act.
The FSEC will comprise the governor, a deputy governor and at least three other members to be appointed on the recommendation of the bank’s board of directors.
Meanwhile, monetary policies, which are to maintain price stability while giving due regard to developments in the economy, would be formulated and implemented autonomously by a Monetary Policy Committee (MPC) established under the Act.
The new Act clearly outlines that the MPC would comprise seven to 11 members, including the governor and deputy governors, who will meet no less than six times a year.
“The members of the MPC must be persons of probity, competence and sound judgment with relevant expertise and experience,” the new Act states.
Other extensive safeguards of the new Act prescribe that monetary policy would only be formulated at a formally convened meeting of the MPC with a quorum of not less than two-thirds of its members.
As part of its efforts to enhance the governance framework to be more robust, the Board Governance Committee, the Board Audit Committee and the Board Risk Committee, consisting only of non-executive directors, would be established to assist Bank Negara’s board of directors in its oversight role of the management and performance review of the bank.
Consistent with the goal to promote Malaysia as an international centre for Islamic finance, the Act also gives due recognition to both the Islamic and conventional financial systems operating in parallel in Malaysia.
The new Act also provides for an enhanced role of the Syariah Advisory Council on Islamic Finance (SAC) whose members are appointed by the Yang di-Pertuan Agong on the advice of the finance minister after consultation with the bank.
The SAC “shall be the authority for the ascertainment of Islamic law for the purposes of Islamic financial business”, the new Act states.
Key changes under the new Act:
1. A more robust governance framework
2. Comprehensive provisions to ensure swift and orderly resolution in the event of an imminent financial crisis
3. Heightened surveillance, pre-emptive actions and resolution powers
4. Central bank to have oversight over the money and foreign exchange markets, payment systems and for enhanced arrangements for cooperation with other supervisory authorities
5. Monetary policy is to be formulated and implemented autonomously by a Monetary Policy 6. Committee established under the Act
6. Due recognition to both the Islamic and conventional financial systems operating in parallel in Malaysia
http://biz.thestar.com.my/news/story.asp?file=/2009/11/27/business/5194496&sec=business
Friday, November 27, 2009
Saturday, November 14, 2009
Overseas Banks in Malaysia
1. OCBC
Oversea-Chinese Banking Corporation Berhad (OCBC Bank) was born out of the Great Depression with the merger of three banks in 1932 - The Chinese Commercial Bank Limited (1912), the Ho Hong Bank Limited (1917) and the Oversea-Chinese Bank Limited (1919). OCBC Bank flourished to become one of the largest banks in Singapore and Malaysia. OCBC Bank was also the only foreign bank to have branches in China in the 1950s - its long history in China dates back to 1925 when it opened its first branch in Xiamen, the first Singapore bank to do so.
The Ho Hong Bank was a Malaysian bank established in (1917 - 1932) to provide banking services that prior to 1912 were solely delivered by European Banks. The Ho Hong Bank was founded by Lim Peng Siang, Dr. Lim Boon Keng and Seow Poh Leng all of whom were, before that time, officers of The Chinese Commercial Bank.
2. UOB
United Overseas Bank (UOB) was founded on 6 August 1935 by Sarawak-born Datuk Wee Kheng Chiang together with 6 other Chinese businessmen, under the name of United Chinese Bank (UCB). Through a series of acquisitions, UOB is now a leading bank in Asia.
In 1965, UCB changed name to United Overseas Bank and opened its first overseas branch in Hong Kong. In 1971, UOB acquired a majority interest in Chung Khiaw Bank Limited and its branch network in Singapore, Malaysia and Hong Kong, and introduced its red five-barred logo still in use today. In 1973, it acquired 100% shareholding in Lee Wah Bank Limited and its branch network in Singapore and Malaysia. UOB subsequently acquired Far Eastern Bank Limited in 1984, and Industrial & Commercial Bank Limited in 1987. Chung Khiaw Bank became a wholly-owned banking subsidiary of UOB in 1988. UOB acquired Westmont Bank in Philippines and Radanasin Bank in Thailand in 1999. In 2001, UOB acquired 100% shareholding in Overseas Union Bank Limited, and ICB in 2002. In 2005, UOB acquired a controlling stake of 53% in PT Bank Buana in Indonesia and renamed the bank to PT Bank UOB Buana (UOB Buana) in 2007.
Lee Wah Bank was incorporated in Singapore in 1920 and opened its first Malaysian branch in 1956.
3. Standard Chartered
The Standard Chartered Group was formed in 1969 through a merger of two banks. The Standard Bank of British South Africa founded in 1863, and the Chartered Bank of India, Australia and China (The Chartered Bank). The Chartered Bank was founded in 1851/1853 following the grant of a Royal Charter from Queen Victoria. It opened its first branches in 1858 in Calcutta and Bombay and soon after in Shanghai. The Standard Chartered Bank first began operations in Malaysia in Penang in 1875. The Bank has evolved from a bank supporting the trading community to a one-stop financial centre today, offering a full range of banking products and services in retail and wholesale banking. It has three core businesses namely Consumer Banking, Corporate and Institutional Banking and Treasury.
4. HSBC
The Hong Kong and Shanghai Banking Corporation (HSBC) was established in Hong Kong in March 1865 to finance the growing trade between China and Europe, with an office opened in Shanghai during April of that year. HSBC's presence in Malaysia dates back to more than 125 years. The Hongkong and Shanghai Banking Corporation Limited established its first branch in Malaysia in 1884, on the island of Penang, with privileges to issue currency notes. Thereafter, it opened branches in Ipoh in 1909 followed by branches in Malacca, Johore Bahru and Kuala Lumpur in 1910. The Kota Bharu branch was opened in 1912. By 1959, The Hongkong and Shanghai Banking Corporation Limited had embarked on a programme of acquisitions - including The Mercantile Bank and alliances and has network of 40 branches throughout Malaysia. Through the acquisition of The Mercantile Bank, which started operations in Malaysia in 1860, HSBC is indirectly the oldest bank in Malaysia.
The Mercantile Bank of India, London and China was established in October 1853 in Bombay (now Mumbai), but its headquarters moved to London in 1858.
5. RBS
The Royal Bank of Scotland was founded in 1727, with the first premises in the Old Town of Edinburgh, and has become one of the largest financial services groups in the world. During the 1900’s, it acquired several English banks including Williams Deacon's Bank, Glyn, Mills & Co and Drummonds Bank. In 1969, it merged with National Commercial Bank of Scotland to achieve a greater market share in Scotland. In 2000, it acquired National Westminster Bank (NatWest) in the biggest banking takeover ever in Britain and so inherited a rich heritage covering more than 200 banks that had made up NatWest. In 2007, in the biggest takeover in banking history, it led a unique consortium to acquire the Dutch bank ABN Amro.
ABN Amro was a prominent international bank, which traces its origins to Nederlandsche Handel-Maatschappij or Netherlands Trading Society (NTS) which was founded on the initiative of the Merchant Monarch, King Willem I, in the Hague on 29 March 1824. The object was to resuscitate national trade and industry in the wake of the period of French rule (1795-1813). NTS was an import/export company set up to expand existing trade relations and open up new channels. The growing concentration of banking in the Netherlands reached a climax in October 1964 when a merger between two of the Big Four Dutch bank, NTS and Twentsche Bank merged to become Algemene Bank Nederland (ABN Bank). A very important acquisition occurred in 1979 with ABN Bank’s take-over of Chicago-based LaSalle National Bank. This take-over laid the foundation for what would become the second home market of the bank. Founded in 1927 as National Builders Bank of Chicago, LaSalle Bank gave ABN its first firm foothold in the US Midwest. In 1990, Exchange Bancorp of Chicago was incorporated in LaSalle.
ABN Bank and Amro Bank decided in mid-1990 to combined forces, and the merger was completed rapidly after ABN AMRO Holding N.V. made a successful bid for the shares of both banks in August 1990. On 22 September 1991, the new ABN AMRO Bank was established, with its head office in Amsterdam.
Twentsche Bankvereeniging (TB) was established in Amsterdam on 24 June 1861 targeting the textile industry in the Twente region in the eastern part of the Netherlands and on financing textile exports to the Dutch East Indies. TB's first major post-war takeover was Van Ranzow's Bank in Arnhem in 1950, followed in 1952 by Van Mierlo en Zoon in Breda. The latter, however, continued to trade under its own name.
Amsterdam-Rotterdam Bank (Amro Bank) was created in 1964 between the merger of Amsterdamsche Bank (AB) and Rotterdamsche Bank (RB), after plans for a merger in 1939 were shelved due to the Second World War.
Rotterdamsche Bank (RB) was founded in Rotterdam on 16 May 1863 by a group of businessmen and bankers. On 19 April 1911, RB merged with Rotterdam's Deposito- en Administratie Bank (est. 1900) to form Rotterdamsche Bankvereeniging (Robaver).
Amsterdamsche Bank (AB) was established in Amsterdam on 5 December, 1871 by a group of mainly German banks led by Bank für Handel und Industrie of Darmstadt. Amsterdamsche Bank and Incasso-Bank signed an agreement in October 1947 under which the two banks merged. This considerably expanded AB’s branch network.
References:
http://www.rbs.com/about-rbs/g2/heritage/our-story/history-highlights.ashx
Oversea-Chinese Banking Corporation Berhad (OCBC Bank) was born out of the Great Depression with the merger of three banks in 1932 - The Chinese Commercial Bank Limited (1912), the Ho Hong Bank Limited (1917) and the Oversea-Chinese Bank Limited (1919). OCBC Bank flourished to become one of the largest banks in Singapore and Malaysia. OCBC Bank was also the only foreign bank to have branches in China in the 1950s - its long history in China dates back to 1925 when it opened its first branch in Xiamen, the first Singapore bank to do so.
The Ho Hong Bank was a Malaysian bank established in (1917 - 1932) to provide banking services that prior to 1912 were solely delivered by European Banks. The Ho Hong Bank was founded by Lim Peng Siang, Dr. Lim Boon Keng and Seow Poh Leng all of whom were, before that time, officers of The Chinese Commercial Bank.
2. UOB
United Overseas Bank (UOB) was founded on 6 August 1935 by Sarawak-born Datuk Wee Kheng Chiang together with 6 other Chinese businessmen, under the name of United Chinese Bank (UCB). Through a series of acquisitions, UOB is now a leading bank in Asia.
In 1965, UCB changed name to United Overseas Bank and opened its first overseas branch in Hong Kong. In 1971, UOB acquired a majority interest in Chung Khiaw Bank Limited and its branch network in Singapore, Malaysia and Hong Kong, and introduced its red five-barred logo still in use today. In 1973, it acquired 100% shareholding in Lee Wah Bank Limited and its branch network in Singapore and Malaysia. UOB subsequently acquired Far Eastern Bank Limited in 1984, and Industrial & Commercial Bank Limited in 1987. Chung Khiaw Bank became a wholly-owned banking subsidiary of UOB in 1988. UOB acquired Westmont Bank in Philippines and Radanasin Bank in Thailand in 1999. In 2001, UOB acquired 100% shareholding in Overseas Union Bank Limited, and ICB in 2002. In 2005, UOB acquired a controlling stake of 53% in PT Bank Buana in Indonesia and renamed the bank to PT Bank UOB Buana (UOB Buana) in 2007.
Lee Wah Bank was incorporated in Singapore in 1920 and opened its first Malaysian branch in 1956.
3. Standard Chartered
The Standard Chartered Group was formed in 1969 through a merger of two banks. The Standard Bank of British South Africa founded in 1863, and the Chartered Bank of India, Australia and China (The Chartered Bank). The Chartered Bank was founded in 1851/1853 following the grant of a Royal Charter from Queen Victoria. It opened its first branches in 1858 in Calcutta and Bombay and soon after in Shanghai. The Standard Chartered Bank first began operations in Malaysia in Penang in 1875. The Bank has evolved from a bank supporting the trading community to a one-stop financial centre today, offering a full range of banking products and services in retail and wholesale banking. It has three core businesses namely Consumer Banking, Corporate and Institutional Banking and Treasury.
4. HSBC
The Hong Kong and Shanghai Banking Corporation (HSBC) was established in Hong Kong in March 1865 to finance the growing trade between China and Europe, with an office opened in Shanghai during April of that year. HSBC's presence in Malaysia dates back to more than 125 years. The Hongkong and Shanghai Banking Corporation Limited established its first branch in Malaysia in 1884, on the island of Penang, with privileges to issue currency notes. Thereafter, it opened branches in Ipoh in 1909 followed by branches in Malacca, Johore Bahru and Kuala Lumpur in 1910. The Kota Bharu branch was opened in 1912. By 1959, The Hongkong and Shanghai Banking Corporation Limited had embarked on a programme of acquisitions - including The Mercantile Bank and alliances and has network of 40 branches throughout Malaysia. Through the acquisition of The Mercantile Bank, which started operations in Malaysia in 1860, HSBC is indirectly the oldest bank in Malaysia.
The Mercantile Bank of India, London and China was established in October 1853 in Bombay (now Mumbai), but its headquarters moved to London in 1858.
5. RBS
The Royal Bank of Scotland was founded in 1727, with the first premises in the Old Town of Edinburgh, and has become one of the largest financial services groups in the world. During the 1900’s, it acquired several English banks including Williams Deacon's Bank, Glyn, Mills & Co and Drummonds Bank. In 1969, it merged with National Commercial Bank of Scotland to achieve a greater market share in Scotland. In 2000, it acquired National Westminster Bank (NatWest) in the biggest banking takeover ever in Britain and so inherited a rich heritage covering more than 200 banks that had made up NatWest. In 2007, in the biggest takeover in banking history, it led a unique consortium to acquire the Dutch bank ABN Amro.
ABN Amro was a prominent international bank, which traces its origins to Nederlandsche Handel-Maatschappij or Netherlands Trading Society (NTS) which was founded on the initiative of the Merchant Monarch, King Willem I, in the Hague on 29 March 1824. The object was to resuscitate national trade and industry in the wake of the period of French rule (1795-1813). NTS was an import/export company set up to expand existing trade relations and open up new channels. The growing concentration of banking in the Netherlands reached a climax in October 1964 when a merger between two of the Big Four Dutch bank, NTS and Twentsche Bank merged to become Algemene Bank Nederland (ABN Bank). A very important acquisition occurred in 1979 with ABN Bank’s take-over of Chicago-based LaSalle National Bank. This take-over laid the foundation for what would become the second home market of the bank. Founded in 1927 as National Builders Bank of Chicago, LaSalle Bank gave ABN its first firm foothold in the US Midwest. In 1990, Exchange Bancorp of Chicago was incorporated in LaSalle.
ABN Bank and Amro Bank decided in mid-1990 to combined forces, and the merger was completed rapidly after ABN AMRO Holding N.V. made a successful bid for the shares of both banks in August 1990. On 22 September 1991, the new ABN AMRO Bank was established, with its head office in Amsterdam.
Twentsche Bankvereeniging (TB) was established in Amsterdam on 24 June 1861 targeting the textile industry in the Twente region in the eastern part of the Netherlands and on financing textile exports to the Dutch East Indies. TB's first major post-war takeover was Van Ranzow's Bank in Arnhem in 1950, followed in 1952 by Van Mierlo en Zoon in Breda. The latter, however, continued to trade under its own name.
Amsterdam-Rotterdam Bank (Amro Bank) was created in 1964 between the merger of Amsterdamsche Bank (AB) and Rotterdamsche Bank (RB), after plans for a merger in 1939 were shelved due to the Second World War.
Rotterdamsche Bank (RB) was founded in Rotterdam on 16 May 1863 by a group of businessmen and bankers. On 19 April 1911, RB merged with Rotterdam's Deposito- en Administratie Bank (est. 1900) to form Rotterdamsche Bankvereeniging (Robaver).
Amsterdamsche Bank (AB) was established in Amsterdam on 5 December, 1871 by a group of mainly German banks led by Bank für Handel und Industrie of Darmstadt. Amsterdamsche Bank and Incasso-Bank signed an agreement in October 1947 under which the two banks merged. This considerably expanded AB’s branch network.
References:
http://www.rbs.com/about-rbs/g2/heritage/our-story/history-highlights.ashx
Malaysian Achor Banks of 1999
In 1999, emerging from the Asian Financial Crisis and other financial issues, and in line with the Government’s plan to consolidate the banking and finance industry, the Government announced the following 10 anchor banks:
1. Malayan Banking
2. Bumiputra-Commerce Bank
3. Public Bank
4. RHB Bank
5. Arab-Malaysian Bank
6. EON Bank
7. Multi-Purpose Bank
8. Hong Leong Bank
9. Affin Bank
10. Southern Bank
Maybank
Malayan Banking, or Maybank, is the largest financial services group in Malaysia boasting group assets worth RM301 billion (USD$87 billion), placing it among the top 120 banks worldwide. It has the largest network of branches with over 374 branches and owns the largest ATM network in Malaysia with over 900 ATMs. Todate, Maybank has more than 4 million deposit accounts and more than half a million loan accounts.
In August 2000, Maybank announced the merger of the commercial banking business under Phileo Allied Bank and the securities business under Phileo Securities with that of Maybank and Mayban Securities respectively.
On 1 January 2001, Maybank also announced the merger of The Pacific Bank with Maybank.
Malayan Banking was formed by Malaysian business tycoon Khoo Teck Puat with a few partners in Kuala Lumpur. It was incorporated on 31 May 1960 and commenced operations on 12 September 1960. The bank grew rapidly to more than 150 branches within 3 years, but in 1965, Khoo Teck Puat was ousted from Maybank by the Government of Malaysia under the then Deputy Prime Minister Tun Abdul Razak's administration on the pretext of pumping the bank's money into his own private firm in Singapore. The bank formed its own investment banking subsidiary, Aseambankers Malaysia Berhad (Asian & Euro-American Merchant Banking (Malaysia) Berhad) in 1973. In 1993, the bank acquired a local insurance company, Safety Life & General insurance Sdn Bhd, and relaunched it as Mayban Life Assurance to focus solely in bankassurance. In 2005, the insurance arm acquired MNI Insurance and Takaful Nasional, and subsequently rebranded its insurance companies to Eitqa in 2008.
The Pacific Bank was established in 1919 and was listed on the KLSE in August 1990 …
PhileoAllied Bank ….
CIMB Bank
CIMB Bank, the consumer banking are of CIMB Group, was rebranded to its current name in 2006 to reflect its group restructuring and the completion of the merger between Bumiputra-Commerce Bank and Southern Bank Berhad.
Bumiputra-Commerce Bank (BCB) was formed in October 1999 through the merger of Bank of Commerce (BoC) and Bumiputra Bank Malaysia Berhad (BBMB) resulting in the biggest merger in Malaysia's banking history.
Bank Bumiputra was established in 1965 in line with government initiatives to increase the Bumiputra participation in the national economy. By the 1980s, it had become the largest bank in the country in terms of assets and was the first domestic bank to have operations in New York, London, Tokyo, Bahrain and Hong Kong. In 1982, it was listed as the largest bank in Southeast Asia by Asian Finance magazine.
The history of Bank of Commerce goes back to November 1979 when Bian Chiang Bank was renamed Bank of Commerce on the acquisition by the UMNO-owned Fleet Group and co-shareholder JP Morgan. Bian Chiang Bank was established in 194 in Kuching by Wee Kheng Chiang, focusing mainly in business financing and the issuance of bills of exchange.
In November 1991, the acquisition of United Asian Bank (UAB) by Bank of Commerce was the starting point for the significant expansion of this nascent force in banking. With the acquisition, the Bank of Commerce branch network increased almost fourfold, complementing its established reputation in the corporate lending market.
United Asian Bank (UAB) was established in Kuala Lumpur in 1972 as a result of the merger of three Indian-owned banks; Indian Overseas Bank Ltd, Indian Bank Ltd and United Commercial Bank Ltd. UAB started as a joint-venture in banking between Malaysia and India, taking over the operations of the Malaysian branches of the Indian banks in 1972.
Southern Bank was founded as Southern Banking Limited in 1965 by the late Tan Sri Saw Seng Kew in Penang and quickly expanded to other parts of the country. In 1978, the bank set up operations in Kuala Lumpur and became recognised as an important player in wealth management products, credit cards and SME lending. The bank was the first in the country to set up the MEPS / ATM system used throughout Malaysia today. Southern Bank was one of the anchor banks announced in 1999, in which Southern Bank acquired Ban Hin Lee Bank. Ban Hin Lee Bank (BHLB) was also established in Penang. Formed in 1935 by “Towkay” Yeap Chor Ee, it originally focused on serving local businessmen in their trading and merchant activities. In the 1960's, it branched into real estate and house financing eventually reaching throughout Malaysia and Singapore from its headquarters in Penang, though it mainly served the Penang region.
RHB Bank
RHB Bank was formed in 1997 as a result of the merger between DCB Bank and Kwong Yik Bank. In line with the government’s plan to consolidate the banking industry, the merger between Sime Bank and RHB Bank was finalized in 1999 to form the RHB Banking Group, resulting in the third largest banking group in Malaysia. In 2003, the RHB Banking Group completed its merger with Bank Utama, offering its customers a wider network of 200 branches nationwide, 470 ATMs and new products and services, such as internet banking.
DCB Bank was established in 1966 as Development and Commercial Bank (D&C Bank) by the late Tun Sir H. S. Lee, a well known entrepreneur and the first Minister of Finance for the country. D&C Bank became the 5th largest Malaysian bank by the late 80’s. In 1990, a majority shareholding of the bank was sold to Abdul Rashid Hussain, the owner of the then largest stock brokerage firm, Rashid Hussain Bhd which was founded in 1982.
Kwong Yik Bank was established in 1913 with a start-up capital of RM300,000 at the Old Market Square in Kuala Lumpur, making it Malaya’s first local bank . In 1996, Abdul Rashid Hussain acquired a 75% stake in Kwong Yik Bank at RM2.3bil and its merger with DCB Bank in 1997 formed the RHB Bank, making it the country’s biggest ever banking merger at that time. 1999, he bought the troubled Sime Bank for RM852.2mil.
Sime Bank was initially set up in 1959 as the United Malayan Banking Corporation (UMBC) by a group of businessmen, led by Mr Chang Ming Thien, a prominent figure in the rubber industry in Malaya and Singapore. The bank was officially declared open by the then Prime Minister, Tunku Abdul Rahman in 1960 as the first commercial bank to be established in independent Malaya. In 1996, UMBC became part of the Sime Darby Group and was renamed Sime Bank Berhad.
Bank Utama (Malaysia) Berhad was first incorporated in 1976 in Sarawak as the first bumiputra-owned bank.
Public Bank
Public Bank merged with Hock Hua Bank in 1999 as part of the government’s merger programme for domestic banking institutions. With this merger, Public Bank saw an increase in its domestic branch network to 381 branches in Malaysia from 345 branches, comprising 213 commercial bank branches and 168 finance company branches.
Public Bank was founded in 1966 by Tan Sri Teh Hong Piow, who began his banking career in 1950 as a bank clerk in Overseas-Chinese Banking Corporation Ltd. and rose in rank to officer within five years. He joined Malayan Banking Berhad as Manager in 1960, and later in 1964, was promoted to the position of General Manager at the age of 34. He left Malayan Banking in 1966 to set up Public Bank. Public Bank is the largest domestic bank in Malaysia by market capitalisation and the third largest by balance sheet. The Public Bank Group employs close to 16,000 people in 2009 – with about 90% of the staff in Malaysia and the remaining spread across Hong Kong and the People’s Republic of China, Cambodia, Vietnam, Laos and Sri Lanka.
Hock Hua Bank was founded in 1952 and became Sarawak’s regional bank. With an established customer base in the state of Sarawak especially in the retail consumer and commercial sectors, Hock Hua Bank complemented and enhanced Public Bank’s similar focus and specialization in the retail and commercial segment.
AmBank
Arab-Malaysian Bank Berhad commenced operations on 1 August 1994, when the AMMB Group acquired the Malaysian operations of Security Pacific Asian Bank Limited from Bank of America (Asia) Limited. On 1 June 2005, the merger of AmBank and AmFinance took place to create AmBank (M) Berhad, the sixth largest domestic bank in the country. On 18 May 2007, AmBank Group commemorated the entry of Australia and New Zealand Banking Group Limited (ANZ Bank) as its strategic partner and major investor.
The AMMB Group began its finance business in 1977, when the Group acquired a 70.0% shareholding in Malaysian Industrial Finance Company Limited (“MIFCL”), which was later renamed Arab-Malaysian Finance Berhad (“AMFB”). In 1990, AMFB acquired First Malaysia Finance Berhad. In line with the Government’s plan to consolidate the industry, AMFB acquired Abrar Finance Berhad in 1998, and MBf Finance Berhad in 2001.
The AMMB Group traces its roots to Arab-Malaysian Development Bank Berhad which was incorporated on 5 August 1975 as a joint venture between Malaysian Industrial Development Finance Berhad, with a 55.0% shareholding, Arab Investments for Asia (Kuwait) with a 33.0% shareholding, and the National Commercial Bank (Saudi Arabia) holding 12.0%.
Mbf Finance was a major finance institution in the country which was built up by the late Loy Hean Heong from the time he purchased Malaysia Borneo Finance Corp. in 1974.
Hong Leong Bank
Hong Leong Bank merged with Wah Tat Bank Berhad and Credit Corporation (Malaysia) Berhad in 2000 as part of the government’s directive for the domestic banking institutions consolidation programme. In 2004, the finance business of Hong Leong Finance Berhad was acquired by Hong Leong Bank. Hong Leong Finance was operating in Malaysia since 1968.
Hong Leong Bank started its humble beginnings in 1905 in Kuching, Sarawak, Malaysia under the name of Kwong Lee Mortgage & Remittance Company and later in 1934, incorporated as Kwong Lee Bank Limited. On 2 February 1983, it changed its name to Malayan United Bank Berhad after the acquisition by Khoo Kay Peng of Malayan Industries Bhd, a former OCBC banker. On 26 June 1989, it changed name to MUI Bank Berhad, operating in 35 branches. In January 1994, the Hong Leong Group acquired MUI Bank and assumed its present name. In that the same year in October, Hong Leong Bank was listed on the Kuala Lumpur Stock Exchange.
Wah Tat Bank started business as Wah Tat Money Exchange and Remittances in Sibu, Sarawak during the Rajah Brooke’s reign in 1929.
EON Bank
EON Bank as of 2008 has a branch network of 136 branches and over 5,000 employees serving a customer base of more than 1,000,000. Its total assets stood at RM41,563 billion as at 30 June 2008.
Kong Ming Bank was founded by the late Datuk Sri Ling Beng Sung in Sarawak in 1965, serving mostly the Sarawak region. In 1991, the bank was acquired by the Edaran Otomobil Nasional (EON) and assumed its present name. EON was established to distribute Malaysia's first national car, Proton. In 2006?, Hong Kong-based principal investment company Primus Pacific Partners, acquired a 20% stake in EON Capital Bhd to enable it to exploit the opportunities in the Malaysian financial sector.
Oriental Bank was founded in 1937…
Affin Bank
Affin Bank commenced operations using its current name in January 2001 following a merger between the former Perwira Affin Bank Berhad and BSN Commercial (M) Berhad in August 2000. In June 2005, pursuant to the amendment to the BAFIA 1989, it again merged with the former Affin-ACF Finance Berhad. To date, Affin Bank has a network of 82 branches nationwide.
Affin Bank was established incorporated in 1975 under the name Perwira Habib Bank Malaysia Berhad. It started as a joint venture between several Malaysian parties including LTAT, Syarikat Permodalan Kebangsaan Berhad, and Habib Bank Limited of Pakistan. In 1991, the Bank embarked on a capital restructuring resulting in the emergence of Affin Holdings Berhad as its largest shareholder in 1992. It later changed its name to Perwira Affin Bank Berhad.
BSN Commercial Bank was incorporated in Malaysia on 16 July 1975 under the name of Bank Buruh (Malaysia) Berhad. It changed its name to BSN Commercial Bank after it was acquired by Bank Simpanan Nasional (BSN) from bankrupt Central Co-operative Bank (CCB) on 11 March 1995.
Alliance Bank
Alliance Financial Group (formerly known as Alliance Banking Group) was founded in early 2001 through a consolidation of 7 financial institutions, in which Multi Purpose Bank Berhad anchored the merger. Besides Multi-Purpose Bank Bhd, the other institutions were International Bank Malaysia Bhd, Bolton Finance Bhd, Bumiputra Merchant Bankers Bhd, Sabah Bank Bhd, Sabah Finance Bhd and Amanah Merchant Bank Bhd.
Multi Purpose Bank first commenced operations in 1958 as Banque de L'indochine, and later changed its name to Banque Indosuez in 1975. In 1982, Banque Indosuez was incorporated into the Malaysian French Bank Berhad. With the corporate restructuring resulting in a majority stake in the bank by Multi-Purpose Capital Holdings Berhad, it was renamed as Multi-Purpose Bank in 1996.
Sabah Bank was incorporated by the State Government of Sabah on 9 August 1977 under the name of Bank Pembangunan Sabah Berhad, as a public limited company under the Companies Act, 1965.
==
Banking Groups announced by Bank Negara
1.Malayan Banking Bhd (MayBank) :
Mayban Finance Bhd, Aseambankers Malaysia Bhd, PhileoAllied Bank Bhd, Pacific Bank Bhd, Sime Finance Bhd and Kewangan Bersatu Bhd
2. The Bumiputra – Commerce Bank Bhd
Bumiputra-Commerce Finance Bhd and Commerce International Merchant Bankers Bhd
3. RHB Bank Bhd
RHB Sakura Merchant Bankers Bhd, Delta Finance Bhd and Interfinance Bhd
4. Public Bank
Public Bank Bhd, Public Finance Bhd, Hock Hua Bank Bhd, Advance Finance Bhd and Sime Merchant Bankers Bhd
5. The Arab Malaysian Bank Bhd (AMMB)
Arab Malaysian Finance Bhd, Arab Malaysian Merchant Bank Bhd, Bank Utama Malaysia Bhd and Utama Merchant Bankers Bhd
6. Hong Leong Bank Bhd
Hong Leong Finance Bhd, Wah Tat Bank Bhd and Credit Corporation Malaysia Bhd
7. Perwira Affin Bank Bhd
Affin Finance Bhd, Perwira Affin Merchant Bankers Bhd, BSN Commercial Bank Bhd, BSN Finance Bhd and BSN Merchant Bank Bhd
8. Multi-Purpose Bank Bhd
International Bank Malaysia Bhd, Sabah Bank Berhad, MBf Finance Bhd, Bolton Finance Bhd, Sabah Finance Bhd, Bumiputra Merchant Bankers Bhd and Amanah Merchant Bank Bhd
9. EON Bank Bhd
EON Finance Bhd, Oriental Bank Bhd, City Finance Bhd, Perkasa Finance Bhd and Malaysian International Merchant Bankers Bhd
10. Southern Bank Bhd
Ban Hin Lee Bank Bhd, Cempaka Finance Bhd, United Merchant Finance Bhd, Perdana Finance Bhd and Perdana Merchant Bankers Bhd
Source: Bank Negara Malaysia
Reference
http://www.maybank2u.com.my/corporate/achievement.shtml
http://www.maybank2u.com.my/corporate/notice3.shtml
http://www.maybank2u.com.my/corporate/press_release/archives/aug30_2.shtml
http://www.cimb.com/index.php?ch=group_ch_acg&pg=group_pg_acg_oh&ac=609&tpt=cimb_group
http://www.rhb.com.my/corporate_profile/history.shtm
http://www.ambg.com.my/ambank_webmedia/file/Our%20History.pdf
http://www.hlb.com.my/ahlb/inv_his.jsp?flag=inv_his
http://www.alliancebank.com.my/ourhistory.html
1. Malayan Banking
2. Bumiputra-Commerce Bank
3. Public Bank
4. RHB Bank
5. Arab-Malaysian Bank
6. EON Bank
7. Multi-Purpose Bank
8. Hong Leong Bank
9. Affin Bank
10. Southern Bank
Maybank
Malayan Banking, or Maybank, is the largest financial services group in Malaysia boasting group assets worth RM301 billion (USD$87 billion), placing it among the top 120 banks worldwide. It has the largest network of branches with over 374 branches and owns the largest ATM network in Malaysia with over 900 ATMs. Todate, Maybank has more than 4 million deposit accounts and more than half a million loan accounts.
In August 2000, Maybank announced the merger of the commercial banking business under Phileo Allied Bank and the securities business under Phileo Securities with that of Maybank and Mayban Securities respectively.
On 1 January 2001, Maybank also announced the merger of The Pacific Bank with Maybank.
Malayan Banking was formed by Malaysian business tycoon Khoo Teck Puat with a few partners in Kuala Lumpur. It was incorporated on 31 May 1960 and commenced operations on 12 September 1960. The bank grew rapidly to more than 150 branches within 3 years, but in 1965, Khoo Teck Puat was ousted from Maybank by the Government of Malaysia under the then Deputy Prime Minister Tun Abdul Razak's administration on the pretext of pumping the bank's money into his own private firm in Singapore. The bank formed its own investment banking subsidiary, Aseambankers Malaysia Berhad (Asian & Euro-American Merchant Banking (Malaysia) Berhad) in 1973. In 1993, the bank acquired a local insurance company, Safety Life & General insurance Sdn Bhd, and relaunched it as Mayban Life Assurance to focus solely in bankassurance. In 2005, the insurance arm acquired MNI Insurance and Takaful Nasional, and subsequently rebranded its insurance companies to Eitqa in 2008.
The Pacific Bank was established in 1919 and was listed on the KLSE in August 1990 …
PhileoAllied Bank ….
CIMB Bank
CIMB Bank, the consumer banking are of CIMB Group, was rebranded to its current name in 2006 to reflect its group restructuring and the completion of the merger between Bumiputra-Commerce Bank and Southern Bank Berhad.
Bumiputra-Commerce Bank (BCB) was formed in October 1999 through the merger of Bank of Commerce (BoC) and Bumiputra Bank Malaysia Berhad (BBMB) resulting in the biggest merger in Malaysia's banking history.
Bank Bumiputra was established in 1965 in line with government initiatives to increase the Bumiputra participation in the national economy. By the 1980s, it had become the largest bank in the country in terms of assets and was the first domestic bank to have operations in New York, London, Tokyo, Bahrain and Hong Kong. In 1982, it was listed as the largest bank in Southeast Asia by Asian Finance magazine.
The history of Bank of Commerce goes back to November 1979 when Bian Chiang Bank was renamed Bank of Commerce on the acquisition by the UMNO-owned Fleet Group and co-shareholder JP Morgan. Bian Chiang Bank was established in 194 in Kuching by Wee Kheng Chiang, focusing mainly in business financing and the issuance of bills of exchange.
In November 1991, the acquisition of United Asian Bank (UAB) by Bank of Commerce was the starting point for the significant expansion of this nascent force in banking. With the acquisition, the Bank of Commerce branch network increased almost fourfold, complementing its established reputation in the corporate lending market.
United Asian Bank (UAB) was established in Kuala Lumpur in 1972 as a result of the merger of three Indian-owned banks; Indian Overseas Bank Ltd, Indian Bank Ltd and United Commercial Bank Ltd. UAB started as a joint-venture in banking between Malaysia and India, taking over the operations of the Malaysian branches of the Indian banks in 1972.
Southern Bank was founded as Southern Banking Limited in 1965 by the late Tan Sri Saw Seng Kew in Penang and quickly expanded to other parts of the country. In 1978, the bank set up operations in Kuala Lumpur and became recognised as an important player in wealth management products, credit cards and SME lending. The bank was the first in the country to set up the MEPS / ATM system used throughout Malaysia today. Southern Bank was one of the anchor banks announced in 1999, in which Southern Bank acquired Ban Hin Lee Bank. Ban Hin Lee Bank (BHLB) was also established in Penang. Formed in 1935 by “Towkay” Yeap Chor Ee, it originally focused on serving local businessmen in their trading and merchant activities. In the 1960's, it branched into real estate and house financing eventually reaching throughout Malaysia and Singapore from its headquarters in Penang, though it mainly served the Penang region.
RHB Bank
RHB Bank was formed in 1997 as a result of the merger between DCB Bank and Kwong Yik Bank. In line with the government’s plan to consolidate the banking industry, the merger between Sime Bank and RHB Bank was finalized in 1999 to form the RHB Banking Group, resulting in the third largest banking group in Malaysia. In 2003, the RHB Banking Group completed its merger with Bank Utama, offering its customers a wider network of 200 branches nationwide, 470 ATMs and new products and services, such as internet banking.
DCB Bank was established in 1966 as Development and Commercial Bank (D&C Bank) by the late Tun Sir H. S. Lee, a well known entrepreneur and the first Minister of Finance for the country. D&C Bank became the 5th largest Malaysian bank by the late 80’s. In 1990, a majority shareholding of the bank was sold to Abdul Rashid Hussain, the owner of the then largest stock brokerage firm, Rashid Hussain Bhd which was founded in 1982.
Kwong Yik Bank was established in 1913 with a start-up capital of RM300,000 at the Old Market Square in Kuala Lumpur, making it Malaya’s first local bank . In 1996, Abdul Rashid Hussain acquired a 75% stake in Kwong Yik Bank at RM2.3bil and its merger with DCB Bank in 1997 formed the RHB Bank, making it the country’s biggest ever banking merger at that time. 1999, he bought the troubled Sime Bank for RM852.2mil.
Sime Bank was initially set up in 1959 as the United Malayan Banking Corporation (UMBC) by a group of businessmen, led by Mr Chang Ming Thien, a prominent figure in the rubber industry in Malaya and Singapore. The bank was officially declared open by the then Prime Minister, Tunku Abdul Rahman in 1960 as the first commercial bank to be established in independent Malaya. In 1996, UMBC became part of the Sime Darby Group and was renamed Sime Bank Berhad.
Bank Utama (Malaysia) Berhad was first incorporated in 1976 in Sarawak as the first bumiputra-owned bank.
Public Bank
Public Bank merged with Hock Hua Bank in 1999 as part of the government’s merger programme for domestic banking institutions. With this merger, Public Bank saw an increase in its domestic branch network to 381 branches in Malaysia from 345 branches, comprising 213 commercial bank branches and 168 finance company branches.
Public Bank was founded in 1966 by Tan Sri Teh Hong Piow, who began his banking career in 1950 as a bank clerk in Overseas-Chinese Banking Corporation Ltd. and rose in rank to officer within five years. He joined Malayan Banking Berhad as Manager in 1960, and later in 1964, was promoted to the position of General Manager at the age of 34. He left Malayan Banking in 1966 to set up Public Bank. Public Bank is the largest domestic bank in Malaysia by market capitalisation and the third largest by balance sheet. The Public Bank Group employs close to 16,000 people in 2009 – with about 90% of the staff in Malaysia and the remaining spread across Hong Kong and the People’s Republic of China, Cambodia, Vietnam, Laos and Sri Lanka.
Hock Hua Bank was founded in 1952 and became Sarawak’s regional bank. With an established customer base in the state of Sarawak especially in the retail consumer and commercial sectors, Hock Hua Bank complemented and enhanced Public Bank’s similar focus and specialization in the retail and commercial segment.
AmBank
Arab-Malaysian Bank Berhad commenced operations on 1 August 1994, when the AMMB Group acquired the Malaysian operations of Security Pacific Asian Bank Limited from Bank of America (Asia) Limited. On 1 June 2005, the merger of AmBank and AmFinance took place to create AmBank (M) Berhad, the sixth largest domestic bank in the country. On 18 May 2007, AmBank Group commemorated the entry of Australia and New Zealand Banking Group Limited (ANZ Bank) as its strategic partner and major investor.
The AMMB Group began its finance business in 1977, when the Group acquired a 70.0% shareholding in Malaysian Industrial Finance Company Limited (“MIFCL”), which was later renamed Arab-Malaysian Finance Berhad (“AMFB”). In 1990, AMFB acquired First Malaysia Finance Berhad. In line with the Government’s plan to consolidate the industry, AMFB acquired Abrar Finance Berhad in 1998, and MBf Finance Berhad in 2001.
The AMMB Group traces its roots to Arab-Malaysian Development Bank Berhad which was incorporated on 5 August 1975 as a joint venture between Malaysian Industrial Development Finance Berhad, with a 55.0% shareholding, Arab Investments for Asia (Kuwait) with a 33.0% shareholding, and the National Commercial Bank (Saudi Arabia) holding 12.0%.
Mbf Finance was a major finance institution in the country which was built up by the late Loy Hean Heong from the time he purchased Malaysia Borneo Finance Corp. in 1974.
Hong Leong Bank
Hong Leong Bank merged with Wah Tat Bank Berhad and Credit Corporation (Malaysia) Berhad in 2000 as part of the government’s directive for the domestic banking institutions consolidation programme. In 2004, the finance business of Hong Leong Finance Berhad was acquired by Hong Leong Bank. Hong Leong Finance was operating in Malaysia since 1968.
Hong Leong Bank started its humble beginnings in 1905 in Kuching, Sarawak, Malaysia under the name of Kwong Lee Mortgage & Remittance Company and later in 1934, incorporated as Kwong Lee Bank Limited. On 2 February 1983, it changed its name to Malayan United Bank Berhad after the acquisition by Khoo Kay Peng of Malayan Industries Bhd, a former OCBC banker. On 26 June 1989, it changed name to MUI Bank Berhad, operating in 35 branches. In January 1994, the Hong Leong Group acquired MUI Bank and assumed its present name. In that the same year in October, Hong Leong Bank was listed on the Kuala Lumpur Stock Exchange.
Wah Tat Bank started business as Wah Tat Money Exchange and Remittances in Sibu, Sarawak during the Rajah Brooke’s reign in 1929.
EON Bank
EON Bank as of 2008 has a branch network of 136 branches and over 5,000 employees serving a customer base of more than 1,000,000. Its total assets stood at RM41,563 billion as at 30 June 2008.
Kong Ming Bank was founded by the late Datuk Sri Ling Beng Sung in Sarawak in 1965, serving mostly the Sarawak region. In 1991, the bank was acquired by the Edaran Otomobil Nasional (EON) and assumed its present name. EON was established to distribute Malaysia's first national car, Proton. In 2006?, Hong Kong-based principal investment company Primus Pacific Partners, acquired a 20% stake in EON Capital Bhd to enable it to exploit the opportunities in the Malaysian financial sector.
Oriental Bank was founded in 1937…
Affin Bank
Affin Bank commenced operations using its current name in January 2001 following a merger between the former Perwira Affin Bank Berhad and BSN Commercial (M) Berhad in August 2000. In June 2005, pursuant to the amendment to the BAFIA 1989, it again merged with the former Affin-ACF Finance Berhad. To date, Affin Bank has a network of 82 branches nationwide.
Affin Bank was established incorporated in 1975 under the name Perwira Habib Bank Malaysia Berhad. It started as a joint venture between several Malaysian parties including LTAT, Syarikat Permodalan Kebangsaan Berhad, and Habib Bank Limited of Pakistan. In 1991, the Bank embarked on a capital restructuring resulting in the emergence of Affin Holdings Berhad as its largest shareholder in 1992. It later changed its name to Perwira Affin Bank Berhad.
BSN Commercial Bank was incorporated in Malaysia on 16 July 1975 under the name of Bank Buruh (Malaysia) Berhad. It changed its name to BSN Commercial Bank after it was acquired by Bank Simpanan Nasional (BSN) from bankrupt Central Co-operative Bank (CCB) on 11 March 1995.
Alliance Bank
Alliance Financial Group (formerly known as Alliance Banking Group) was founded in early 2001 through a consolidation of 7 financial institutions, in which Multi Purpose Bank Berhad anchored the merger. Besides Multi-Purpose Bank Bhd, the other institutions were International Bank Malaysia Bhd, Bolton Finance Bhd, Bumiputra Merchant Bankers Bhd, Sabah Bank Bhd, Sabah Finance Bhd and Amanah Merchant Bank Bhd.
Multi Purpose Bank first commenced operations in 1958 as Banque de L'indochine, and later changed its name to Banque Indosuez in 1975. In 1982, Banque Indosuez was incorporated into the Malaysian French Bank Berhad. With the corporate restructuring resulting in a majority stake in the bank by Multi-Purpose Capital Holdings Berhad, it was renamed as Multi-Purpose Bank in 1996.
Sabah Bank was incorporated by the State Government of Sabah on 9 August 1977 under the name of Bank Pembangunan Sabah Berhad, as a public limited company under the Companies Act, 1965.
==
Banking Groups announced by Bank Negara
1.Malayan Banking Bhd (MayBank) :
Mayban Finance Bhd, Aseambankers Malaysia Bhd, PhileoAllied Bank Bhd, Pacific Bank Bhd, Sime Finance Bhd and Kewangan Bersatu Bhd
2. The Bumiputra – Commerce Bank Bhd
Bumiputra-Commerce Finance Bhd and Commerce International Merchant Bankers Bhd
3. RHB Bank Bhd
RHB Sakura Merchant Bankers Bhd, Delta Finance Bhd and Interfinance Bhd
4. Public Bank
Public Bank Bhd, Public Finance Bhd, Hock Hua Bank Bhd, Advance Finance Bhd and Sime Merchant Bankers Bhd
5. The Arab Malaysian Bank Bhd (AMMB)
Arab Malaysian Finance Bhd, Arab Malaysian Merchant Bank Bhd, Bank Utama Malaysia Bhd and Utama Merchant Bankers Bhd
6. Hong Leong Bank Bhd
Hong Leong Finance Bhd, Wah Tat Bank Bhd and Credit Corporation Malaysia Bhd
7. Perwira Affin Bank Bhd
Affin Finance Bhd, Perwira Affin Merchant Bankers Bhd, BSN Commercial Bank Bhd, BSN Finance Bhd and BSN Merchant Bank Bhd
8. Multi-Purpose Bank Bhd
International Bank Malaysia Bhd, Sabah Bank Berhad, MBf Finance Bhd, Bolton Finance Bhd, Sabah Finance Bhd, Bumiputra Merchant Bankers Bhd and Amanah Merchant Bank Bhd
9. EON Bank Bhd
EON Finance Bhd, Oriental Bank Bhd, City Finance Bhd, Perkasa Finance Bhd and Malaysian International Merchant Bankers Bhd
10. Southern Bank Bhd
Ban Hin Lee Bank Bhd, Cempaka Finance Bhd, United Merchant Finance Bhd, Perdana Finance Bhd and Perdana Merchant Bankers Bhd
Source: Bank Negara Malaysia
Reference
http://www.maybank2u.com.my/corporate/achievement.shtml
http://www.maybank2u.com.my/corporate/notice3.shtml
http://www.maybank2u.com.my/corporate/press_release/archives/aug30_2.shtml
http://www.cimb.com/index.php?ch=group_ch_acg&pg=group_pg_acg_oh&ac=609&tpt=cimb_group
http://www.rhb.com.my/corporate_profile/history.shtm
http://www.ambg.com.my/ambank_webmedia/file/Our%20History.pdf
http://www.hlb.com.my/ahlb/inv_his.jsp?flag=inv_his
http://www.alliancebank.com.my/ourhistory.html
Wednesday, November 11, 2009
FRS 139 and its bearing on transfer pricing
Wednesday November 11, 2009
COME Jan 1, the Malaysian Accounting Standards Board’s Financial Reporting Standard 139 – Financial Instruments: Recognition and Measurement (FRS 139) will finally be implemented in Malaysia. Four years since its implementation date was set, it is still considered uncharted waters for many corporations. This is not surprising since FRS 139 is considered the “mother” of all standards by some.
Under FRS 139, many financial assets and financial liabilities are required to be carried at fair value. This will have a significant impact on loans between related parties, which generally can be interest-free or carry interest rates which are well below the market rates.
The definition of fair value under FRS 139 is “the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction”. Paragraph 48A of FRS 139 further states that “The best evidence of fair value is quoted prices in an active market ... Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties, if available ... ”
Interestingly, it loosely echoes the Organisation for Economic Cooperation and Development’s guide for an arm’s length interest rate:
“... an arm’s length interest rate shall be an interest rate which was charged, or would have been charged, at the time the financial assistance was granted, to uncontrolled transactions with or between independent persons under similar circumstances.”
It could well imply that the measurement of related party loans initially at their respective fair values and subsequently at amortised cost using the effective interest method, may be deemed to be in line with the arm’s length principle since market interest rate is used.
Following the introduction of Section 140A of the Income Tax Act 1967 (ITA) which basically requires taxpayers to ensure that their related party transactions are carried out at arm’s length, would this then mean that an assessment of the fair value of related party loans by the auditors under FRS 139 can serve as contemporaneous documentation for transfer pricing purposes?
The corporate taxpayers do not have an option as to whether to accept the fair value accounting treatment in their financial statements – it is a requirement of FRS 139 and also the Companies Act 1965.
Further, requiring corporations to measure related-party loans initially at their respective fair value may not only affect the income statement. However, for certain, the subsequent amortisation amounts, measured at amortised costs, will represent accounting interest income or interest expense in the income statement. Book entries are generally not the actual receipts or payments, and in tax terms are not real costs or income earned.
At this point, it would be helpful to look at what other tax jurisdictions have done under similar circumstances. Hong Kong, Singapore and New Zealand tax authorities have issued departmental interpretation and practice notes on the income tax implications arising from the adoption of IAS 39 or its local equivalent.
While in general most tax authorities require the tax treatments to follow or be consistent with the accounting treatment under FRS 139 as far as possible, they also acknowledge that the revenue versus capital consideration would need to be considered in determining the tax treatment.
As an example, in Singapore, the tax adjustment is such that the discount on the interest-free loan recognised in the income statement will not be allowed as a tax deduction and the interest income recorded will not be taxed because these are merely book entries.
The auditor’s primary role is still that of expressing an opinion as to the true and fair view of the financial statements. This means that corporations would still need to provide auditors with supporting evidence of the fair value of the related-party loans to enable auditors to express an opinion.
The fair value measurement rests on the rebuttable presumption that effective interest rates used in the amortised cost method is the market interest rate and is thus, at arm’s length. While this is generally true, loan arrangements made with unrelated parties in the current business environment should be considered as arm’s length, although they may not carry the same market interest rates due to various factors such as level of credit risks, tenure, size of collaterals, etc.
So, what would corporations provide to the auditors? Section 140A of the ITA provides that the acquisition or supply of property or services with related parties be conducted at arm’s length, failing which the Director General of Inland Revenue may adjust the transfer prices.
Since 2003, transfer pricing guidelines have been issued, setting out the extent of information required in a transfer pricing report. The guidelines also stipulate that it is a pre-requisite that a comparable analysis (benchmarking) be carried out to substantiate the arm’s length pricing.
To ensure that corporations provide auditors with the correct arm’s length and market rate interest for related-party loans in the FRS 139 measurement of fair value, it is very likely that a comparable analysis would need to be carried out. This should then provide the setting not only for the auditors but for the tax authorities in support of the argument for arm’s length. Any fair value book entries put through the financial statements should then be met with minimum queries from the tax authorities.
http://biz.thestar.com.my/news/story.asp?file=/2009/11/11/business/5084831&sec=business
COME Jan 1, the Malaysian Accounting Standards Board’s Financial Reporting Standard 139 – Financial Instruments: Recognition and Measurement (FRS 139) will finally be implemented in Malaysia. Four years since its implementation date was set, it is still considered uncharted waters for many corporations. This is not surprising since FRS 139 is considered the “mother” of all standards by some.
Under FRS 139, many financial assets and financial liabilities are required to be carried at fair value. This will have a significant impact on loans between related parties, which generally can be interest-free or carry interest rates which are well below the market rates.
The definition of fair value under FRS 139 is “the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction”. Paragraph 48A of FRS 139 further states that “The best evidence of fair value is quoted prices in an active market ... Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties, if available ... ”
Interestingly, it loosely echoes the Organisation for Economic Cooperation and Development’s guide for an arm’s length interest rate:
“... an arm’s length interest rate shall be an interest rate which was charged, or would have been charged, at the time the financial assistance was granted, to uncontrolled transactions with or between independent persons under similar circumstances.”
It could well imply that the measurement of related party loans initially at their respective fair values and subsequently at amortised cost using the effective interest method, may be deemed to be in line with the arm’s length principle since market interest rate is used.
Following the introduction of Section 140A of the Income Tax Act 1967 (ITA) which basically requires taxpayers to ensure that their related party transactions are carried out at arm’s length, would this then mean that an assessment of the fair value of related party loans by the auditors under FRS 139 can serve as contemporaneous documentation for transfer pricing purposes?
The corporate taxpayers do not have an option as to whether to accept the fair value accounting treatment in their financial statements – it is a requirement of FRS 139 and also the Companies Act 1965.
Further, requiring corporations to measure related-party loans initially at their respective fair value may not only affect the income statement. However, for certain, the subsequent amortisation amounts, measured at amortised costs, will represent accounting interest income or interest expense in the income statement. Book entries are generally not the actual receipts or payments, and in tax terms are not real costs or income earned.
At this point, it would be helpful to look at what other tax jurisdictions have done under similar circumstances. Hong Kong, Singapore and New Zealand tax authorities have issued departmental interpretation and practice notes on the income tax implications arising from the adoption of IAS 39 or its local equivalent.
While in general most tax authorities require the tax treatments to follow or be consistent with the accounting treatment under FRS 139 as far as possible, they also acknowledge that the revenue versus capital consideration would need to be considered in determining the tax treatment.
As an example, in Singapore, the tax adjustment is such that the discount on the interest-free loan recognised in the income statement will not be allowed as a tax deduction and the interest income recorded will not be taxed because these are merely book entries.
The auditor’s primary role is still that of expressing an opinion as to the true and fair view of the financial statements. This means that corporations would still need to provide auditors with supporting evidence of the fair value of the related-party loans to enable auditors to express an opinion.
The fair value measurement rests on the rebuttable presumption that effective interest rates used in the amortised cost method is the market interest rate and is thus, at arm’s length. While this is generally true, loan arrangements made with unrelated parties in the current business environment should be considered as arm’s length, although they may not carry the same market interest rates due to various factors such as level of credit risks, tenure, size of collaterals, etc.
So, what would corporations provide to the auditors? Section 140A of the ITA provides that the acquisition or supply of property or services with related parties be conducted at arm’s length, failing which the Director General of Inland Revenue may adjust the transfer prices.
Since 2003, transfer pricing guidelines have been issued, setting out the extent of information required in a transfer pricing report. The guidelines also stipulate that it is a pre-requisite that a comparable analysis (benchmarking) be carried out to substantiate the arm’s length pricing.
To ensure that corporations provide auditors with the correct arm’s length and market rate interest for related-party loans in the FRS 139 measurement of fair value, it is very likely that a comparable analysis would need to be carried out. This should then provide the setting not only for the auditors but for the tax authorities in support of the argument for arm’s length. Any fair value book entries put through the financial statements should then be met with minimum queries from the tax authorities.
http://biz.thestar.com.my/news/story.asp?file=/2009/11/11/business/5084831&sec=business
Tuesday, November 10, 2009
New Islamic banking licences under process
Tuesday November 10, 2009
Keen interest to set up Islamic banking operations in Malaysia
KUALA LUMPUR: The applications for two new Islamic banking licences, which are part of the financial sector liberalisation plan, are still being processed, according to Deputy Finance Minister Datuk Dr Awang Adek Hussin.
“Bank Negara at the moment is processing the applications and making the necessary evaluations. The decision will be made by the central bank in the best interest of the financial sector.
“I was informed that there have been quite a number of applications as well as keen interest from other players to set up Islamic banking operations in the country,” he told a press briefing in conjunction with the Islamic Financial Planning and Wealth Management Conference 2009 (IFPC 2009) here.
In April, the Government announced a financial sector liberalisation plan that included the issuance of licences for seven banking and two takaful players from this year until 2011. It also, among others, eased foreign ownership rules by increasing limits of equity ownership to 70% from 49% for investment banks, Islamic banks, insurance companies and takaful operators.
From left: Financial Planning Association of Malaysia president Wong Boon Choy, Organising Committee IFPC 2009 chairman Datuk Ibrahim Muhammad, Datuk Dr Awang Adek Hussin and Islamic Banking and Finance Institute Malaysia CEO Datuk Dr Adnan Alias at the opening of the IFPC 2009 conference on Monday.
On whether there would be further liberalisation in the financial sector, Awang Adek said it would be done in stages and more would come over time.
“When the time is right and we think we are ready for the next step, we will take it. I don’t think this is the end of liberalisation,” he said.
He noted that the Islamic banking sector had registered double-digit growth over the past eight
years with an average annual growth rate of 20% in terms of assets.
As at end-June, the share of Islamic banking assets in the banking sector had expanded to 19% from 6.9% in 2000. Given the growing maturity of the local bond market, Awang Adek said it was timely that Malaysia offered its own “brand proposition”.
This was to distinguish foreign currency-denominated bonds and sukuk originating from the country in global capital markets, he said.
He added that Petroliam Nasional Bhd had become the largest issuer of US dollar-denominated bonds and sukuk in Asia ex-Japan with the issue of US$3bil worth of bonds and US$1.5bil of sukuk.
Awang Adek also called on Islamic and conventional advisors, including financial planners, to capitalise on the potential growth of syariah-compliant financial sectors, such as the financing-protection segment, where previously Muslims were not able to participate due to a lack of syariah-compliant products.
The increasing demand for Islamic financial products necessitates financial planners to be equipped with the knowledge of syariah requirements of Islamic finance and such expertise was a potential area for growth, he said.
http://biz.thestar.com.my/news/story.asp?file=/2009/11/10/business/5074249&sec=business
Keen interest to set up Islamic banking operations in Malaysia
KUALA LUMPUR: The applications for two new Islamic banking licences, which are part of the financial sector liberalisation plan, are still being processed, according to Deputy Finance Minister Datuk Dr Awang Adek Hussin.
“Bank Negara at the moment is processing the applications and making the necessary evaluations. The decision will be made by the central bank in the best interest of the financial sector.
“I was informed that there have been quite a number of applications as well as keen interest from other players to set up Islamic banking operations in the country,” he told a press briefing in conjunction with the Islamic Financial Planning and Wealth Management Conference 2009 (IFPC 2009) here.
In April, the Government announced a financial sector liberalisation plan that included the issuance of licences for seven banking and two takaful players from this year until 2011. It also, among others, eased foreign ownership rules by increasing limits of equity ownership to 70% from 49% for investment banks, Islamic banks, insurance companies and takaful operators.
From left: Financial Planning Association of Malaysia president Wong Boon Choy, Organising Committee IFPC 2009 chairman Datuk Ibrahim Muhammad, Datuk Dr Awang Adek Hussin and Islamic Banking and Finance Institute Malaysia CEO Datuk Dr Adnan Alias at the opening of the IFPC 2009 conference on Monday.
On whether there would be further liberalisation in the financial sector, Awang Adek said it would be done in stages and more would come over time.
“When the time is right and we think we are ready for the next step, we will take it. I don’t think this is the end of liberalisation,” he said.
He noted that the Islamic banking sector had registered double-digit growth over the past eight
years with an average annual growth rate of 20% in terms of assets.
As at end-June, the share of Islamic banking assets in the banking sector had expanded to 19% from 6.9% in 2000. Given the growing maturity of the local bond market, Awang Adek said it was timely that Malaysia offered its own “brand proposition”.
This was to distinguish foreign currency-denominated bonds and sukuk originating from the country in global capital markets, he said.
He added that Petroliam Nasional Bhd had become the largest issuer of US dollar-denominated bonds and sukuk in Asia ex-Japan with the issue of US$3bil worth of bonds and US$1.5bil of sukuk.
Awang Adek also called on Islamic and conventional advisors, including financial planners, to capitalise on the potential growth of syariah-compliant financial sectors, such as the financing-protection segment, where previously Muslims were not able to participate due to a lack of syariah-compliant products.
The increasing demand for Islamic financial products necessitates financial planners to be equipped with the knowledge of syariah requirements of Islamic finance and such expertise was a potential area for growth, he said.
http://biz.thestar.com.my/news/story.asp?file=/2009/11/10/business/5074249&sec=business
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