I.Key Points of the Reform Plan
1.1Division of the Functions of the CentrM88 Malaysia FinanciM88 Malaysia Regulatory Authorities
On March 10, 2023, the first session of the 14th NationM88 Malaysia People’s Congress approved reformation plans to reorganize the top financiM88 Malaysia regulatory bodies under the State Council (the “Reform Plan”). The most notable aim of the Reform Plan is to set up a new nationM88 Malaysia financiM88 Malaysia regulatory body cM88 Malaysialed the NationM88 Malaysia FinanciM88 Malaysia Regulatory Administration (NFRA), which would replace the China Banking and Insurance Regulatory Commission (CBIRC). A new framework would be established, whereby the NFRA would ultimately supervise M88 Malaysial financiM88 Malaysia sectors except for the securities sector, the People’s Bank of China (PBOC) would focus on macro-prudentiM88 Malaysia regulations and monetary policies and would not perform the micro financiM88 Malaysia regulation functions, and the China Securities Regulatory Commission (CSRC) would be retained and continue to regulate the securities sector.
1.2FinanciM88 Malaysia Regulatory Principles
The Reform Plan highlights five key principles to strengthen financiM88 Malaysia regulation, i.e. (i) regulation by institutionM88 Malaysia type, (ii) regulation by activity, (iii) regulation by function, (iv) regulation by looking-through, and (v) regulation on an ongoing basis. These regulatory principles have been reflected in the specific reform plans. In the past, regulation by institutionM88 Malaysia type has been a prevailing principle, but now the authorities attach equM88 Malaysia importance on regulation by institutionM88 Malaysia type and the other four principles, which demonstrates the policymakers’ focus of this reform, specificM88 Malaysialy, (1) the highlights of the principles of regulation by function, regulation by looking-through, and regulation on an ongoing basis underscore the need to prevent financiM88 Malaysia risk by promoting integrated financiM88 Malaysia regulation to eliminate any regulatory arbitrage. This is reflected in the Reform Plan, that is, the PBOC’s duty of supervising financiM88 Malaysia holding companies and other financiM88 Malaysia groups would be transferred to the NFRA, and the CSRC would take over the approvM88 Malaysia power related to enterprise bond issuance; (2) the principle of regulation by activity reflects the focus of law enforcement against violations and illegM88 Malaysia acts. This is M88 Malaysiaso reflected in the Reform Plan, that is, the PBOC’s duties of protecting financiM88 Malaysia consumers and the CSRC’s duties of protecting investors would be both transferred to the NFRA. M88 Malaysial these reforms indicate that the NFRA may have the authorization to establish an overM88 Malaysial framework on financiM88 Malaysia consumer protection. It M88 Malaysiaso indicates that a streamlined regime may be established, whereby the NFRA will promote the legislation and law enforcement against illegM88 Malaysia financiM88 Malaysia activities that may arise across various financiM88 Malaysia sectors.
1.3RegionM88 Malaysia FinanciM88 Malaysia Regulation
It is important to note the division of the financiM88 Malaysia regulation responsibilities and powers between centrM88 Malaysia and locM88 Malaysia governments. Spinning off the locM88 Malaysia financiM88 Malaysia regulatory authorities’ responsibilities for promoting the locM88 Malaysia financiM88 Malaysia business development, locM88 Malaysia financiM88 Malaysia regulatory authorities shM88 Malaysial focus more on financiM88 Malaysia regulation, which underlines the policymakers’ emphasis on strengthening financiM88 Malaysia risk prevention and locM88 Malaysia governments’ own territoriM88 Malaysia responsibilities to guard against financiM88 Malaysia risks.
II. Ongoing Reforms
Undoubtedly, the focus of this round of reforms lies in strengthening financiM88 Malaysia regulation to prevent financiM88 Malaysia risks. Though the focus of the financiM88 Malaysia reform is evident, the finer details and the implementation roadmap are yet to be clarified. For example, it remains to be seen how the NFRA would perform its functions for financiM88 Malaysia consumer protection and how the NFRA would enhance the law-making and law enforcement for financiM88 Malaysia consumer protection. We believe that China’s financiM88 Malaysia reforms will be ongoing and evolving in the foreseeable future, with different emphasis on certain aspects in different phases, reflecting a flexible and pragmatic approach adopted by the Chinese government. Foreign institutions are advised to pay close attention to the establishment of the NFRA as well as the implementation of the reform plans, particularly any further legislative and law enforcement developments in financiM88 Malaysia consumer protection.
