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Banking Industry: More Regulatory Sandboxes

Bank Negara Malaysia (BNM) has released details of the framework for Malaysia’s regulatory sandbox. The finalisation of the framework follows a consultation which began in July.

Under the sandbox framework BNM may consider granting regulatory exemptions to applicants for the purpose of testing an innovative product, service or solution for a period of up to 12 months.

Applicants wishing to apply for the sandbox should have innovations which are ready for testing and have the potential to:

  • improve the accessibility, efficiency, security and quality of financial services;

  • enhance the efficiency and effectiveness of Malaysian financial institutions’ management of risks; or

  • address gaps in or open up new opportunities for financing or investments in the Malaysian economy.

Applicants must also identify the potential risks to financial institutions and consumers that may arise from testing and propose appropriate safeguards.

Upon the completion of the testing, BNM will decide whether to allow the product, service or solution to be introduced in the market on a wider scale. The sandbox is open to FinTech companies and financial institutions and will commence immediately.

The BNM sandbox framework is similar to the UK’s and generally has more favourable terms than those proposed by the Australian Securities and Investments Commission (ASIC). The BNM participants have the ability to propose consumer safeguards appropriate to their business while ASIC has proposed specific limitations that will apply to all participants such as investment and client caps and types of services that may be offered. BNM’s testing timeframe of 12 months is double that proposed by ASIC and there is no requirement to be sponsored by a third party. However, ASIC is proposing a notification process rather than an application process for FinTech businesses wishing to participate which, depending on eligibility requirements, may be a less onerous process for FinTech businesses.

BNM’s release of its sandbox framework follows sandbox announcements last month from Thailand and Hong Kong.

Copyright 2019 K & L Gates

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About this Author

Jim Bulling, KL Gates, financial services lawyer, funds management attorney
Partner

Mr. Bulling's practise focuses on banking and financial services and he acts for a range of entities in the financial services and funds management industry. His clients include Australian and international investment managers, banks, trustees of superannuation funds, wholesale and retail investment trusts, funds management companies and financial planning groups.

His main areas of focus include banking and financial product disclosure issues, financial services compliance issues, financial product distribution issues and superannuation and...

61-3-9640-4338
Michelle Chasser, KL Gates, financial services compliance lawyer, disclosure obligations attorney

Ms. Chasser is a corporate and regulatory lawyer with a focus on the superannuation and financial services industries. Ms. Chasser advises clients on a range of issues including compliance with Australian regulatory and licensing requirements, financial services compliance issues and disclosure obligations.

Ms. Chasser's clients include superannuation fund trustees, banks, wholesale and retail fund managers, as well as financial service providers.

61-3-9205-2086