Bank Negara Malaysia
Infobox Central bank
Central Bank of Malaysia
bank_name_in_local = Bank Negara Malaysia ms icon
image_1 = Central Bank of Malaysia headquarters, Kuala Lumpur.jpg
image_title_1 = The Central Bank of Malaysia headquarters in Kuala Lumpur.
bank_of = MYS
Kuala Lumpur, Malaysia
Zeti Akhtar Aziz
leader_title = Governor
January 26, 1959
currency_iso = MYR
website = [http://www.bnm.gov.my/ bnm.gov.my]
"Bank Negara Malaysia" or BNM is the
Malaysian central bank. Its headquarters is located in Kuala Lumpur, the capital of Malaysia, and was established on January 26, 1959(as the Central Bank of Malaya or "Bank Negara Tanah Melayu") to issue currency, act as banker and adviser to the Government and influence the country's credit situation.
Since its inception there have been seven governors.
Bank Negara Malaysia was established on 26 Janury 1959 under Central Bank of Malaya Ordinance, 1958.cite news| title=BNM: About the bank| url= http://www.bnm.gov.my/index.php?ch=7&pg=1&ac=1| publisher=Bank Negara Malaysia| accessdate=2008-07-26] With it founding, it was to meet 5 objectives:-
* To issue currency, the
Malaysian Ringgitand keep reserves safeguarding the value of the currency;
* To act as a banker and financial adviser to the Government;
* To promote monetary stability and a sound financial structure;
* To promote the reliable, efficient and smooth operation of national payment and settlement systems and to ensure that the national payment and settlement systems policy is directed to the advantage of Malaysia
* To influence the credit situation to the advantage of the country.
Hence, with the following objective, the bank was created to safe guard the
economy of Malaysia. The bank's broader goals are promoting economic growth in Malaysia, a high level of employment, maintaining price stability and a reasonable balance in the country's international payments position, eradicating poverty and restructuring society.
In 1985, following the "Plaza meeting" of G-5 finance ministers in
New York City, the US dollar fell sharply causing major losses in Bank Negara's dollar reserves. The bank responded by starting a program of aggressive speculative trading to make up these losses (Millman, p. 226). Jaffar Hussein, the Bank Negara Governor at the time, referred to this strategy as "honest-to-God trading" in a December 1988 speech in New Delhi.
In the late 1980s, Bank Negara under Governor Jaffar Hussein, was a major player in the forex market. Its activities caught the attention of many; initially, Asian markets came to realize the influence Bank Negara had on the direction of forex market.
Alan Greenspanacting the Federal Reserve chairman later realized Bank Negara's massive speculation activities and requested the Malaysian central bank to stop it.
BNM sold between $500 million on
September 21, 1990- $1 billion worth of pound sterlings in a short period, driving the pound down 4 cents on the dollar (Millman, p. 228). In response, bankers began front runningBank Negara's orders. Two years later, Bank Negara attempted to defend the value of the British pound against attempts by George Sorosand others to devalue the pound sterling. George Soros won and Bank Negara reportedly suffered losses of more than USD $4 billion. [http://www.asiaweek.com/asiaweek/98/0925/biz5.html] Bank Negara lost an additional $2.2 billion in speculative trading a year later (Millman, p. 229). By 1994, the bank became technically insolvent and was bailed out by the Malaysian Finance Ministry (Millman, p. 229).
In 1998, Bank Negara pegged 3.80 ringgit to a US dollar after the ringgit substantially depreciated during the 1997 Asian financial crisis. In July 2005, the central bank abandoned
fixed exchange rateregime in favor of managed floating exchange ratesystem an hour after China floated its own currency. This resulted in capital flightof more than USD 10 billion, thought to be due to the repatriation of speculative funds that entered the country in anticipation of the abandonment of the peg: - Bank Negara's foreign exchange reserves increased by USD24 billion in the one year period between July 2004 and July 2005 (see table below). During this period there was widespread believe that the ringgit was undervalued and that if the peg was removed, the ringgit would appreciate.
Bank Negara continues to run negative interest rate differential to USD. The ringgit has appreciated gradually since the peg was abandoned and as at
28 May 2007, it traded at around 3.40 to the US dollar. Malaysia's foreign exchange reserves have increased steadily since the initial capital flight, and as at 31 March 2007 the reserves stood at approximately USD88 billion, which is approximately USD10 billion more than the reserves just prior to the peg being abandoned.
31 July 2007the Malaysian reserves stood at approximately USD98.5 billion which is equivalent to RM340.1 billion. The figure increase to USD 101.3 billion in 31 December 2007which is equivalent to RM335.7 billion. Bank Negara's international reserves increase further 15 days later to USD 104.3 billion or MYR 345.4 billion [ [http://biz.thestar.com.my/news/story.asp?file=/2008/1/23/business/20092385&sec=business International reserves at US$104bil] ] [ [http://www.btimes.com.my/Current_News/BTIMES/Wednesday/BizBriefs/bnrsv.xml/Article/ Bank Negara reserves at RM345.4b] ] .
Bank Negara's headquarters is located at Jalan Dato' Onn in Kuala Lumpur. A
KTM Komuterstation with the same name is located next door. An overhead crossing over Jalan Kuching and the Gombak Riverallows pedestrians access to the Bandaraya LRT stationand the rest of downtown Kuala Lumpur.
Bank Negara had previously maintained branches in each of the country's . Most of them were closed in the 1990s when retail banks began taking over most of the counter services. There are still branches in
Penang, Johor Bahru, Kota Kinabalu, Kuchingand Kuala Terengganu, while the Shah Alambranch was converted into a currency distribution and processing centre. Bank Negara also retains representative offices in Londonand New York City, and a personnel training centre in Petaling Jaya, Malaysia.
Powers of the bank
The bank is endowed with certain powers through establishment of legal Acts by the
Parliament of Malaysiato help fulfill its objectives. New legislation are created and current legislation is amended to reflect the needs of the time and future.
Exchange Control Act 1953
Allows the bank to confer powers, and impose duties and restrictions in relation to gold, currency, payments, securities, debts, and the import, export, transfer and settlement of property, and for purposes connected with the matters aforesaid.cite news|title=BNM Administered Legislation"| url= http://www.bnm.gov.my/index.php?ch=14&pg=17&ac=481&full=1| accessdate=2008-07-28| publisher=Bank Negara Malaysia]
Central Bank of Malaysia Act 1958
Islamic Banking Act 1983
Banking and Financial Institutions Act 1989
Takaful Act 1984
Insurance Act 1996
Money-Changing Act 1998
Anti-Money Laundering and Anti-Terrorism Financing Act 2001
Development Financial Institutions Act 2002
Payment Systems Act 2003
* Gregory J. Millman, Around the World on a Trillion Dollars a Day, Bantam Press, London and New York, 1995.
* en icon [http://www.bnm.gov.my/ Bank Negara Malaysia official site]
* [http://www.islamicbankinglaw.com Islamic Banking Law]
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