Compliance Risks Loom Large in Malaysia’s Finance Sector
As the business landscape continues to evolve, financial institutions in Malaysia are facing a myriad of compliance risks that threaten their very existence. The country’s regulatory bodies have been working tirelessly to mitigate these risks, but the stakes remain high.
Central Counterparties: A Key Role in Compliance
At the heart of the issue is Bursa Malaysia Securities Clearing (BMSC) and Bursa Malaysia Derivatives Clearing (BMDC), two clearing houses licensed by the Securities Commission of Malaysia under the Capital Market Services Act 2007. These entities have been approved to operate as central counterparties, a role that carries immense responsibility.
Commitment to Observing Principles for Financial Market Infrastructures
Bursa Malaysia has committed to observing the Principles for Financial Market Infrastructures (PFMI) published by the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO). This move is aimed at ensuring the stability and integrity of the country’s financial system.
Compliance Function: A Critical Role in Risk Management
The compliance function within Bursa Malaysia plays a critical role in managing and providing reasonable assurance that the company’s activities are in line with applicable rules, laws, regulatory requirements, code of ethics, business conduct, internal policies, and procedures. This includes:
- Monitoring potential compliance risks to ensure timely intervention
- Reporting on compliance risks to stakeholders
Business Continuity Management: A Framework for Operational Disruptions
In addition, Bursa Malaysia has established a Business Continuity Management (BCM) framework to prepare for operational disruptions. The BCM process is designed in accordance with the CPMI IOSCO Principles for Financial Market Infrastructure guideline, principle 17 Operational Risk. This initiative aims to:
- Minimize the impact of service disruptions
- Ensure continuity of critical operations
Remaining Vigilant and Proactive
As the financial landscape continues to evolve, it is crucial that Malaysia’s regulatory bodies and financial institutions remain vigilant and proactive in addressing compliance risks. The stakes are high, and any lapses can have far-reaching consequences for the country’s economy and reputation.