An Overview of the Malaysian Banking Sector
FINA0501 ASIAN FINANCIAL INSTITUTIONS TERM PAPER LEE JUNHONG, JEREMY 2010540826

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Introduction Malaysia has been an important player in the Asian economy since the early days of independence, and even before that, as a British protectorate. It is currently the third largest economy in Southeast Asia, and is the 28th largest economy in the world in terms of purchasing power parity according to the World Bank. Malaysia has also successfully diversified its role by focusing her economy on both the traditional sphere of primary agricultural produce as well as being a hub for light manufacturing in consumer durables and electronics. Strong economic planning and farsighted vision by both the government and central bank has been instrumental in maintaining a strong growth rate of her economy; her combined year on year growth since independence in 1957 has averaged 6.6%, which is no doubt a stellar record and one of the highest in Asia. The financial institutions and their functions have been instrumental in this success, and this paper will strive to highlight the strengths and weaknesses, as well as a general overview of the Malaysian banking sector.

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Historical background The earliest beginnings of the banking sector in Malaysia dates back to the early 19th Century under British influence and the expatriate (mainly British) merchant communities. The Straits Settlements comprising of Singapore, Malacca and Penang were administered as a Crown Colony in 1867, and they became an important trading post in the Empire trade between the East and West. By the mid-19th Century, Singapore had already grown to be the dominant port in the Malay Archipelago. To meet the needs of the fledging economic trade in cash crops and mining, the British administration had given licenses for the establishment of branch offices of the