Bank Negara Malaysia announces that the minimum capital funds unimpaired by losses for domestic banking groups would be increased to RM2 billion. For purposes of calculating the capital funds of a domestic banking group, only the capital funds of the commercial bank, finance company and merchant bank would be aggregated.

The minimum capital funds for foreign-owned banking institutions would be increased to RM300 million.

The new capital funds requirement will be gazetted pursuant to Section 14 of the Banking and Financial Institutions Act 1989. All domestic banking groups and foreign-owned banking institutions have until 31 December 2001 to comply with the new capital requirement.

The increase in minimum capital funds is in line with the overall objective to strengthen the resilience of banking institutions and to enhance the level of capitalisation of the players in the domestic market. Given the rapid pace of development in the financial markets, it is crucial that banking institutions are strongly capitalised to better withstand challenges arising from a more competitive and liberalised economic environment and undertake investment in information technology. In addition, the stronger capital position would place banking institutions in a better position to meet the demands of the new economy. Bank Negara Malaysia will closely monitor to ensure that all banking institutions comply with the minimum capital requirement.