Bank Negara Malaysia and the Securities Commission wish to announce the completion of the rationalization of the discount house industry and the status of the transformation of merchant banks, stockbroking companies and universal brokers into investment banks.

With the completion of the rationalization of the discount houses, all discount houses will cease operations by 31 December 2006. All discount houses which belong to banking groups have now been absorbed by the merchant banks within their banking groups. KAF Discounts Berhad has obtained a merchant banking licence from the Minister of Finance on 26 December 2006 and will be given 6 months to complete its transformation exercise into an investment bank. With the merchant banking licence, KAF Discounts Berhad will continue to accept deposits and undertake activities of a licensed merchant bank pursuant to the Banking and Financial Institutions Act 1989. For Abrar Discounts Berhad, it will cease to operate as a discount house with effect from 31 December 2006. In this regard, the depositors of Abrar Discounts Berhad are assured that all their deposits will be honoured.

With respect to the rationalisation of merchant banks and stockbroking companies within the banking groups, all the entities concerned have obtained the necessary approvals to transform into investment banks. Most are expected to complete the legal process and transform into investment banks by end-2006, while the remaining merchant banks will do so by first quarter 2007.

K & N Kenanga Berhad, Hwang-DBS Securities Berhad and OSK Securities Berhad have also been granted merchant banking licences by the Minister of Finance, having received the necessary approvals to transform into investment banks. The remaining universal brokers are still in the process of meeting the necessary pre-requisites to become investment banks.

Bank Negara Malaysia and Securities Commission
29 December 2006