Essay on The Malaysia Financial System

Essay on The Malaysia Financial System

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The Malaysia financial system is structure into two major categories it is financial institution and financial market. But I will cover about financial institution only. The role of financial institutions is to resolve the problems caused by market imperfections. Without financial institutions the information and transaction costs of financial markets transactions would be excessive. Under financial institutions there are two type first banking system and non-bank financial intermediaries. Financial institution in banking system like Bank Negara Malaysia (BNM), commercial banks, finance companies, merchant banks, Islamic bank, and other. While in non bank financial intermediaries there have Provident and Pension Funds (PPFs), insurance companies and Takaful operators, development finance institutions, saving institutions, unit trusts, pilgrims fund board and etc.
Risk can be defined as the variability or volatility of unexpected occur or outcomes. Financial institutions face some of the risk in their daily activities. Financial risks happen when there have the possibility to losses in the financial markets because of the movements in the market. Financial risk can be systematic risk and unsystematic risk. Systematic risk when involved with economy or overall market. While the unsystematic risk related with company, assets or firm. Three types of risk clarify by Oldfield and Santomero in 1957. It is the risk can be eliminate, can be transfer and risk can be manage by the institution. In financial risk there are two types of risk. It is market risk and credit risk. In non financial risk are operational risk, regulatory risk and legal risk.


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...generally less liquid but more profitable assets in order to honor withdrawal requests from their depositors.

Risk management framework of Islamic banks face unique risks. Given that there is no clear risk management framework for Islamic banks, they mostly tend to address the risks faced by conventional guidelines. It is, however, important that risk managers identified risks faced by Islamic banks properly, they measured accordingly, reduction and control them in accordance with Shariah requirements and reported them to all stakeholders honestly and accurately.

REFERENCES (At Least 50 comprises of Web, Book and Journal Articles, Newspaper and Magazines. )

1) Financial risk ,management for Islamic banking and finance
2) Financial institutions management
3) Islamic banking and finance in Malaysia: issues, system and challenges.

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