Foreign-owned locally incorporated banks in Malaysia are subject to a discriminatory operational restriction limiting the number of local branches that they are entitled to open. They are currently allowed to have up to eight additional branches. Previously, the opening of such branches was subject to a specified distribution ratio of 1(market centre): 2(semi-urban): 1(non-urban) . Since 2011, the specified distribution ratio no longer applies, but the limit remains in force. For the purposes of the OECD FDIRRI, since the framework does not encompass this type of operational restriction, it is assumed equivalent to a minor restriction under the FDIRRI framework (e.g 'local content' restriction).
"Bank Negara Malaysia wishes to announce that greater flexibility will be accorded to the newly licensed locally-incorporated foreign banks and existing locally-incorporated foreign banks that have yet to reach a sizeable scale of operation from complying with the distribution ratio requirement for the establishment of branches. Currently, locally-incorporated foreign banks can open up to eight additional branches, subject to a specified distribution ratio of 1(market centre): 2(semi-urban): 1(non-urban). With this flexibility, locally-incorporated foreign banks that have yet to establish the new branches or currently have less than eight branches will not be required to comply with the distribution ratio for the setting-up of their branches. This will facilitate the newly licensed locally-incorporated foreign banks to better serve their targeted customer segments and niche areas. This flexibility would also enable the existing locally-incorporated foreign banks to achieve a meaningful scale of operations to contribute more effectively to the overall development of the financial sector in Malaysia." (Bank Negara Malaysia, Press Release: Flexibility from Complying with the Distribution Ratio Requirement for Locally-Incorporated Foreign Banks, Ref No: 08/11/06, 17-Aug-2011)
Bank Negara Malaysia, Press Release: Flexibility from Complying with the Distribution Ratio Requirement for Locally-Incorporated Foreign Banks, Ref No: 08/11/06, 17-Aug-2011.
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