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Bank Negara Malaysia issues new Policy Document on Transfers of Business

17 April 2025

Bank Negara Malaysia (“BNM”) issued a Policy Document on Transfers of Business (“Policy Document”) on 10 April 2025. The Policy Document came into effect immediately on its date of issuance, superseding the policy document of the same name issued by BNM on 5 August 2016.
 
The Policy Document applies to the following: 
  1. licensed banks;
  2. licensed investment banks;
  3. licensed Islamic banks;
  4. licensed insurers;
  5. licensed takaful operators; and
  6. the transferee (including a non-licensed person), 
in respect of business transfer schemes under section 100 of the Financial Services Act 2013 (“FSA”) or section 112 of the Islamic Financial Services Act 2013 (“IFSA”).
 
Where a licensed person is a foreign insurer or foreign takaful operator, the requirements in the Policy Document apply to the transfers of its Malaysian policies or Malaysian takaful certificates, and foreign policies or foreign takaful certificates issued in Malaysia.
 
The Policy Document: 
  1. seeks to facilitate business expediency while ensuring that business transfer schemes do not adversely affect the safety and soundness of a licensed person;
  2. requires a licensed person to take appropriate steps to safeguard, where necessary, the rights and interests of any person who is likely to be affected by the business transfer schemes; and
  3. outlines the types of transfers that require the prior written approval of BNM, and where such approval is required, the documents or information to be submitted with the application for approval. 
The Policy Document is to be read together with other relevant legal instruments and policy documents issued by BNM, including any amendments or reissuance thereafter, in particular those listed in sub-paragraphs (a) to (l) of paragraph 6.1 of the Policy Document.
 
Regulatory process
 
Transfers requiring specific approval
 
According to paragraph 8.1 of the Policy Document, the prior written approval of BNM must be obtained by any person to enter into an agreement or arrangement for a scheme to transfer the whole or any part of the business of a licensed person involving the following: 
  1. a business segment or unit1;
  2. impaired loans or financing2;
  3. loans, financing or other assets that are linked to projects of strategic importance to the nation, including by way of collateralisation3;
  4. financial consumer services or products proposed to be transferred to a non-licensed person4;
  5. securitisation transactions where the underlying loans or financing are not serviced by a licensed person; or
  6. assets and liabilities, where the book value is at least RM 1.0 billion. 
BNM may specify conditions in granting its approval.
 
Before making an application, the transferor and transferee should discuss the scheme with BNM as soon as is reasonably practical to enable BNM to consider issues that are likely to arise in its assessment of the scheme.
 
In its Transfers of Business - Frequently Asked Questions (Last updated: 10 April 2025), BNM provided helpful clarifications on the following: 
  1. the “whole or part of the business” of a licensed person is not restricted to its licensed business but includes both its licensed business and other business; for example, the transfer of the whole or part of a licensed person’s merchant acquiring business will fall within the ambit of the Policy Document, even though such business is not a “licensed business”;
  2. the term “business segment” has the same meaning as applied for the purpose of paragraphs 13.1(d) and 14.1(c) of BNM’s Policy Document on Financial Reporting5;
  3. the expression “including by way of collateralisation” in sub-paragraph (c) of paragraph 8.1 of the Policy Document is intended to capture cases where the asset being transferred (e.g. a loan) is itself not of strategic importance to the nation, but is collateralised by another asset that is of such importance (e.g. public transport infrastructures); and
  4. as the Policy Document grants approval for most securitisation transactions, an application for BNM’s approval will only be necessary where the underlying loans or financing are not serviced by a licensed person, or where the transaction includes impaired loans or financing, assets linked to projects of strategic importance, or the entire portfolio of a business segment or unit under sub-paragraphs (e), (b), (c) and (a) respectively of paragraph 8.1 of the Policy Document. 
Transfers deemed approved
 
Pursuant to paragraph 8.1 of the Policy Document, approval is deemed granted under section 100(1) of the FSA and section 112(1) of the IFSA, as applicable, for any person to enter into an agreement or arrangement for a scheme to transfer the whole or any part of the business of a licensed person that do not fall within the ambit of sub-paragraphs (a) to (f) of paragraph 8.1.
 
The approval in paragraph 8.1 includes approval for a securitisation transaction which falls under sub-paragraphs (d) or (f) of that paragraph where the underlying loans or financing are serviced by a licensed person.
 
Submission requirements
 
Pursuant to section 100(3) of the FSA and section 112(3) of the IFSA, an application6 for BNM’s approval must be supplemented with the following: 
  • the transferor:
  1. approval from its board of directors for the proposed business transfer scheme;
  2. details of the proposed business transfer scheme, including a description of the purpose of the scheme, the assets and liabilities to be transferred, their values and the purchase consideration;
  3. a report on the transferee’s assessment, including the effect of the proposed business transfer scheme on the interests of any person likely to be affected by the scheme and mitigation measures proposed, where relevant;
  4. where applicable, a valuation report on the liabilities to be transferred, prepared by the appointed actuary of the licensed insurer or licensed takaful operator;
  5. where applicable, the assessment by the Islamic financial institution’s Shariah Committee that the business transfer scheme is undertaken in accordance with Shariah requirements; and
  6. any other information as may be required by BNM. 
  • the transferee:
  1. approval from its board of directors for the proposed business transfer scheme;
  2. where the transferee is a licensed person, a report on the transferee’s assessment on:
  • the risks associated with the business to be acquired and potential impact to the transferee’s financial condition;
  • the readiness of its existing infrastructure and resources to manage the business to be acquired, and where applicable, to ensure that the Shariah compliant business to be acquired is managed in a Shariah compliant manner on an ongoing basis7;
  • where applicable, the assessment by the Shariah Committee that the Shariah compliant business to be acquired is to be managed on a Shariah compliant manner; and
  • where applicable, the necessary revisions to the transferee’s business plan and strategy, should the transfer result in a significant change in the transferee’s risk profile;
  1. where the transferee is not a licensed person:
  • details of its shareholding structure depicting its legal and beneficial ownership;
  • source of funding for the scheme;
  • information on the board and senior management; and
  • where applicable, a report on the assessment made by the transferee and a Shariah Committee or Shariah advisor appointed by the transferee on the readiness of its existing infrastructure and resources to manage the Shariah compliant business to be acquired in a Shariah compliant manner on an ongoing basis;
  1. for transfers of insurance policies or takaful certificates, an acknowledgement that the transferee will assume liability for claims which have been incurred but not yet reported; and
  2. any other information as may be required by BNM. 
 
Article by Phua Pao Yii (Partner) and Tan Wei Liang (Partner) of the Corporate Practice of Skrine.
 
 
 
1 These include the transfer of a mortgage loan book or a portfolio of insurance/takaful contracts in the context of an exit strategy.
2 These refer to loans and financing that are subject to the Policy Document on Disposal and Purchase of Impaired Loans/Financing issued on 25 June 2024.
3 This includes loans, financing or other assets for or related to national infrastructure projects (such as those in the area of transportation, telecommunications, energy, logistics and utilities), as well as those identified by the Government as strategic through its various developmental plans (such as projects involving circular economy, integrated water resource management and digital connectivity under the 12th Malaysia Plan 2021-2025).
  These include transfers where the reference assets are used for the settlement of credit derivative transactions.
5 In cases where the “business segment” threshold is not passed, but the proposed transfer nonetheless involves a similar scope of assets and liabilities, financial institutions are encouraged to engage BNM on whether the transfer falls within the ambit of "business unit".
6 Licensed persons should also refer to paragraph 14.1 of the Policy Document on Disposal and Purchase of Impaired Loans/Financing issued on 25 June 2024 for applications relating to impaired loans as provided in sub-paragraph (b) of paragraph 8.1 of the Policy Document.
7 For example, readiness of system and internal policy and procedure for the Shariah contract that underlies the Islamic financing portfolio.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.

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