On 20 May 2022, Bank Negara Malaysia (‘BNM
’) issued a revised Policy Document on Granting of Credit Facilities
The Policy Document sets out the requirements to be complied with by a licensed insurer under the Financial Services Act 2013 (‘FSA
’) and licensed takaful operator under the Islamic Financial Services Act 2013 (‘IFSA
’) (each a ‘licensed person
’) in granting credit facilities.
The expression ‘credit facilities’ is not defined in the Policy Document or the IFSA, but guidance may be drawn from the FSA which defines ‘credit facility’ to mean:
‘(a) the giving of any advance, loan or other facility in whatever form or by whatever name called;
(b) the giving of a guarantee; or
(c) any other dealing or transaction as prescribed under section 4 (of the FSA)
Paragraph 7.1 of the Policy Document requires a licensed person to obtain the prior written approval of BNM to:
The restriction in paragraph 7.1(b) does not apply to the granting of a credit facility to a director of a licensed person if that credit facility is fully secured by a life policy or family takaful certificate held by the director which does not exceed the surrender value of the policy or takaful certificate (paragraph 7.3).
For the purposes of paragraphs 7.2 and 7.3, a ‘director’ includes a relative of a director. A ‘relative’ is defined in subsections 2(1) and 2(2) of both the FSA and the IFSA and will, presumably, be given that meaning in the Policy Document.
The Policy Document also provides that the purchase of corporate bonds and/or sukuk by a licensed person in the primary or secondary market is not deemed as the granting of a credit facility.
Approval from, or notification to, BNM is dispensed with for credit facilities granted by a licensed person to its insurance or takaful agents. However, a licensed person is required to set out in its internal policies, the specific purposes for which credit facilities may be granted to such agents and to comply with the same. Further, any credit facilities granted by a licensed person to its insurance or takaful agents is to be granted from the shareholders’ funds of the licensed person.
The Policy Document is deemed to have come into effect from 1 December 2015 and supersedes the Policy Document on Granting of Credit Facilities issued by BNM on 25 November 2015.
Alert prepared by Grace Teo Shi Kay (Senior Associate) of the Corporate Practice of Skrine.