As Executive Director of The Association of Banks in Malaysia (ABM), I have pleasure in submitting the Annual Report and the Audited Financial Statements for the year ended 31 December 2010 on behalf of the Council.
Introduction
“A picture paints a thousand words”, as the saying goes. The cover page of this Annual Report with the image of an out-reached hand offering a warm smile in friendship sums-up in our view quite aptly ABM’s stance for 2010. Building on the corner-stones of “change” and “connect” which were laid the year before in 2009, ABM set out in earnest in 2010 to engage with each of its three major groups of stakeholders – the consumers, the regulator and other governmental agencies, and our member banks. Whether face to face or through written and telecommunications, we made concerted efforts to listen and tried our best to appreciate the issues highlighted as well as to empathize. More importantly, we strove to share with our stakeholders the general principles of the conduct of banking business as well as the concepts of risk and risk appetite with the aim of narrowing any gap of expectations.
Thus, the theme of partnership and collaboration underpinned most of ABM’s public agenda in 2010. In a quick flash-back, there were industry issues to address and initiatives to implement together with our members. We also relished the opportunity of cooperating with regulators and governmental agencies as the liaison for the commercial banking sector in their review of pertinent policies, directives and guidelines during the year. On the consumer front, processes for handling complaints, enquiries and feedback were beefed up in tandem with the closer working relationships established with consumer associations such as the National Consumer Complaints Centre and The Consumers’ Association of Penang. ABM’s achievements in 2010 can be gleaned from the report below and the calendar of events which follows.
We are especially pleased with the head-way made with the Small and Medium Enterprises (SMEs). It is hoped that with the initiatives introduced over the course of 2010 our members have become more effective partners in business with SMEs better appreciating what key factors our members seek when appraising loan applications. There is undeniably much to be done still going forward and we will not rest on our laurels. Please take clasp of our hand and work with us as partners in continuum for the betterment of the commercial banking industry.
Report of Main Activities in 2010
Partnering Customers and the Public
Acknowledging the importance of SMEs as engines of growth of our economy, ABM and its member banks launched a series of initiatives towards enhancing banking efficiency and customer services under the banner called “PARTNER”. To ensure that the PARTNER initiative would be relevant, ABM embarked on a series of industry consultative sessions with SME related trade and business organizations, associations and chambers of commerce to solicit feedback and comments on the approach to be undertaken before-hand.
Phase 1 of the PARTNER initiative, which was successfully launched on 1 November 2010 comprised the following:-
• Simplifying and streamlining the process for loan applications;
• Committing to a common timeline for the processing of straightforward loan applications; and
• Making publicly available and in as comprehensive a manner as possible, the SME contact points of our Council banks.
We are pleased to report that positive feedback has been received from the SME organizations and they agree that it is a very commendable first step towards making the application process for SME loans more consistent and transparent. To further facilitate accessibility, the package of documents has been made available in the websites of 12 of the 14 participating banks or in hard copy form at the SME contact points. The same is also available at the ABM website at www.abm.org.my.
We would like to thank all parties who worked with us tirelessly on this initiative – in particular our 14 Council banks as well as the SME trade associations and the various chambers for their invaluable feedback. Work on Phase 2 of PARTNER, which will pursue other areas of improvement in providing SMEs better access to financing, has already commenced.
There was no let-up on our road-shows which have proven to be a most effective way of touching base with the views on the ground so to say. The year started off with the dialogue in Ipoh which was held over two half-day sessions. The first session was tailored specially for the Malaysian Timber Council to enable it to share with the bankers the prospects of the timber sector, the timber industry’s contributions to the economy and its recommendations to improve access to financing for timber companies. The second session saw representatives from Bank Negara Malaysia, Credit Guarantee Corporation Malaysia Berhad (CGC) and SME Corporation Malaysia presenting to the business and trade associations the full spectrum of financing options that are available to SMEs and business organizations. This was followed by the dialogue proper where questions and comments relating to SME financing were aired.
Having held several dialogues in West Malaysia, plans to organize a next dialogue in East Malaysia finally materialized when Kuching, Sarawak became the first leg of our foray to Sabah and Sarawak. More than 80 bankers and representatives from the various chambers of commerce and trade associations in Kuching attended a dialogue on 19 October 2010 where queries and issues relating to the local business community were raised, discussed and clarified.
At the next stop, Kota Kinabalu, Sabah a get-to-know-you session was similarly organized on 21 October 2010 firstly with the banking community and then with the business organizations in the presence of the bankers. Attended by more than 70 bankers and representatives from the various chambers of commerce and trade associations in Kota Kinabalu, the dialogue provided a good platform for both the business community and the bankers to exchange useful views and feedback.
Dove-tailing the dialogue and in conjunction with Minggu Kesedaran Kewangan (M2K), a one-day SME seminar was organized by ABM with the support of Bank Negara Malaysia, SME Corporation Malaysia and CGC in Kota Kinabalu the day after. We are happy to report that the SME seminar was a resounding success. Businessmen and entrepreneurs from the surrounding vicinity which attended the seminar gained considerable insight we were told from the talks given by experts from various member banks and development financial institutions on subject matters that are vital to the SMEs such as loan processing, SME financial assistance, effective cash management, micro-financing as well as guarantee schemes provided by CGC. Concurrent with the seminar, visitors could visit booths set up by Agensi Kaunseling dan Pengurusan Kredit (AKPK), Financial Mediation Bureau (FMB) and banks for on the spot advice and guidance from the financial institutions on all commercial matters. Given the positive feedback, we are certainly looking forward to more regular visits to the Land of the Hornbills and the Land Beneath the Wind.
ABMConnect, a toll-free service on 1-300-88-9980 set up in 2008 by ABM to receive queries and complaints on issues relating to the local conventional banking industry, continued to play a key role in addressing the concerns of the banking public. ABM is pleased to report that since its inception, it has received about 3,000 calls from members of the public. 99% of the calls were resolved by the banks with their customers. eABMConnect, the online version which enables the public to submit their complaints and/or queries to ABM 24/7 remains a popular alternative channel. These online complaints/queries were also addressed and responded to promptly.
ABM has also been an active participant of the Focus Group on Private Sector Efficiency and Accountability towards Consumerism (FGPE) established under the auspices of PEMUDAH. The Focus Group is co-chaired by YBhg Dato’ Pardip Kumar Kukreja, a PEMUDAH member and YBhg Datuk Mohd Zain bin Mohd Dom, Ketua Setiausaha, Kementerian Perdagangan Dalam Negeri, Koperasi dan Kepenggunaan (KPDNKK). Five task force groups have been set up under its broad umbrella each taking charge of a particular industry, namely Banking and Insurance; Retail; Public Utilities; Legal and Telecommunications.
ABM has also been co-opted into the Task Force for Banking and Insurance which serves as a platform to identify initiatives for productivity improvement in the industries concerned that will benefit their consumers. The improvement measures are tracked by the Task Force and reported to FGPE during its monthly meetings. Fully supportive of the steps paved by the Government of Malaysia towards a holistic revamp in the name of business efficacy and efficiency, ABM is conscientious in its role and participation in other Focus Groups such as the Focus Group on Registering Property (FGoRP) and the Focus Group on Paying Taxes (FGoPT) and attends the meetings diligently, ready with input and comments. The FGoRP has as its objectives, the improvement of processes and the enhancement of the transparency in the procedures for registering property in Malaysia. One of the contributions on the part of commercial banks is the streamlining and shortening of the duration taken to issue a redemption statement which is now within two working days of receipt of instruction and for the release of titles which is now within five working days from date of receipt of the redemption sum. The FGoPT on the other hand has been asked to improve the processes and procedures of payment of labour taxes. Initiatives being considered include promoting e-payment of taxes to statutory bodies.
Partnering Member Banks
Tax and accounting issues remained high on our agenda in 2010.
With the imposition of the service tax of RM50 on each principal credit card and charge card as well as the service tax of RM25 on each supplementary card a year coming into effect on 1 January 2010, ABM worked pro-actively with the National Cards Group to prepare responses to a list of anticipated Frequently Asked Questions to explain the effect and impact of the imposition of the service tax to members of the public who, as expected, called the customer service lines of card issuers and ABMConnect seeking advice and clarification. ABM also took the lead in ironing out other implementation matters relating to the same, both from the technical as well as media and public relations aspects. We would like to take this opportunity to place on record our gratitude to Jabatan Kastam Diraja Malaysia for all its guidance and kind assistance. Although there are still several loose ends to be tied up, we are confident we shall be able to resolve the same in the spirit of cooperation demonstrated thus far. In 2010, ABM continued to follow up with the relevant authorities on its appeal in respect of the ad valorem stamp duty imposed on instruments relating to clean or unsecured facilities which are repayable on demand or in a bullet repayment following from the amendments to the Stamp Act 1949 which came into force on 1 January 2009. ABM met with the relevant authorities on a number of occasions to explain its adverse implications to both the borrowers who bear the burden of payment and the financial industry.
On the accounting front, ABM continued to work closely with Bank Negara Malaysia and the Malaysian Accounting Standards Board to consider transitional provisions to alleviate the difficulties faced by banks in implementing the incurred loss model for the impairment of financial assets currently applied under FRS 139. Taking heed of the banks’ concerns, the deadline for compliance with the FRS provision requirement was extended to 1 January 2012 and Bank Negara Malaysia accordingly introduced a transitional collective impairment provision to allow banks time to comply with the FRS provision by 2012. ABM also reviewed and responded to Bursa Malaysia on the proposed amendments to add a new category of witnesses who will be able to verify and attest account opening forms under the Rules of Bursa Depository, and also on the Rules in relation to the issuance of statements of securities accounts for inactive accounts.
In support of the Government’s initiatives to promote electronic payments, ABM worked with its member banks to ensure successful implementation of the electronic share payment (ESP) and e-dividend initiatives. Roll-out was planned and strategized over several round-table dialogues in ABM’s Dialogue Suite between bankers and brokers. As announced in the 2010 Budget Speech, all public listed issuers were required to provide e-dividend services to their shareholders by the 3rd quarter of 2010. For this purpose, shareholders were given a one-year period to provide their bank account details to Bursa Malaysia Depository Sdn Bhd for the crediting of dividend payments. To facilitate the registering process, ABM sought and obtained the agreement of its member banks not to levy any charges for bank account validation such as issuance of a confirmation letter on the shareholder’s bank account details or endorsement of the shareholder’s bank statements.
Throughout the year, various industry issues were addressed by ABM. These included participation in the working groups formed by Kementerian Perumahan dan Kerajaan Tempatan to revive abandoned housing projects and giving input to AKPK on its debt management programme.
Fraud related issues affecting the banking industry were also on ABM’s radar. Modus operandi of fraud syndicates were shared amongst member banks to alert them of the latest fraud trends. A list of outstanding straightforward fraud cases were compiled and submitted to Polis Diraja Malaysia requesting it to give due attention to these cases.
Partnering Regulators and Governmental Agencies
During the year, ABM continued to meet and have dialogues with other government agencies such as Kementerian Perdagangan Antarabangsa dan Industri to facilitate financing of trade and investments in the country, KPDNKK on consumer related issues such as hire purchase and bank charges and Kementerian Wilayah Persekutuan dan Kesejahteraan Bandar on issues relating to financing under the Rakyat Housing Programme. ABM also collaborated with Kementerian Pembangunan Wanita, Keluarga dan Masyarakat on the missing child alert initiative for dissemination of notices of missing children to members and posting of the same at bank premises, on ATM screens and their respective websites.
Partnering Regional and International Organizations
Regionally, ABM represents Malaysia at the annual meetings of the APEC Financial Institutions dealing with SMEs. The objective of the annual meetings is to review cooperation activities in the past year and discuss future plans among the participating economies. In accordance to the Memorandum of Understanding signed in 2003, signatory economies meet at least once a year prior to the APEC Finance Ministers Meeting in alphabetical rotation and Malaysia was given the honour to host the event in 2010. The start of 2010 saw ABM launching into preparations for the 7th Annual Meeting and Conference of APEC Financial Institutions Dealing with SMEs ranging from the selection of venue for the meetings and appointment of event organizers to composing and dispatching invitations to delegates, bankers, speakers and panelists. ABM is extremely grateful to Bank Negara Malaysia for offering us the use of Lanai Kijang for the Annual Meeting and Conference growth? Discussions at the meeting were lively with frank exchange of views as well as sharing of a wealth of invaluable information among the member economies. As approved by the Signatory Members, Nacional Financiera, S.N.C.(NAFINSA) will host the 8th APEC Financial Institutions Dealing with SMEs Annual Meeting in Mexico next year.
In conjunction with the Annual Meeting, a one-day conference entitled “SME Development and Financing at the Threshold of the Next Decade – Review, Re-strategize, Revamp” was held on 16 July 2010. We were honoured to have YBhg Tan Sri Dato’ Sri Dr Zeti Akhtar Aziz, Governor, Bank Negara Malaysia to grace and officiate the Conference. Several eminent speakers and panelists from both the financing as well as the business sectors were invited to present at the Conference. Leading the line-up were Dr Matthew Gamser, Principal, Advisory Services, International Finance Corporation (IFC) Asia and Pacific, Dr Yeah Kim Leng, Group Chief Economist, RAM Holdings Berhad and Encik Mahdi Mohd Ariffin, Deputy Chief Executive Officer, SME Corporation Malaysia. The audience also enjoyed the frank and candid conversations with Ms Michelle Lau, Managing Director of Meesha Sukira, Mr Chris Thiagarajah, Chief Executive Officer of SkyBus Ventures Sdn Bhd and Mr Adrian Yeo, Managing Director of Adrian Yeo & Co. Chartered Accountants in respect of their personal experiences on the often treacherous road to success in their quests to being self-employed and to being their own “boss”. We are deeply grateful for all the cooperation and support rendered to us by Bank Negara Malaysia, Kementerian Kewangan, invited speakers, panelists and our member banks in making the event a huge success. ABM as the chair for the Permanent Committee on ASEAN Inter-Regional Relations under the auspices of the ASEAN Bankers Association organized a study visit to Australia in September 2010 to broaden inter-regional relations. A total of 16 participants from five countries namely Laos, Myanmar, Singapore, Thailand and Malaysia made up the delegation. The delegation visited several organizations in Australia such as the Australian Bankers’ Association, Commonwealth Bank, Industry and Investment Department of the New South Wales Government and Australian Trade Commission (Austrade), Westpac Institutional Bank, KPMG and Reserve Bank of Australia. With the itinerary, the delegates not only gained a better understanding of the banking industry in Australia but also benefitted from the platform set up on that occasion for the delegates to network and build ties with both the Australian banks and other financial related agencies. ABM wishes to record its thanks and appreciation for the warm hospitality extended by the various Australian organizations to the delegation during the visit to Sydney.
In November 2010, ABM participated in the 18th ASEAN Banking Conference and 40th ASEAN Banking Council Meeting in Bali, Indonesia. The theme of the Conference was “Towards One ASEAN Market – Enhancing and Strengthening the Collaboration among ASEAN countries” in line with the ASEAN agenda in approaching the year 2015, when the ASEAN Economic Community and ASEAN Single Market will be realized. The Conference comprised two Plenary Sessions where speakers from the region were invited to share on collaboration and competition issues as well as the financial industry trends in the One ASEAN market. Following from the Conference, the ASEAN Banking Council Meeting was held. Recognizing the need for banks in the region to cooperate amongst each other, several key programmes were adopted by the ASEAN Banking Council for 2011.
Membership strength
During the year, Industrial and Commercial Bank of China (Malaysia) Berhad commenced operations in Malaysia and was admitted as a member of ABM. As at 31 December 2010, the ordinary membership of ABM increased to 23 commercial banks operating in Malaysia. The branch network of commercial banks increased to 2,026 branches as at 31 December 2010.
Changes to the Council
At the 36th Annual General Meeting held on 23 June 2010, pursuant to Article 13 (iii) of the Constitution, Public Bank Berhad and RHB Bank Berhad retired and were re-elected as Council members. Alliance Bank Malaysia Berhad, AmBank (M) Berhad and EON Bank Berhad were coopted as Council members for the year. Malayan Banking Berhad was re-elected as Chairman Bank for the ensuing year.
Formation of new working groups and changes in Council representation
The Council approved the setting up of two new working groups during the year, i.e. the ABM Tax Working Group as well as the ABM Compliance and Legal Working Group to address specific issues relating to tax and legal and compliance issues, respectively. We welcome the representatives to the Working Groups and look forward to their support and cooperation.
The year also saw some changes in the Council representation. ABM welcomes Mr Sng Seow Wah, Group Chief Executive Officer of Alliance Bank Malaysia Berhad who joined the Council on 22 July 2010. We bid a fond farewell to those who have left or, as the case may be, decided to take a temporary reprieve from the banking industry and would like to take this opportunity to record our heartfelt appreciation to Datuk Michael Lor, Group Chief Executive Officer of EON Bank Berhad and Dato’ Tajuddin Atan, Group Managing Director of RHB Bank Berhad for their contributions to ABM, the Council and the industry. We wish them all the very best in their future endeavours.
Conclusion
It was a brighter year for the global economy overall and Malaysia experienced an economic growth of 7.2% for the year 2010. Reflecting the improving economic outlook, the banking industry has remained robust and well-capitalized.
For ABM, the year 2010 had been a progressive one marked by fast paced developments. Much had been achieved within the 12 months under the leadership of the Council and the various ABM Committees as well as Working Groups which met frequently to deal with the requisite changes and refinements. With the accelerating pace of change and development envisaged of the industry, we anticipate greater challenges and more demanding tasks ahead. ABM remains committed to assist member banks in addressing and resolving issues at the industry level and looks forward to member banks’ continued support and cooperation.
Once again, ABM and its Council wish to record their highest appreciation of Bank Negara Malaysia, Kementerian Kewangan, Government agencies and other regulatory authorities including the Securities Commission for their kind assistance and guidance during the course of the year.
On behalf of the Council
Chuah Mei Lin
Executive Director
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