POWER TO ACHIEVE FINANCIAL STABILITY
A major amendment is the expansion of the powers of the Central Bank for the purpose of achieving financial stability.
With the continuous evolution of the financial landscape and greater volatility in the financial markets, the power of the Central Bank has been extended under section 31 of the Act. In addition to the power to issue orders requiring any person to take measures to avert or reduce any risk to financial stability, the Central Bank may specify measures which, in its opinion, would contribute to the resilience of the financial system or limit the accumulation of any risk to financial stability. Such measure may be directed to a class, category or description of persons engaging in financial intermediation.
OPPORTUNITY TO MAKE REPRESENTATION
The Central Bank has also been given extra powers to ensure compliance with any such measure or order under section 31(6). It may conduct due diligence or require such person approved by the Central Bank to submit any document or information or appoint an auditor or any other person to carry out an assessment to determine whether the person has complied with such measure or order. Failure to comply with any such measure or order or request by the Central Bank under section 31(6) is a criminal offence and carries the penalty of a fine not exceeding MYR10 million or imprisonment for a term not exceeding 10 years or both.
Another major amendment is the protection of rights of parties under a qualified financial agreement, of which a new definition has been introduced. There is also a new definition for, among others, qualified financial transaction referring to derivative or a repurchase, reverse repurchase or buy-sell back agreement with respect to securities.
The Act expressly provides that the enforcement by the parties of their rights under a qualified financial agreement shall not be affected by the following, namely any measure or order issued under section 31(1); any vesting order made under section 32(1)(c); and any direction given or requirement imposed under section 77(1).
The Third Schedule to the Act has also been amended to specify the positions of the transferees and transferors under a qualified financial agreement subject to a vesting order.
The amendments essentially intends to ensure that, in a transfer of a qualified financial agreement pursuant to a vesting order, all rights and obligations of the transferor, including any property of the transferor which is the subject matter of a financial collateral under a qualified financial agreement, are fully transferred to the transferee and, in particular, upon enforcement by the parties of their rights under such qualified financial agreement, the enforcement shall be in the terms of such agreement as if the transferee had always been a party to such agreement.
For further insight in this area of law, please contact our Partners:
Loh Mei Mei
Kung Suan Im
Chan Kwan Hoe