Bank Negara Malaysia: What the Central Bank Is Legally Required to Do

At a glance

Name	Bank Negara Malaysia / Central Bank of Malaysia
Type	Statutory body; the central bank for Malaysia (s.4, Act 701)
Operations began	26 January 1959
Governing statute	Central Bank of Malaysia Act 2009 (Act 701), in force 25 November 2009
Predecessor statute	Central Bank of Malaysia Act 1958, repealed by s.99
Capital	RM100 million (s.6(1)); any increase is subscribed and paid by the Government (s.6(2))
Head office	Kuala Lumpur (s.3(4))
Governor	Abdul Rasheed Ghaffour, the 10th Governor, in office since 1 July 2023 (five-year term, s.15(4))
External auditor	The Auditor General (s.11)
Website	bnm.gov.my

The 2009 Act did not create a new institution. Section 3 says the body corporate established under the repealed 1958 Act “shall continue to be in existence” — the same legal person, given a sharper mandate.

The two objects, and the nine functions

Almost every question about what BNM may or may not do resolves to section 5.

Section 5(1) — principal objects: to promote monetary stability and financial stability conducive to the sustainable growth of the Malaysian economy.

Section 5(2) — primary functions:

#	Function
a	Formulate and conduct monetary policy in Malaysia
b	Issue currency in Malaysia
c	Regulate and supervise financial institutions subject to the laws enforced by the Bank
d	Provide oversight over money and foreign exchange markets
e	Exercise oversight over payment systems
f	Promote a sound, progressive and inclusive financial system
g	Hold and manage the foreign reserves of Malaysia
h	Promote an exchange rate regime consistent with the fundamentals of the economy
i	Act as financial adviser, banker and financial agent of the Government

Section 5(3) grants only the powers “necessary, incidental or ancillary” to those functions, and section 5(4) requires the Bank to have regard to the national interest in exercising them. Read together, they are both a licence and a fence.

Who decides what

BNM’s decisions are deliberately spread across statutory bodies, not concentrated in the Governor.

Body	Composition	What it decides
Board of Directors	Governor, up to three Deputy Governors, five to eight appointed directors (s.14(3)); chaired by the Governor (s.19(1))	General administration, budget, oversight of management
Monetary Policy Committee	Governor, Deputy Governors, and three to seven other members including external members (s.23(2))	Monetary policy and the Overnight Policy Rate
Financial Stability Executive Committee	Governor, one Deputy Governor, three to five members appointed by the Minister on the Board’s recommendation (s.37(2))	Liquidity assistance, capital injections and vesting orders tabled under s.38
Shariah Advisory Council	Members appointed by the Yang di-Pertuan Agong on the advice of the Minister after consultation with the Bank (s.53)	Ascertainment of Islamic law for Islamic financial business (s.51)
Board Governance, Audit and Risk Committees	Board committees required by s.21	Nominations and budget recommendations; audit; risk oversight

Two appointment rules matter: the Governor is appointed by the Yang di-Pertuan Agong for a term of five years, and the Deputy Governors by the Minister of Finance for three years (s.15(1), s.15(4)).

The MPC must meet at least six times a year (First Schedule, paragraph 3), and section 24 obliges the Bank to publish a monetary policy statement — decision plus rationale — after every meeting. The Overnight Policy Rate has stood at 2.75% since the cut on 9 July 2025 and was left unchanged at the meeting of 9 July 2026. How that single number travels to your loan is covered in the Overnight Policy Rate.

What BNM actually regulates

BNM’s supervisory reach is defined by the statutes it administers, not by the word “financial”.

Statute	Who it covers
Financial Services Act 2013	Banks, insurers, payment system operators and other approved persons
Islamic Financial Services Act 2013	Islamic banks, takaful operators and Islamic market participants
Development Financial Institutions Act 2002	Prescribed development financial institutions
Money Services Business Act 2011	Money changing, remittance and wholesale currency businesses
Currency Act 2020	Currency management and currency processing businesses
AMLA 2001	BNM acts as the competent authority appointed by the Minister
Central Bank of Malaysia Act 2009	The Bank’s own objects, powers and financial stability toolkit

Beyond licensing, the Act arms the Bank for stress: it may demand information relevant to financial stability from other supervisors and from unsupervised entities (s.30), specify measures to limit the build-up of risk (s.31), extend liquidity assistance (s.32), and operate a credit bureau collecting credit information on financial institutions’ customers (s.47).

What BNM does not control

This is the half most explainers skip.

• The capital market. Shares, bonds and sukuk, unit trusts, fund management, take-overs and licensed intermediaries fall to the Securities Commission Malaysia, established on 1 March 1993 and regulating entities licensed under the Capital Markets and Services Act 2007. Crowdfunding and P2P platforms are SC-registered, not BNM-licensed — see equity crowdfunding and P2P financing.
• Deposit insurance. PIDM, not BNM, protects eligible deposits up to RM250,000 per depositor per member bank. It is automatic and free.
• Digital assets. Under the 6 December 2018 joint statement, the SC regulates ICOs and digital asset exchanges; BNM reiterated that digital assets are not legal tender in Malaysia.
• The exchange rate regime. Determined by the Minister of Finance on the Bank’s recommendation (s.66(1)). BNM conducts foreign exchange operations autonomously within it — see foreign exchange policy and what moves the ringgit.
• Fiscal policy and tax. Budgets, subsidies and tax administration belong to the Ministry of Finance and LHDN. BNM may extend only temporary financing to the Government, capped by section 71(3) at 12.5% of estimated federal receipts when aggregated with government securities it holds outside monetary policy operations.

Section 72 completes the picture. The Bank must keep the Minister informed of policies relating to its principal objects; if the two disagree and cannot reach agreement, the Board furnishes a statement, the Minister takes it to Cabinet, and Cabinet may determine the policy to be adopted — with the Government accepting responsibility for it. Section 22(2), meanwhile, states that monetary policy is formulated and implemented autonomously by the Bank, without external influence.

Common mistakes

• Calling BNM a government department. It is a statutory body with its own capital, audited by the Auditor General, whose financial statements and Board report are laid before both Houses of Parliament (s.13).
• Assuming BNM regulates anything financial. If the entity is not licensed, approved or registered under a statute in the table above, BNM is not its regulator.
• Confusing the OPR with the rate you pay. The MPC sets a policy rate; lenders set their own reference rates from it.
• Expecting BNM to compensate for a failed investment. Its consumer channel, BNMLINK, deals with institutions it regulates — not with schemes outside its remit.

What’s next

• The policy rate in practice: the Overnight Policy Rate
• The currency it issues: the ringgit
• The price data it targets: inflation and the CPI
• Payments it oversees: payment regulation in Malaysia
• Read the statute itself at Act 701 on the AGC’s Laws of Malaysia portal or the BNM legislation page.