Malaysia's Banking Sector: Commercial, Islamic and Investment Banks

Open a bank account in Kuala Lumpur and you have quietly stepped into one of the few countries that runs two complete banking systems side by side — conventional and Islamic — under one central bank and two matching laws written in the same year.

Malaysia’s banking sector is not a loose collection of “banks.” It is a licensed landscape, and every institution in it holds a specific type of licence under a specific statute. Understanding those categories is the fastest way to make sense of who does what.

Which laws govern Malaysia’s banks?

Two twin statutes anchor everything. The Financial Services Act 2013 (Act 758) covers conventional banking, insurance and payment systems, while the Islamic Financial Services Act 2013 (Act 759) covers Shariah-compliant banking and takaful. Both received Royal Assent in March 2013 and both came into force on 30 June 2013 — the FSA via P.U. (B) 276/2013 (with a small set of provisions, namely section 129 and Schedule 9, commencing later) and the IFSA via P.U. (B) 277/2013.

The two Acts were a consolidation, not an addition. The FSA 2013 replaced and repealed a stack of older laws — the Banking and Financial Institutions Act 1989 (BAFIA), the Insurance Act 1996, the Payment Systems Act 2003 and the Exchange Control Act 1953. The IFSA 2013 did the same on the Islamic side, replacing the Islamic Banking Act 1983 and the Takaful Act 1984. In one stroke, banking, insurance, payments and foreign-exchange oversight moved into a single, modern framework.

The common thread through both Acts is Bank Negara Malaysia (BNM), the central bank, which licenses and supervises the institutions and reports to the Minister of Finance.

What are the main categories of licensed banks?

The core landscape breaks into a handful of licence types. The table below shows each category, the Act it sits under, and roughly how many institutions held that licence as at March 2026.

Category	Governing Act	Count (as at Mar 2026)	What they do
Commercial banks	FSA 2013	24	Full-service conventional banking: deposits, retail and corporate lending, trade finance, treasury
Islamic banks	IFSA 2013	16	Shariah-compliant banking business
International Islamic bank	IFSA 2013	1	Islamic banking in non-Ringgit currencies with residents and non-residents
Investment banks	FSA 2013	10	Corporate advisory, debt and equity capital markets, structured finance
Digital banks	FSA 2013	3	Technology-led conventional banking
Islamic digital banks	IFSA 2013	2	Technology-led Shariah-compliant banking

The counts move over time as banks merge, rebrand or exit. In recent examples, The Bank of Nova Scotia Berhad ceased its business and operations in Malaysia with effect from 5 June 2024, and MIDF Amanah Investment Bank Berhad was rebranded MBSB Investment Bank Berhad effective 10 July 2025 following its integration into the MBSB group.

What is the difference between a commercial bank and an investment bank?

The split is about breadth versus depth.

Commercial banks are the everyday workhorses. They take deposits, lend to households and companies, run trade finance and treasury desks, and operate the branch and card networks most people interact with. The 24 licensees are a mix of domestically incorporated banks and locally incorporated subsidiaries of foreign banks — the latter including names such as Citibank Berhad, HSBC Bank Malaysia Berhad, Standard Chartered Bank Malaysia Berhad, Deutsche Bank (Malaysia) Berhad, MUFG Bank (Malaysia) Berhad and Bank of China (Malaysia) Berhad.

Investment banks are narrower and more specialised. The 10 licensees — including Maybank Investment Bank, CIMB Investment Bank, AmInvestment Bank, Affin Hwang Investment Bank and MBSB Investment Bank — concentrate on corporate advisory, raising debt and equity in the capital markets, and structured finance. They do not chase retail deposits the way commercial banks do.

Both categories are licensed under the same statute, the FSA 2013. Many of them, on either side, also run Islamic banking windows — approved arms that offer Shariah-compliant products alongside the conventional business.

Where do Islamic banks fit — the “dual banking” system?

This is the feature that sets Malaysia apart. Rather than bolting Islamic finance onto a conventional system, Malaysia legislated it as a full parallel track. Islamic banks are licensed under their own Act (the IFSA 2013), regulated by the same central bank, and required to operate in accordance with Shariah.

Two layers keep that promise honest:

• The Shariah Advisory Council, established under the Central Bank of Malaysia Act 2009, is the apex authority whose rulings Islamic financial institutions must follow.
• Every licensed Islamic institution must also set up its own internal Shariah committee to ensure its day-to-day business stays Shariah-compliant.

Alongside the 16 domestic Islamic banks sits a single international Islamic bank — PT. Bank Muamalat Indonesia — licensed to conduct Islamic banking in currencies other than the Ringgit with both residents and non-residents. This dual system, combined with a deep sukuk market, is why Malaysia is widely regarded as a global leader in Islamic finance.

What about digital banks and development banks?

Two more groups round out the picture — one brand new, one long-standing.

Digital banks are the newest licensed category. On 29 April 2022 Bank Negara Malaysia awarded five digital banking licences: three under the FSA and two under the IFSA. The recipients were consortia led by Boost–RHB, GXS Bank–Kuok Brothers and Sea–YTL (conventional), plus AEON–MoneyLion and KAF Investment Bank (Islamic). They commenced operations progressively between 2023 and 2025 and now operate as brands including GX Bank, Boost Bank, Ryt Bank, AEON Bank and KAF Digital Bank, aimed squarely at financial inclusion and mobile-first customers.

Development financial institutions (DFIs) are the veterans. Set up by the government to channel financing into strategic sectors, the prescribed DFIs — Bank Pembangunan Malaysia, SME Bank, Export-Import Bank of Malaysia (EXIM), Bank Kerjasama Rakyat (Bank Rakyat), Bank Simpanan Nasional and Bank Pertanian Malaysia (Agrobank) — are supervised by BNM but under a different law: the Development Financial Institutions Act 2002 (DFIA), not the FSA or IFSA. Several of them also run Islamic banking windows.

Foreign banks, meanwhile, generally participate through locally incorporated subsidiaries holding a Malaysian licence — a deliberate design that keeps regulated banking business inside BNM’s supervisory perimeter.

How does a bank get and keep its licence?

Whichever category a bank falls into, the gatekeeper is the same. Bank Negara Malaysia assesses applicants, licenses the institution under the relevant Act, and supervises it thereafter — with powers to issue guidelines to all financial institutions and specific directions to individual entities to protect financial stability. Existing licences and approvals granted under the old repealed laws were carried over and are treated as if issued under the FSA or IFSA, which is why the 2013 transition did not force banks to re-apply from scratch.

What’s next

If you want to go deeper, the natural next steps are the institutions and rules behind this structure: Bank Negara Malaysia itself as the central bank and supervisor; the mechanics of Islamic finance and the sukuk market; and the digital-bank cohort as it matures from launch into everyday use. For live, exact numbers and the names in each category, the authoritative reference is Bank Negara Malaysia’s own Financial Sector Participants Directory, which is updated as licences are granted, surrendered or transferred. This article is an AI-assisted draft and has not yet been reviewed by a human editor; figures should be checked against BNM’s directory before use in any formal context.