# Bank Negara Malaysia: The Central Bank

> What Bank Negara Malaysia actually does under the Central Bank of Malaysia Act 2009 — set the policy rate, issue the ringgit, supervise banks and insurers, manage the reserves, and administer the foreign exchange rules — and how to check any of it at source.

- Category: government
- Language: en
- Status: published
- Updated: 2026-08-01
- Canonical: https://negaraku.md/en/government/bank-negara-malaysia

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Every time a headline says interest rates are holding, the ringgit slipped against
the dollar, or a bank was told to tighten its lending, the same institution sits
behind the story. It works out of a fortress-like complex on Jalan Dato' Onn in
Kuala Lumpur, it never lends you a cent directly, and yet almost every ringgit in
your pocket and every loan on your statement passes through rules it writes.
That institution is Bank Negara Malaysia — and most of what people assume it does
is either only half right or belongs to a different agency entirely.

## At a glance

| | |
| --- | --- |
| Name | Bank Negara Malaysia / Central Bank of Malaysia |
| Type | Statutory body; the central bank for Malaysia |
| Founding law | Central Bank of Malaysia Act 2009 (Act 701) |
| Royal assent / gazetted | 19 August 2009 / 3 September 2009 |
| Continues | The body corporate first established under the Central Bank of Malaysia Act 1958 (now repealed) |
| Principal objects | Monetary stability and financial stability conducive to sustainable growth (s.5(1)) |
| Paid-up capital | RM100 million, subscribed by the Government (s.6) |
| Head office | Kuala Lumpur (s.3(4)) |
| Governor (as at 2026) | Dato' Sri Abdul Rasheed Ghaffour |
| Website | `bnm.gov.my` |

The most important line in that table is the one about lineage. BNM is not a new
2009 creation: Act 701 explicitly continues the same body corporate that has
existed since the late 1950s, now under a modern statute. When people ask "when
was Bank Negara set up," the honest answer is that the institution predates its
current law by half a century, but the *rulebook* you should read today is the
2009 Act.

## What is Bank Negara Malaysia legally responsible for?

Strip away the jargon and BNM's job is defined in one sentence of statute.
Section 5(1) of Act 701 states that the Bank's principal objects "shall be to
promote monetary stability and financial stability conducive to the sustainable
growth of the Malaysian economy." Two stabilities — money and the financial
system — in service of growth. Everything else is machinery for delivering those.

Section 5(2) then lists nine **primary functions**. This is the definitive list;
if someone claims BNM does something, it should map to one of these:

| # | Primary function (s.5(2)) | In plain terms |
| --- | --- | --- |
| a | Formulate and conduct monetary policy in Malaysia | Set the policy rate, manage liquidity |
| b | Issue currency in Malaysia | Print and mint the ringgit |
| c | Regulate and supervise financial institutions subject to the laws it enforces | Licence and police the banks, insurers, takaful operators |
| d | Provide oversight over money and foreign exchange markets | Keep the wholesale funding and FX markets orderly |
| e | Exercise oversight over payment systems | Oversee the plumbing behind transfers and cards |
| f | Promote a sound, progressive and inclusive financial system | Financial development and inclusion |
| g | Hold and manage the foreign reserves of Malaysia | Custody of the national reserves |
| h | Promote an exchange rate regime consistent with the fundamentals of the economy | Keep the ringgit's regime credible |
| i | Act as financial adviser, banker and financial agent of the Government | Be the Government's bank and adviser |

Two things follow from this list. First, retail banking is *not* on it — BNM does
not compete with commercial banks for your deposit. Second, the Bank is required,
under Section 5(4), to have regard to the national interest in everything it does,
and Section 5(3) gives it all the incidental powers needed to carry the functions
out. The rest of this guide walks through the functions that matter most to
ordinary people and businesses.

## How does BNM set monetary policy?

This is the function most likely to touch your monthly budget, because it drives
the cost of borrowing. Under Section 22, "in promoting monetary stability, the
Bank shall pursue a monetary policy which serves the interests of the country."
The concrete lever is the **Overnight Policy Rate (OPR)** — the benchmark rate
that anchors what banks charge each other overnight, and by extension what they
charge you.

The OPR is not set by the Governor alone or by the Government. Section 23
establishes a **Monetary Policy Committee (MPC)** with sole responsibility for
formulating monetary policy and the policies for conducting monetary policy
operations. Its design is worth knowing:

- The MPC consists of the Governor, the Deputy Governors, and **not less than
  three but not more than seven** other members (s.23(2)).
- Members other than the Governor and Deputy Governors may be appointed for a
  term **not exceeding three years**, renewable (s.23(6)).
- Crucially, "the monetary policy of the Bank shall be formulated only at a duly
  convened meeting of the Monetary Policy Committee" (s.23(10)) — no policy by
  memo.
- After every meeting, Section 24 requires the Bank to publish a monetary policy
  statement giving the decision and the rationale.

That transparency requirement is why you can always find, in writing, why rates
moved or held. In practice the MPC meets **six times a year**. For 2026 the
scheduled meeting dates were 22 January, 5 March, 7 May, 9 July, 3 September and
5 November. Following the January 2026 meeting the OPR stood at **2.75%** — the
level it has held since it was lowered from 3.00% in July 2025.

A worked example makes the transmission concrete. Say the MPC cuts the OPR by 25
basis points, from 3.00% to 2.75%. Banks' cost of funds falls, so floating-rate
loans pegged to a bank's Standardised Base Rate or Base Rate tend to drift down,
and a borrower on a 30-year home loan sees a slightly smaller monthly instalment
within a billing cycle or two. Deposit rates fall too. The Bank is trading a
little savers' yield for cheaper credit to support growth — exactly the balance
Section 22 asks it to strike.

## Who issues the ringgit?

Only one body can, and it is BNM. Section 61 of Act 701 fixes the fundamentals:
"The unit of currency in Malaysia shall be the ringgit, which shall be divided
into one hundred sen," and its abbreviated form "shall be 'RM' or 'MYR'." When
you see a price written as RM49.90, that notation is statutory, not stylistic.

Issuing currency (function (b) above) means BNM alone designs, prints and mints
the notes and coins, decides denominations, and manages their circulation and
replacement. Counterfeiting or defacing them is an offence against the currency,
not merely against a bank.

Currency and the exchange rate are related but legally distinct. The **exchange
rate regime** — whether the ringgit floats, is managed, or is pegged — is *not*
BNM's unilateral choice. Under Section 66, "the exchange rate regime for the
ringgit shall be determined by the Minister on the recommendation of the Bank."
BNM recommends; the Minister of Finance decides. Separately, Section 65 lets the
Bank "at its discretion buy and sell ringgit against gold or any foreign currency
eligible for inclusion in the foreign reserves," which is the statutory basis for
its market operations. So the common shorthand "Bank Negara sets the ringgit's
value" is imprecise: BNM manages, intervenes and advises, but the ringgit's day
-to-day value is a market outcome and the regime itself is the Minister's call.

## How does BNM supervise banks and insurers?

Regulating and supervising financial institutions is function (c), and Part VI of
Act 701 arms the Bank with financial-stability powers — to collect information,
impose measures, and act to avert or reduce risks to the financial system. But the
day-to-day rulebook for the institutions themselves lives in two companion laws
that BNM administers.

The **Financial Services Act 2013 (FSA)** and the **Islamic Financial Services
Act 2013 (IFSA)** both came into force on **30 June 2013**. Between them they
consolidated a stack of older statutes into a single modern framework for the
conventional and Islamic sectors respectively. The laws they replaced included:

- the Banking and Financial Institutions Act 1989 (BAFIA)
- the Islamic Banking Act 1983
- the Insurance Act 1996 and the Takaful Act 1984
- the Payment Systems Act 2003
- the Exchange Control Act 1953

Under these, BNM licenses banks, insurers and takaful operators, sets capital and
governance standards, conducts supervision and stress testing, and can intervene
in a troubled institution. This is the layer people feel indirectly: when a bank
tightens mortgage assessment or an insurer changes how it prices a product, it is
usually responding to BNM policy documents issued under the FSA or IFSA.

A useful boundary to remember: BNM supervises **banks, insurers and takaful
operators**; it does **not** regulate the stock market or unit trusts — that is
the Securities Commission Malaysia under separate capital-markets law. Confusing
the two is one of the most common mistakes people make about who to complain to.

## What are the foreign exchange (FEP) rules?

If you run an import business, invest abroad, or hold a foreign-currency account,
this is the BNM function you will meet in person. Malaysia does not have free-for
-all cross-border money movement; it operates a set of **Foreign Exchange Policy
(FEP)** rules — formerly called Foreign Exchange Administration (FEA) — that BNM
administers under the FSA and IFSA to support monetary and financial stability and
safeguard the ringgit.

The FEP is a set of Notices, and the rules differ depending on whether you are a
**resident** or a **non-resident**. In broad strokes:

- A **resident** may freely buy or sell ringgit against foreign currency with a
  licensed onshore bank for current and financial account transactions, and may
  open and maintain a Foreign Currency Account, subject to the limits and
  conditions in the Notices (for example, thresholds on borrowing in foreign
  currency and on investing abroad when the resident has domestic ringgit
  borrowing).
- A **non-resident** may buy or sell foreign currency against ringgit on a spot
  basis for any purpose, and on a forward basis where there is an underlying
  obligation, and may hold a Foreign Currency Account onshore. The per-year limits
  on foreign-currency investment that can apply to residents do not apply to
  non-residents.

Because the FEP Notices are updated periodically, the golden rule is to read the
current Notice at `bnm.gov.my/fep` (or ask your bank's forex desk) before
structuring a cross-border transaction — do not rely on a summary, including this
one, for a live deal.

## Where BNM sits among the other agencies

A lot of confusion disappears once you see which agency owns which lane. Here is
how BNM compares with the neighbours it is most often mixed up with:

| Institution | Owns this lane | Does NOT do |
| --- | --- | --- |
| Bank Negara Malaysia | Monetary policy, the ringgit, bank/insurer supervision, reserves, forex rules | Retail banking; the stock market; tax |
| Securities Commission Malaysia | Capital markets — equities, bonds, unit trusts, licensed fund managers | Set the policy rate; supervise banks |
| Department of Statistics (DOSM) | Official statistics — GDP, CPI, labour, trade | Set policy; regulate anyone |
| Inland Revenue Board (LHDN) | Direct taxes — income tax, RPGT, stamp duty | Monetary or banking policy |
| Ministry of Finance | Fiscal policy, the Budget, ownership of BNM; decides the FX regime on BNM's advice | Conduct monetary policy itself |

Two relationships in that table are subtle. First, BNM is owned by, and is banker
to, the Government (function (i), and Section 69 makes it "banker and financial
agent to the Government") — yet monetary policy is the MPC's, not the Cabinet's.
Second, BNM may extend **temporary financing** to the Government under Section 71,
but the amount outstanding is capped at **twelve and a half per cent (12.5%)** of
the Federation's estimated receipts for that financial year — a statutory guard
against the central bank simply funding the budget.

## A quick decision framework: which BNM channel do I need?

Match your situation to the right door rather than emailing the Governor:

- **You want to know why rates moved or where they might go.** Read the latest
  Monetary Policy Statement and the OPR decisions page on `bnm.gov.my`. Every
  decision comes with a published rationale (s.24).
- **You have a complaint about a bank, insurer or takaful operator.** This falls
  under laws BNM enforces (FSA/IFSA). Use BNM's public contact channel (BNMLINK /
  BNMTELELINK) or the Ombudsman for Financial Services for eligible disputes.
- **You are doing a cross-border or foreign-currency transaction.** Check the
  current Foreign Exchange Policy Notices at `bnm.gov.my/fep`, then confirm with
  your licensed onshore bank.
- **You need an economic statistic** (GDP, inflation, unemployment). That is DOSM,
  not BNM — though BNM publishes monetary and banking-system data of its own.
- **You have a tax question.** That is LHDN. BNM has no role in tax.

## Common mistakes and misconceptions

- **"Bank Negara sets the ringgit's exchange rate."** It manages and advises, but
  under Section 66 the regime is the Minister's decision on BNM's recommendation,
  and the day-to-day rate is a market outcome.
- **"You can open an account or get a loan from Bank Negara."** You cannot. BNM is
  a central bank; retail banking is not among its Section 5(2) functions.
- **"The Governor decides interest rates."** Monetary policy can only be
  formulated at a duly convened MPC meeting (s.23(10)); it is a committee decision.
- **"Bank Negara regulates the stock market."** No — that is the Securities
  Commission. BNM's remit is banks, insurers, takaful, payment systems and the
  money and FX markets.
- **"Bank Negara controls inflation on its own."** It targets monetary stability
  through policy, but prices also move with fiscal policy, global commodity prices
  and supply shocks well outside any central bank's control.
- **Citing an old FEP or FEA rule.** The Foreign Exchange Policy Notices are
  revised over time; always read the current Notice before acting.
- **Treating a news summary as the source.** For anything load-bearing, quote the
  Act by section, or the dated Monetary Policy Statement, not a headline.

## What's next

If you came here for a specific number rather than the institution, the live
figures live on `bnm.gov.my`: the OPR decisions page for the policy rate, the
Monetary Policy Statements for the reasoning, and the Foreign Exchange Policy
section for the forex rules. For the wider economic picture — GDP, inflation and
the labour market — the publishing authority is the
[Department of Statistics Malaysia](/en/government/dosm), not BNM. For how the
Government raises and spends money, see the
[federal budget](/en/government/federal-budget); and for the tax side of the
ledger, the [Inland Revenue Board](/en/government/lhdn). To read the rules
yourself, start with the Central Bank of Malaysia Act 2009 (Act 701) — it is short
enough to skim and definitive enough to settle almost any argument about what
Bank Negara Malaysia is, and is not, allowed to do.

## Sources

- Central Bank of Malaysia Act 2009 (Act 701) — Laws of Malaysia, updated text as at 1 November 2020 — https://www.investmalaysia.gov.my/media/sbqpwvem/central-bank-of-malaysia-act-2009.pdf (Government of Malaysia (Laws of Malaysia reprint))
- Introduction — Bank Negara Malaysia — https://www.bnm.gov.my/introduction (Bank Negara Malaysia)
- OPR Decisions — https://www.bnm.gov.my/monetary-stability/opr-decisions (Bank Negara Malaysia)
- Financial Services Act 2013 and Islamic Financial Services Act 2013 Come Into Force — https://www.bnm.gov.my/-/financial-services-act-2013-and-islamic-financial-services-act-2013-come-into-force (Bank Negara Malaysia)
- Foreign Exchange Policy — https://www.bnm.gov.my/fep (Bank Negara Malaysia)
- MPC Meeting Schedule — https://www.bnm.gov.my/mpc-meeting-schedule (Bank Negara Malaysia)
- Abdul Rasheed Ghaffour Appointed Governor of Bank Negara Malaysia (five-year term, 1 July 2023 to 30 June 2028) — https://www.mof.gov.my/portal/en/news/press-citations/abdul-rasheed-ghaffour-appointed-governor-of-bank-negara-malaysia (Ministry of Finance Malaysia)
- Bank Negara keeps OPR at 2.75pct in second MPC meeting — https://www.nst.com.my/business/corporate/2026/03/1390459/bank-negara-keeps-opr-275pct-second-mpc-meeting (New Straits Times)
- Dato' Sri Abdul Rasheed Ghaffour — Governor — https://www.bnm.gov.my/governors/rasheed (Bank Negara Malaysia)
- Policy consistency, strong fundamentals anchor investor confidence — Bank Negara governor — https://www.thestar.com.my/business/business-news/2026/08/14/policy-consistency-strong-fundamentals-anchor-investor-confidence---bank-negara-governo (The Star)
- MPC Meeting Decision Schedule — tag/mpc-2026 — https://www.bnm.gov.my/monetary-stability/mpc-meetings/-/tag/mpc-2026 (Bank Negara Malaysia)
- Monetary Policy Statement 09072026 — https://www.bnm.gov.my/-/monetary-policy-statement-09072026 (Bank Negara Malaysia)

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Source of truth: https://github.com/negaraku-md/NegaraKu.md
License: CC BY-SA 4.0