Malaysia Financial Reporting Guidelines for Banking Institutions – An Overview and Summary
The Guidelines address requirements on the application of financial reporting standards and information to be disclosed in the financial statements of banking institutions. Compliance with IFRS has been mandatory in Malaysia since January 1, 2012 for interim and annual financial statements and reports. This article provides a brief overview of its requirements.
Applicability
- The Guidelines are applicable to all banking institutions - both commercial and investment banks, licensed under the Banking and Financial Institutions Act 1989 (BAFIA)
Regulatory Requirements
Compliance with Financial Reporting Standards
- Banking institutions should ensure that financial statements are prepared in accordance with the financial reporting standards approved by Malaysia Accounting Standards Board (MASB).
- The board of directors needs to ensure that the financial statements should give a true and fair view of the state of affairs and of the results of the banking institutions.
Specific Accounting Requirements
- The presentation currency should be in Ringgit Malaysia in the financial statements and financial reports.
- Banking institutions that are member institutions of Perbadanan Insurans Deposit Malaysia (PIDM) should also comply with disclosure requirements specified by PIDM.
Requirements on the Use of Fair Value Option for Financial Instruments
- The application of fair value option should be consistent with both applicable financial reporting standards and the banking institution’s risk management and controls framework.
- Banking institutions should ensure that the senior management and the board understands, manages, monitors and controls the use of the fair value option in an effective and transparent manner.
- The use of the fair value option must be supported by a sound governance structure, risk management systems and related policies and procedures.
- Banking institutions should not apply the fair value option to instruments where reliable estimates of fair values cannot be made or where the valuation methodology has proven to be unreliable.
- Banking institutions should also establish procedures for approving the use of the fair value option for new items, products or transactions, as well as the related controls.
- Banking institutions should ensure sufficient documentation to support the use of the fair value option.
- Banking institutions should assign specific responsibility for the determination of fair values used in the financial statements to persons outside the risk-taking functions.
- The use of the fair value option should be monitored by a function (e.g. the finance or control functions) that is independent of the risk-taking activities within the banking institution.
- The appropriateness of a banking institution’s use of the fair value option should be subject to a periodic review by internal audit.
Minimum Disclosure Requirements
- The key principles governing disclosure of information are:
- information should be timely and up-to-date
- the scope and content of information disclosed should be sufficient to provide comprehensive information
- adequate disclosures should be provided on areas of uncertainty
- comparisons over time and between institutions is possible
- Banking institutions should present a statement of financial position that groups assets and liabilities by nature, listed in an order that reflects the relative liquidity of the groups of assets and liabilities.
- The explanatory notes to be disclosed in both annual and interim financial statements of banking institutions should include the following information:
- deposits from customers
- loans, advances and financing
- movement schedule of impairment provisions
- loans, advances and financing classified as impaired
- interest income and interest expenses
- capital
- commitments and contingencies
- operations of Islamic banking
- In addition to above, the annual financial statements should also include
- CEO and Directors remuneration
- liquidity risk information
- reserves
- non-interest income and other operating expenses
Submission Requirements
Annual Financial Statements
- Banking institutions should submit audited financial statements to Jabatan Penyeliaan Konglomerat Kewangan or Jabatan Penyeliaan Perbankan, Bank Negara Malaysia, as applicable, within 3 months after the close of each financial year.
- The supporting schedules to be included in the annual financial statements are:
- management letter prepared by the external auditors
- the draft annual financial statements of any subsidiaries which are major contributors to the group’s profits
- analysis, both in tabular and narrative form, of the overall assessment of the group’s financial performance.
Interim Financial Reports
- In case of interim financial reports prepared on a quarterly basis,
- The banking institutions should submit the first and third quarter reporting to Jabatan Penyeliaan Konglomerat Kewangan or Jabatan Penyeliaan Perbankan, Bank Negara Malaysia not later than 4 weeks after the end of each interim period.
- Unless notified by the Bank, banking institutions should disclose the interim financial reports in their respective websites not earlier than 5 working days after the final submission of the interim financial reports and relevant schedules to the Bank.
- In case of interim financial reports prepared on a half-yearly basis,
- The banking institutions should submit the first half quarter reporting to Jabatan Penyeliaan Konglomerat Kewangan or Jabatan Penyeliaan Perbankan, Bank Negara Malaysia not later than 4 weeks after the end of each interim period.
- Unless notified by the Bank in writing, banking institutions should not disclose (and/or submit to Bursa Malaysia, in the case of a listed banking institution) the interim financial reports in their respective websites
- The following supporting schedules should be attached to the submission of the interim financial reports:
- interim financial reports of principal subsidiaries;
- certification confirming that the interim financial reports are consistent with the financial reporting standards in Malaysia
- where an interim dividend is proposed,
- a certification by the external auditor of the banking institution; and
- a statement by the board certifying the banking institution’s compliance with the Bank’s expectations on financial reporting
- analysis, in tabular and narrative form, of the overall assessment of the group’s financial performance.
Publication Requirements
Annual Financial Statements
- Banking institutions should publish a complete set of the financial statements within 14 days after the laying of the financial statements at its general meeting, in at least two local daily newspapers – one in national language and the other in English.
- The two approved local daily newspapers are - Berita Harian or Utusan Malaysia and The New Straits Times or The Star
- If the full text of the annual audited financial statements is made available on the respective banking institution’s website, the banking institution may publish an abridged format of the annual audited financial statements in the newspapers.
- The abridged format of the financial statements should include:
- a statement of financial position
- a statement of comprehensive income
- a statement of changes in equity
- a statement of cash flows
- Auditors’ Report
- explanatory notes
Interim Financial Reports
- Banking institutions should disclose on the websites the interim financial reports (prepared on a quarterly and half-yearly basis) not later than 8 weeks after the close of the interim period
Additional Resources
Read the Malaysian Financial Reporting Guidelines for Banking Institutions in full here.
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