Parliament unanimously passes PIDM Amendment 2021 Bill

The bill, which was approved after the third reading, was to amend the Malaysia Deposit Insurance Corporation 2011 (Act 720) by inserting new provisions.

Earlier, Deputy Finance Minister II Yamani Hafez Musa tabled the bill for the second reading after the first reading on Sept 23, 2021.

He said the objective of PIDM establishment was to govern the deposit insurance system, as well as takaful and insurance benefits protection system under Act 720.

"It is also to provide insurance against the loss, part or all, of the deposit for which the depositor member is liable and to provide protection against the loss, part or all, of the takaful or insurance benefits for which the insured member is liable.

"The objective is also to provide incentives for proper risk management in the financial system and to promote or contribute to the stability of the financial system," he said.

Yamani Hafez said the financial industry has become more complex and dynamic with the emergence of new technologies and innovations, globalisation, demographic changes and constantly changing market environment.

"This has created new opportunities and challenges to the financial sector in Malaysia," he said.

Therefore, he said PIDM was constantly conducting research and reviews the PIDM Act to make it more effective, agile and able to meet the needs of the rapidly changing financial sector.

"The PIDM Amendment 2021 bill is necessary and important to enable PIDM to play its role and fulfil its mandate more efficiently and effectively.

"Hopefully, the amendment can protect the interest and preserve public confidence in the banking and insurance system, thus, maintaining the stability of the financial system while stimulating Malaysia's economic growth and prosperity," he said.

In the winding-up session, he said the amendment bill would, among others, improve the efficiency of PIDM corporate governance and strengthen PIDM's operational readiness and efficiency in performing its functions and obligations to promote the stability of the Malaysian financial system.

Besides, he said it would enhance the effectiveness of premiums and levy assessment of PIDM member institutions and enhance the effectiveness of administration, clarification and coordination of the exercise of its authority, as well as to correct typographical errors.

He said Clauses 4 to 8 were amendments to enhance the effectiveness and accountability of PIDM's board governance.

Meanwhile, he said to strengthen PIDM's readiness and efficiency in discharging its statutory responsibilities, the new Section 97A (under Clause 30) provided that PIDM would draft, review and amend resolution plans for its member institutions.

He said for the assessment of premiums and levies, Clause 12 to 17, in respect of deposit-taking members, and Clause 22 to 27, in respect of members of insurers, of the bill aimed to refine the assessment of premiums and levies for PIDM member institutions.

"This amendment provides for the assessment of premiums and levies for member institutions involved in amalgamation," he said.

Yamani Hafez said if a member institution were to merge with another, the merged entity would be assessed based on the risk profile of the merged member institution.

"This will ensure that the assessment of premiums and levies is fairer, more transparent and on par with the assessment of other member institutions," he said.

He said to correct typographical errors, the proposed amendments included harmonising the interpretation of "conventional deposits", "Islamic deposits" and "investment accounts" in the PIDM Act with the interpretations on Bank Negara Malaysia's legislations, namely the Financial Services Act 2013 (Act 758) and the Islamic Financial Services Act 2013 (Act 759).

Besides, he said the bill also clarified that investment linked to derivative products were not included in the definition of "deposit" and therefore not under the scope of PIDM's protection.

He added that the bill also updated and amended all references to the old Companies Act 1965 (Act 125) to the new Company Act 2016 (Act 777).

Ten lawmakers debated on the bill.