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• Banking and Financial Legalese (Terms)
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CAN LICENSED BANKS OR FINANCIAL INSTITUTIONS GRANT CREDIT FACILITIES TO ITS DIRECTORS AND OFFICERS ?

Unless it is exempted by the Central Bank of Malaysia, no bank or financial institution is allowed to grant any credit facility to

• any of its director or officers or other persons receiving remuneration from it. These exclude accountant, advocate, architect, estate agent, doctor and any other person receiving remuneration from it in respect of his professional services. However credit facility can be granted to
• any of its officers or its executive director which is provided for under his scheme of service or where there is no such provision in special or compassionate circumstances a loan not exceeding at any one time 6 months remuneration of that officer or executive director
• the spouse, child or parent of an officer including an executive director for the purchase of a house.
• any body corporate or incorporate, or a sole proprietorship which any of its directors or officer is a guarantor or agent
• any corporation in which any of its directors or officers has any interest in the shares of that corporation
• any person for whom any of its directors or officers has given any guarantee or other undertaking whatsoever involving financial liability

Every director of a bank or financial institution shall declare any interest whatsoever that he has in a proposed credit facility as soon as it is practicable. The declaration must be made in writing at a duly constituted meeting of directors and the secretary or officer appointed shall distribute a copy of declaration to every director regardless whether he attended such meeting.

WHAT HAPPENS IF A DIRECTOR OR OFFICER OF A BANK OR FINANCIAL INSTITUTION GIVES CREDIT FACILITY EXCEEDING THE LIMIT IMPOSED ON HIM ?

A director or officer of a bank or financial institution is prohibited to give any credit facility in excess of the limit, or outside the scope of any terms and conditions, imposed on him by the licensed institution, or in contravention of any directions given to him by such institution.

Any person who contravenes the above provision shall be guilty of an offense and shall on conviction be liable to be punished with

• imprisonment not exceeding 5 years or
• with a fine not exceeding RM$5 million.

The Central Bank of Malaysia may call for the credit policy of the bank or financial institution and if necessary, direct the institution to amend the credit policies and lending limits of its directors and officers.