KUALA LUMPUR (Oct 11): The proposal by the Government to merge Malaysia's development financial institutions (DFI) will lead to greater synergies, as well as fulfilling the needs of the new economy, according to Bank Pembangunan Malaysia Bhd (BPMB).

In a statement following the Budget 2020 announcement today, BPMB said the proposal is a "positive development" in the Government's efforts to strengthen the DFI eco-system.  

"BPMB’s business lines are complementary to the other institutions, and the proposal will lead to greater synergies that would benefit all stakeholders, as well as fulfill the needs of the new economy," it said.

In his speech today, Finance Minister Lim Guan Eng said Bank Negara Malaysia (BNM) is proposing a two-phase restructuring plan for the DFIs to form a new financial institution through the merger of BPMB, Danajamin Nasional, SME Bank, and the Export-Import Bank of Malaysia.

The Edge Malaysia weekly had reported in early September that BNM was set to impose higher corporate governance (CG) standards on DFIs, similar to the ones for banks.

The standards were proposed after DFIs, especially BPMB, were under increased scrutiny after recent scandals, including dubious loans to politically connected parties, revealed glaring weaknesses in its governance and lending practices.

On Aug 23, the central bank issued an exposure draft outlining proposals for enhancements to the CG requirements for DFIs. These relate to the composition of boards and directors’ responsibilities, in particular.

Among others, DFIs can no longer have active politicians on their boards. Also, a board must have a majority of independent directors at all times.

On other proposals in the Budget, BPMB said it welcomes the increased allocation for the Sustainable Development Financing Fund (SDFF) from RM1 billion to RM2 billion.

This, it said, is very much in line with BPMB’s three-year strategic plan of prioritising impactful development.

"The increased allocation for the Maritime and Logistics Fund from RM1.5 billion to RM2 billion will enable BPMB to step up financing support for the maritime sector’s modernization and fleet expansion projects," it added.