Banking sector is developing rapidly in Malaysia and commercial banks are become the most important part of the financial institutions. Malaysian banking system consisted of monetary and non-monetary institution. The monetary institution are the central bank which known as Bank Negara Malaysia (BNM), and the commercial banks included Bank Islam. However, the non-monetary institutions comprised into two categories; the first group is supervised by Bank Negara Malaysia (BNM); comprises commercial banking institutions (including Islamic), investment banks and development financial institutions. The second is under the supervision of several government agencies and departments (IMF, 2014).
Bank Negara Malaysia or known as Central Bank of Malaysia is a statutory body which established on 1959 (BNM, 2016). BNM is governed by the Central Bank of Malaysia Act 2009. The role of BNM is to promote monetary and financial stability. This is aimed at providing a conducive environment for the development of Malaysian economy (BNM, 2016). According to ASEAN +3 Bond Market Guide, Malaysia (2016), BNM focuses on three important elements of central banking which are monetary stability, financial stability and payment system. Furthermore, importance has given to the development of BNM align to economic management, institution building and strengthening of financial system.
The primary functions of BNM are as below:
a) Formulate and implement monetary policy in Malaysia
b) Issues currency in Malaysia
c) Regulate and monitor financial institutions
d) Hold and manage the foreign reserve of Malaysia
e) Act as financial advisor, banker and financial agent of government.
f) Provide foreign exchange market
Source : ASEAN +3 Bond Market Guide 2016, Malaysia
The banking services considered as one of the largest and important industry in Malaysia. This industry encourages the development of new infrastructure which provide new income opportunities (Productivity Report 2010/2011). Banking is one of the sector that experiencing major challenges due to globalization. According to Panatik & Noordin (2015), banking industries in Malaysia have to cope with technological changes, managerial changes and global competition (Ang et al., 2014). The ability to offer a wide range of services with high quality by banks in Malaysia to satisfy the customers will enable the financial institution to be a competitive in a worldwide. In today banking business, a competitor will gain a customer if another bank fail to satisfy the customer. It is because banking situation is experiencing to improve through meeting the customers’ demands who is expecting greater changes in the industry (Osman, et.al 2016). In addition, the author further mentioned that banking sector now becoming more integrated due to technological changes, deregulation and liberalization which leads to competitive environment. Thus, banks need to focus on the factors that helps to develop competent employees. Currently, Malaysian financial institution is constituted by 27 commercial banks which are 8 domestically owned and 19 foreign owned banks. These banks serve for customers included Malaysians and non-Malaysians (Bank Negara Malaysia, 2016). Besides, there are 16 Islamic Banks which included in local and foreign setting.