Building a Sustainable Capital Market

Critical to the SC’s efforts to build attractive SRI policies and promote a sustainable capital market, are engagements with public policymakers to ensure that the SRI strategic priorities are in line with the overarching national policies and commitments to sustainable development and climate targets. The involvement of capital market intermediaries and other relevant stakeholders is also crucial for the success of SRI initiatives and the development of a facilitative and vibrant SRI ecosystem in Malaysia.

Significant emphasis is placed on strategic discussions with businesses in order to better understand their sustainable financing needs and enhance awareness of the various SRI financing avenues accessible through the capital market. In order to build climate resilience in Malaysia’s financial sector, the SC works closely with BNM and other financial industry stakeholders on ways to accelerate the financial sector’s response to climate risk. At the regional and international level, the SC continues to be active in a number of forums such as the ACMF and IOSCO, where it collaborates with other regulators to drive sustainable finance policies, share experiences and knowledge, and develop capacity building in sustainable finance. The SC continues to spearhead the development of ASEAN sustainable capital markets alongside other ASEAN member nations in its role as Co-Chair of the ACMF’s SFWG.

To enhance collaboration and knowledge sharing on sustainability, the SC also works with global technical specialists, multilateral development agencies, global sustainable finance platforms, and leading sustainable finance industry groups. The SC frequently engages in speaking engagements organised by relevant stakeholders to promote and elevate Malaysia’s profile as a regional SRI hub.

Mitigating Systemic Risks And Promoting Financial Stability

Enhanced Risk Governance Framework

In 2021, the SC-wide risk governance framework was enhanced as part of an overall initiative to have an effective integrated and predictive risk surveillance to maintain regulatory agility.

The structured risk governance framework integrated the wider spectrum of risks such as technology, cyber and conduct risk at the SC’s Systemic Risk Oversight Committee (SROC) and Accounting, Market and Corporate Surveillance Committee (ACMS).

Intensified surveillance

The SC continued to intensify its surveillance of systemic risk to maintain market resilience and stability. Regular SROC engagements were held to deliberate concerns emanating from various segments across the capital market. Domestic equity and bond market, foreign fund flows and trade participation continued to be monitored closely for potential stress points. 

In addition, measures and economic stimulus packages introduced by the government to weather the impact of COVID-19, market trading conduct and the financial position of listed companies were among the focus areas for discussion.

Thematic assessments

The SC also conducted thematic assessments covering investors’ fund flows, the position of firms, and policy decisions to ascertain the possible impact on the capital market. In 2021, the SC reviewed and enhanced its crisis indicators on potential emerging risks in the
capital market. 

The enhanced crisis indicators provided a reference point for escalation to SROC when the identified indicators and triggers materialised and ensured prompt response to manage and prevent any issues of concern that might lead to a systemic crisis.

Joint regulatory discussions

In 2021, the SC conducted frequent joint regulatory discussions with other authorities such as Bank Negara Malaysia (BNM) and Labuan Financial Services Authority (Labuan FSA) to identify systemic risk concern areas within the financial and capital markets in Malaysia.

Monitoring of various components of the capital market

The SC continued its efforts to undertake a methodological and integrated approach to ensure any potential systemic risk was being monitored, mitigated, or managed. Figure 1 highlights the findings from the following risk assessments on the various components of the capital market.

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