The Financial Services Act allows the minister to impose new conditions on existing financial institutions.

PETALING JAYA: A lawyer has disputed finance minister Tengku Zafrul Aziz’s statement that the government does not have any legal power over banks when it comes to imposing loan moratoriums.

Derek Fernandez said the minister actually has “tremendous power” to legally compel the banks to agree to provide the moratorium.

“All governments have the power to fully control financial institutions because banking and finance is a critical component of national and economic security,” he said.

He added that a banking licence is not a legal right, but a privilege, that comes with conditions that the government can and must impose for the good of the nation.

Fernandez said the government through the finance minister can re-enact the Covid-19 Temporary Measures Act and enlarge its scope to cover financial institutions and loan repayments, if polite appeals to the banks do not work.

The government may even widen the scope of the powers of the Emergency (Essential Powers) Ordinance 2021 to achieve the same result, albeit it may be unnecessary as there are other legal avenues, notably, the Financial Services Act (2013).

He added that the finance ministry, which is the issuer of banking licences under Section 10 of the Act, and also Bank Negara (which may also grant licenses under Section 11) can decide not to renew or give further licence approvals to banks which do not cooperate with the government.

Section 13 of the Act also allows the minister or Bank Negara to impose new conditions on any financial institution.

Elaborating further, he said Section 11 and Section 13 of the Act allow national policy considerations to be taken into account when deciding whether or not to approve or renew a license of financial institutions.

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At a press conference yesterday, Tengku Zafrul said the latest loan moratorium the government had proposed under the Pemerkasa Plus stimulus package followed discussions with Bank Negara and the banks.

He had been asked why the moratorium was not given to all and on an automatic basis, as was done in the first MCO.

The new opt-in moratorium is targeted at the B40 group, those who lost their jobs, and small and medium-sized enterprises.

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