Will BNM delay announcing successful bidders for digital banking licenses?

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LAST month, Bank Negara Malaysia (BNM) Governor Nor Shamsiah Mohd Yunus reportedly said the central bank was at an advanced stage of assessing applications for digital banks and was aiming to announce digital banks with the publication of the BNM’s annual report at the end of March 2022.

She also said that the BNM had received 29 applications and that she intended to allow a maximum of five, she had to thoroughly evaluate each of the applications.

In the policy document on licensing framework for digital banks published by BNM on December 31, 2020, it is stated that BNM will assess the shareholders of applicants against the factors set out in Schedule 6 of the Financial Services Act ( FSA) and Islamic financial services. law (ISFA), which states, among other things, the following:

“The character and integrity of the applicant, or if the applicant is a legal person, its reputation for being operated in a manner consistent with standards of good governance and integrity”.

FSA and IFSA Schedule 7 – List of Prohibited Business Conduct – further states the following:

1. Engage in conduct that is misleading or misleading, or likely to mislead or deceive regarding the nature, features, terms or price of any financial service or product.

2. Induce or attempt to induce a financial consumer to do or omit to do any act in connection with a financial service or product by:

– make a statement, illustration, promise, forecast or comparison that is misleading, false or misleading;

– concealing, omitting or dishonestly providing material facts in an ambiguous manner; Where

– recklessly make any statement, illustration, promise, forecast or comparison that is misleading, false or misleading.

3. Exercising undue pressure, influencing or using or threatening to use harassment, coercion or physical force in connection with the provision of any financial service or product to a financial consumer, or payment for any financial service or product by a financial consumer

Paragraph 12 of the Licensing Procedures Policy document also states that applicants must describe measures for responding to customer questions or complaints.

One such candidate was BigPay, a holding company of the Capital A group of companies (formerly AirAsia Group Bhd), which announced on July 1 last year that it had established a strong consortium of partners. which includes Malaysian Industrial Development Finance Bhd and Ikhlas Capital to support its digital banking license application.

Capital A Bhd has been classified as Practice Note 17 (PN17) following its failure to obtain an extension of the relief period from Bursa Malaysia on January 14, 2022.

The PN17 classification or its predecessor PN4 was introduced by Bursa Malaysia for companies listed in Bursa following the financial crisis that hit the country in 1997, where many listed companies were forced into financial distress status after the stock market fell nearly 54% in a few days. Companies that enter into financial distress are generally faced with either a liquidity problem, which may be temporary, or over-indebtedness. The classification also aims to enable and alert investors to companies in financial difficulty as early as possible before it turns into a more serious problem.

It is obviously not a simple accounting and structuring question, as the founder of AirAsia said. Perhaps the other 25 companies rated PN17 along with AirAsia Group Bhd and AirAsia X will agree and concur with this statement. Do Bursa Malaysia, Securities Commission and Audit Oversight Board also agree?

What is an accounting and structural issue and not the liquidity or profitability of the business is the RM33 billion that AirAsia X will reinject into profits in the next quarter following the completion of the restructuring of its debt.

If the triggering of PN17 status is simply due to a lease that AirAsia never paid and should not be included in profit and loss as the founder claims, why does Ernst & Young, the external auditor, insist? it for the company to report this amount in its accounts? books?

If this is a lease that AirAsia never paid, this is consistent with AirAsia Group’s past behavior in its long-running dispute with Malaysia Airports (Sepang) Sdn Bhd (MASSB) over service charges. passengers, aircraft parking and landing fees, as well as aerobridge fees, check-in counter fees and late payment fees, which resulted in the Court of Appeal’s dismissal of an appeal by the low-cost carrier seeking to strike out the MASSB claim after many years.

It was ironic that AirAsia X argued that the fee increase could not be justified due to “substandard facilities and services which they believe should not be imposed on passengers with higher fares. students “.

AirAsia Group demonstrated the same substandard services when it ignored or refused to respond and publicly state whether it would refund the amount of approximately RM600 million owed to customers who, due to the pandemic, did not couldn’t fly. These passengers did not request reimbursement. Admittedly, unlike KLM, which has a general no-refund policy, the refund was an option offered by the AirAsia Group to allow them to opt for a cash refund or take a credit voucher. Capital A has yet to respond to those passengers, who have taken to social media to vent their frustrations.

At the start of this pandemic, the group claimed to have handled more than half a million queries from its customers, which is apparently 10 times its normal volume. Subsequently, the group moved answering customer queries to the “Ava” virtual chat box. Although AirAsia has posted screenshots showing how to navigate the chat box service feed, with extensive customer service on the airline’s live chat as well as social media including Facebook, Twitter and WeChat, customers still found the virtual chat box difficult to use.

This was especially the case when the mechanism did not provide a satisfactory resolution and customers wanted to contact a human to respond.

A casual check of all social media group posts will reveal the public’s continued dissatisfaction with their queries from the AirAsia Group Help Desk. If this can happen at the group level, what assurance can BigPay give to adequately respond to customer queries or complaints?

Yes, Capital A and BigPay may be able to meet all other requirements set out in BNM’s Licensing Framework for Digital Banks and qualify for licensing. Yes, the AirAsia Group has contributed significantly to the economy and employment of Malaysians. Yes, they led and helped fly more Malaysians.

But if their corporate behavior falls short of Schedules 6 and 7 of the FSA and IFSA, the finance minister and the BNM will find it difficult to license the consortium led by BigPay.

Given recent developments, BNM might also want to know about the viability of the holding company, Capital A Bhd, how and where would it find new funds to replace the RM500 million that the group rejected for the bonds to be secured by Danajamin. Yes, the amount is for Capital A and BigPay is properly capitalized according to the framework, but any issues affecting the sustainability of Capital A’s business would certainly impact the sustainability and viability of BigPay as a licensed digital bank.

No amount of corporate or legal gymnastics can explain the corporate behavior of this plaintiff’s holding company.

Will BNM delay this announcement to allow Capital A to exit its PN17 status for license allocation or does it believe the above company behavior is acceptable and will not influence its decision to award the digital banking license to the consortium? – March 22, 2022.

*FLK reads The Malaysian Insight.

* This is the opinion of the author or publication and does not necessarily represent the views of The Malaysian Insight.

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