The existing resolution power of Malaysia Deposit Insurance Corporation will be strengthened through new provisions under the Malaysia Deposit Insurance Corporation Act 2011 (PIDM Act), namely compulsory share transfer power.

The proposal is among those contained in the provisions to the Act that was tabled for second reading by Deputy Finance Minister Johari Abdul Ghani at the Dewan Rakyat today.

He said the proposed compulsory share transfer power was aimed at allowing PIDM to take immediate resolution actions toward institutional members which were declared as not viable.

"PIDM can, with the approval of the Finance Minister, transfer shares of institutional members which are not viable to private sector buyers who are able to invest funds to revive the institutional member which is not viable," he said.

Johari said a reasonable compensation would be given to the shareholder who has the opportunity to apply for a review on the reasonable compensation through the assessment committee.

"The compulsory share transfer power proposal is an important private sector resolution to ensure problematic institutions could be revived via private funds, when there are private buyers who are prepared to revive problematic institutional members," he said.

He said the compulsory share transfer power would be able to minimise systemic interference in managing the problematic institutional members, besides protecting the important economic functions.

"This resolution method enables institutional members to continue to exist and operate as a valid entity, as well as avoid disorder in banking or insurance services, for the interest of depositors and takaful certificate and insurance policy owners," he added.

He said these additional compulsory share transfer power was recognised at the international level as among the preferred resolution tools and was important for financial stability.

Johari said since the occurrence of the global financial crisis, regulatory bodies in countries such as the United Kingdom, Canada, and Singapore have introduced compulsory share transfer power to resolve institutions that are facing difficulties.

He said the bills were also to amend other provisions in the PIDM Act to improve administration effectiveness, clarity, and consistency in PIDM's power implementation.

The Dewan Rakyat will resume on Monday.

- Bernama