PETALING JAYA: South-East Asian banks opening new branches in Malaysia in the future will likely provide services such as small and medium enterprise (SME) financing or trade financing.

“New foreign banks to open in Malaysia will not compete on the same playing field as the others and will need to offer new products in this market – it won’t be retail banking,” said a local bank-backed research analyst.

Reuters quoted Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz as saying that Malaysia might allow South-East Asian banks to open more branches in Malaysia in the future as it seek to further liberalise the financial sector.

However, it is unclear if this would apply for new banks making a presence in Malaysia or a blanket ruling for all foreign banks based in this country.

Zeti told reporters at an Islamic finance conference in Jakarta on Monday that the number of branches by owned foreign banks would be increased from eight now.

Analysts expect more liberalisation measures to be included in the new financial sector blueprint to be announced by the central bank soon.

Some of these measures include increasing financial linkages and encouraging foreign banks to increase their network in the country.

The focus of the new masterplan will be on enhancing the capacity and capability of the Malaysian financial sector to serve the needs of a high-value-added and high-income economy and reinforcing the country’s position as a global hub for Islamic finance.

It will also focus on supporting the holistic review of pension and social security system, given the demographic and social trends in Malaysia; and deepening the country’s inter-linkages with regional and international economies by facilitating further growth of cross-border financial transactions.

A banking analyst with foreign research house said she expected competition to intensify in the consumer banking sector among incumbent foreign banks should they be allowed to increase their number of branches and having a greater distribution reach.

Malaysia has restricted the number of branches a foreign bank can open as it wants banks to open not only in urban but also rural areas to reach small businesses.

Some of the Asean banks that have a presence in Malaysia are Singapore’s United Overseas Bank Malaysia Bhd and OCBC Bank Malaysia Bhd as well as Indonesia’s largest bank, Bank Mandiri, which has reportedly said that it wanted to expand in Malaysia.