Page 29 - CMP3

which seeks to improve the comparability of sustainability-related disclosures as well as cross-border regulatory and supervisory co-ordination. Domestically, both the SC and Bank Negara Malaysia (BNM) kicked off the Joint Committee on Climate Change (JC3) with industry players, to accelerate climate action through the financial sector. Centres of Excellence (COEs) on sustainability for PLCs, financial intermediaries and investors respectively were also established by Capital Markets Malaysia (CMM), an SC affiliate, together with strategic partners to enhance the SRI capabilities among relevant stakeholders.
Such efforts are crucial in the face of greater global impetus to address climate change and pandemic- exacerbated social needs, and are expected to elevate Malaysia’s position as a SRI centre in the region.
1.3 ENHANCED GOVERNANCE FOR MARKET INTEGRITY AND INVESTOR PROTECTION
Market integrity and investor protection are key tenets of a thriving capital market. Against a backdrop of continuous market growth and innovation, the regulatory framework governing markets, intermediaries and corporates had to evolve to stay relevant. Enhanced governance and greater accountability, coupled with credible deterrence and investor empowerment, have played a crucial role in protecting investors and ensuring the integrity of the markets.
1.3.1 STRENGTHENED OVERSIGHT OF SYSTEMIC RISKS
The previous financial crises have led to greater emphasis by banking and securities regulators worldwide on the need for early identification of systemic risks. The SC’s approach to systemic risk management was multi-pronged, taking into consideration potential risks arising from sources external and internal to the capital market.
At the macro-level, the Macro-Prudential Surveillance Framework was established to identify vulnerabilities in the capital market by assessing risk transmission across intermediaries and market segments. This enabled the deployment of policy alternatives to prevent distress and mitigate systemic risks. In tandem, the Securities Commission Act 1993 (SCA) and Capital Markets and Services Act 2007 (CMSA) were enhanced to strengthen the SC’s ability to manage and monitor such risks.
These efforts complemented a shift towards a risk-focused supervisory approach, with emphasis on intermediaries’ risk profiles in relation to their business strategies and exposures. A dedicated risk supervisory group was set up to focus on systemically important financial institutions (SIFIs), to ensure that preventive and corrective actions can be taken in a timely manner to address emerging risks. For smaller intermediaries that are vulnerable to economic shocks, proactive engagement was undertaken to promote the adoption of stress testing in their risk management processes.
The Systemic Risk Oversight Committee (SROC) was also established to oversee systemic risks and co-ordinate market crisis management issues. This includes co-ordination with national and international regulators to ensure a more holistic approach to managing systemic risk and financial sector stability. This framework enabled both the SC and BNM to manage risks and stability in the financial and capital markets as the impact of the pandemic unfolded in the country.
CAPITAL MARKET MASTERPLAN 3
27