SC urges bond, sukuk trustees to embrace digital transformation
Published on: Saturday, May 13, 2023
By: Bernama
Securities Commission Malaysia’s (SC) Chairman Datuk Seri Dr Awang Adek Hussin - Bernama pix
Kuala Lumpur: Bond and sukuk trustees should concentrate on raising their professional standards and creating better service offerings in order to keep up with the growth of the bonds and sukuk market.Securities Commission Malaysia’s (SC) Chairman Datuk Seri Dr Awang Adek Hussin said this includes leveraging technology to better undertake their role to protect investors’ interests and act as intermediaries between issuers and investors more effectively.
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He noted significant changes in the way services are provided are expected with the transformation of technology Friday, with the underlying goal to enhance transparency and accountability in the provision of cost-effective services for issuers and investors, saving them time and reducing the risk of errors.
“Regtech, or regulatory technology, is becoming increasingly important in the financial industry, particularly among trustees, as they face an increasing number of regulatory requirements and increased investor scrutiny.
“By leveraging regtech solutions, bond trustees can streamline compliance processes and enhance their risk management capabilities,” he said in his speech at the Bond and Sukuk Trustees Forum 2023 Friday.
He said that the Malaysian bond and sukuk market is one of the most developed and largest in the region, with a total outstanding value of about RM1.9 trillion, representing over 50 per cent of the size of the Malaysian capital market of which corporate bonds and sukuk make up 42 per cent of the total outstanding value.
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“Despite various pandemic challenges and post-pandemic that include global monetary policy tightening, recession fears and geopolitical tensions, the Malaysian corporate bond and sukuk market has continued to grow, with the total outstanding increasing to RM811 billion as at April 2023 compared to the pre-pandemic level of RM717 billion in 2019,” Awang Adek said.
This is a testament to the resilience and strength of the Malaysian bond and sukuk market and as our economy continues on its recovery path, we can expect the market to thrive and grow further, he said.
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It is also worthy to note that while the appointment of a trustee is not required under the law for government-guaranteed bonds and sukuk, 60 per cent of such issuances have trustees as part of the offering structure.
“This clearly shows the recognition made by market players on the important role that trustees play to protect investors’ interest in bond and sukuk issuances,” he noted.
As part of the initiatives to empower trustees so they can further strengthen their role in the bond and sukuk market, the SC has released the revised Guidelines on Trust Deeds in 2020.
A key amendment to the guideline is raising the sum of money available to the Trustee’s Reimbursement Account (TRA) from RM30,000 to RM100,000, which will increase the funds available to trustees, whenever there is a need to act in the event of default and ensure they have adequate resources to perform their duties.
He also highlighted that buzzwords like “big data”, “Industry 4.0”, “A.I”, and “blockchain” have captivated the financial and capital markets across the world and technology has transformed every aspect of lives, and the financial industry is no exception.
In light of this development, he noted that the SC is also moving ahead with its digital agenda to help increase investor participation and develop a capital market ecosystem that is more synergistic across all segments.
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