1. Concept of Financial system is related to availability of Finance to various different sections of the society and it is related to maintenance of a system which will be providing transparency and liquidity and credit availability at regular intervals which will help in boosting growth of the economy and helped in creation of jobs and maintenance of the transparency and protection of the interest of the market participants.

Financial system is a system which is comprising of financial intermediaries along with Central banks and regulators and stock exchanges which will provide for movement of money from one source to another and it will always aim at providing better credit availability and maintenance of transparency and protection of the interest of depositors so a well managed financial system will help the economy in able to manage the the finance in a better manner and help in growth.

2. Two type of banking institution in Malaysian banking system are-

A. Commercial banks- Commercial banks are those banks which will be accepting deposits and providing loans and they are accepting deposits and loan on the basis of the profit making and they are governed by providing interest and accepting interest and they are also entering into a large number of transaction in order to maximize their interest and their value so they will try to enhance the credit availability and adapt to the monetary policy which has been established by the central bank.

B. Islamic banks- Islamic banks will be governed by the principles of Islam and they will not accept interest and they will believe in risk sharing so they will offer various instruments which will be alternative to the traditional systems of banking but they will not follow up with the traditional banking because it is a riba free concept