In every economy in the world, financial system plays an essential role in facilitating financial intermediation process that oversees the funds flow between savers and borrowers. Therefore it is essential to ensure financial intermediation process operate smoothly to promote financial stability in an economy. In Malaysia, basically there are two group of licensed financial institutions which promote financial stability in the country, they are; Licensed financial institutions and licensed insurance companies and Takaful operators. Licensed financial institutions consist of conventional banks, Islamic banks, International Islamic banks, Investment banks and other financial institutions while licensed insurance companies and Takaful operators consist of life business, life and general reinsurance business, life reinsurance business, general reinsurance business, Takaful operators and Retakaful operators. For the purpose of this study only one aspect of the licensed financial institutions which is conventional banks are focused on.