Bank Negara announces new liberalisation rules

PETALING JAYA: Bank Negara has announced a slew of liberalisation measures regarding the use and conversion of foreign exchange, in line with its efforts to enhance competitiveness and develop the domestic financial markets.

Source from (The Sun Daily): http://biz.thestar.com.my/news/story.asp?file=/2012/1/31/business/10567362&sec=business
Published: January 31, 2012

Under the new ruling, which comes into effect from today, licensed onshore banks are allowed to trade foreign currency against another foreign currency with a resident.

This means a resident is allowed to buy and sell foreign currency against another foreign currency for any purpose, including for trading, although such transactions shall only be undertaken with a licensed onshore bank.

However, the liberalisation is only for transactions involving foreign currency against another foreign currency for any purpose and does not include the trading of foreign currency against the ringgit.

The central bank said in a statement that the prevailing rules on the buying and selling of foreign currency against the ringgit were that a resident was only allowed to buy and sell foreign currency against the ringgit with a licensed onshore bank on a spot and forward basis.

Bank Negara’s definition of “licensed onshore banks” includes licensed commercial banks, licensed Islamic banks and licensed investment banks in Malaysia.

It added that to deepen the domestic interest rate derivatives market, a licensed onshore bank was allowed to offer ringgit-denominated interest rate derivatives to a non-bank non-resident.

Ringgit-denominated interest rate derivatives included interest rate futures, options and swaps, it said.

In order to enhance the asset liability management of residents, Bank Negara has also permitted flexibility for a resident to convert his existing ringgit or foreign currency debt obligation into a debt obligation of another foreign currency.

It said these measures were part of the broad thrust of the Financial Sector Blueprint which would contribute towards increasing the liquidity, depth and participation of wider range of players in the domestic financial markets.