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    BNM Consults on Requirements for Repurchase Agreement Transactions

    August 20, 2019

    BNM published an exposure draft setting out the revised expectations from the licensed banks and licensed investment banks that enter into repurchase agreement (repo) transactions. This policy document is applicable to repo transactions involving Ringgit and non-Ringgit Repo securities and reverse repo transactions including any outright sale or purchase of repo securities with an intention to repurchase or resell these repo securities at a future date. The response period for the consultation ends on September 13, 2019.

    The policy document on repo transactions seeks to set out the scope of repo transactions that can be conducted by licensed banks and licensed investment banks, to set out regulatory requirements and expectations in relation to repo transactions entered into by licensed banks and licensed investment banks, and to promote sound risk management practices by licensed banks and licensed investment banks for the conduct of repo transactions. Revisions to the policy document comprise primarily of the following:

    • Extension of the maximum tenor of a repo to 5 years from 365 days
    • Expansion of eligible securities to accord flexibility to market participants in their conduct of repo transactions
    • Removal of subjection to Malaysian Annex

    This document will supersede the policy document on repurchase agreement transactions (BNM/RH/PD 032-3), which was issued on July 31, 2015. The revised policy document shall come into effect on date of publication of the final policy. This policy document must be read together with other policy documents and guidelines of BNM, particularly the capital adequacy framework (Basel II – Risk Weighted Assets) issued on May 03, 2019; the single counterparty exposure limit requirements issued on July 09, 2014; the Foreign Exchange Administration rules; the Code of Conduct for Malaysia Wholesale Financial Markets issued on April 13, 2017; the net stable funding ratio requirements issued on July 31, 2019; and the STATsmart reporting requirements.

     

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    Comment Due Date: September 13, 2019

    Keywords: Asia Pacific, Malaysia, Banking, REPO, Repurchase Agreement, BNM

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