Featured Product

    BNM Proposes Strategic Direction for KLIBOR and KLIRR

    May 19, 2021

    BNM published a discussion paper that sets out proposed design and features for the development of an alternative reference rate, potential enhancements to the Kuala Lumpur Interbank Offered Rate (KLIBOR), IBOR fallback language, and a review of the Kuala Lumpur Islamic Reference Rate (KLIRR). BNM, in consultation with the Financial Markets Committee, is conducting a comprehensive review on the continuity of KLIRR and a potential alternative Islamic reference rate that adheres to the global standards for financial benchmarks. The comment period for this discussion paper ends on June 18, 2021.

    BNM currently compiles and publishes the Average Overnight Interbank Rate (AOIR), which is a near risk-free weighted average overnight interbank funding rate that considers the BNM's monetary operations and interbank transactions based solely on transaction data, consistent with the development of major alternative reference rates of major currencies worldwide. Taking into consideration the characteristics of the current AOIR, the Financial Markets Committee identified AOIR as the ARR. Financial Markets Committee also proposed some technical refinements to the AOIR to enhance its robustness and representativeness. The refined AOIR is proposed to be renamed as the Malaysia Overnight Rate (MYOR), with the following proposed features:

    • Calculation methodology. MYOR will be calculated as the volume-weighted average rate of unsecured overnight MYR interbank transactions.
    • Data source. MYOR will capture all eligible transactions sourced from the Real-time Electronic Transfer of Funds and Securities System (RENTAS).
    • Data collection window. All eligible transactions settled via RENTAS throughout the entire business day will be included in the MYOR calculation
    • Publication time. To capture all eligible transactions settled on the same day, the Financial Markets Committee proposes for the publication time of the next business day. This proposed change is in line with the international practices for publication of rates such as the Secured Overnight Financing Rate (SOFR) and the Sterling Overnight Index Average (SONIA), which are published on the following business day.
    • Erroneous data. A re-publication shall be made if the error is more than two basis points away from the correct rate and is identified or reported by 2.00 pm on publication day. The re-publication will be made by 4.0 0pm on the same day. If findings or reports of erroneous calculations are made after the cut-off time, no republication will be made.
    • Contingency arrangements. As a backstop in the event of disruption to the normal production of MYOR, BNM shall, at its discretion, publish MYOR using a simple average of MYOR over the previous three publication days. For exceptional circumstances, BNM reserves the right to determine the appropriate contingency rate.

    With respect to refinements to KLIBOR, the Financial Markets Committee proposes to adopt a phased approach to potentially discontinue rate submissions for the least referenced tenors to ensure the integrity of KLIBOR rates and facilitate transition. In this regard, the two-month and twelve-month tenors will be discontinued first, followed by the six-month tenor. The Financial Markets Committee proposes that market participants are given an advance notice of 12 months in the event that certain KLIBOR tenors are discontinued upon review.

     

    Related Links

    Comment Due Date: June 18, 2021

    Keywords:  Asia Pacific, Malaysia, Banking, Securities, KLIBOR, Alternative Reference Rates, ARR, KLIRR, Interest Rate Benchmarks, Benchmarks Reforms, BNM

    Related Articles
    News

    APRA Issues Interim Update to Policy Priorities for 2021 and Beyond

    In a letter addressed to the industry, the Australian Prudential Regulation Authority (APRA) set out an updated schedule of policy priorities for the banking, insurance, and superannuation industries.

    September 24, 2021 WebPage Regulatory News
    News

    EBA Publishes Single Rulebook Q&A, Launches Transparency Exercise

    The European Banking Authority (EBA) published answers to 29 questions in the Single Rulebook Question and Answer (Q&A) tool in September.

    September 24, 2021 WebPage Regulatory News
    News

    EC Adopts Solvency II and Resolution Rules Package for Insurers

    The European Commission (EC) adopted a comprehensive review package of Solvency II rules in the European Union.

    September 22, 2021 WebPage Regulatory News
    News

    OCC Issues Booklets on Regulatory Reporting and Earnings

    The Office of the Comptroller of the Currency (OCC) issued Versions 1.0 of the "Earnings" and "Regulatory Reporting" booklets of the Comptroller's Handbook.

    September 22, 2021 WebPage Regulatory News
    News

    ECB Sets Out Results of Economy-Wide Climate Stress Tests

    The European Central Bank (ECB) published results of its economy-wide climate stress test, which aimed to assess the resilience of non-financial corporates and euro area banks to climate risks.

    September 22, 2021 WebPage Regulatory News
    News

    EBA Examines Implications of Increasing Use of Digital Platforms in EU

    The European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in European Union.

    September 21, 2021 WebPage Regulatory News
    News

    HKMA Issues Updates on Policy Measures Intended to Ease COVID Impact

    The Hong Kong Monetary Authority (HKMA) published updates on the policy measures that were announced in context of the ongoing pandemic.

    September 21, 2021 WebPage Regulatory News
    News

    ISDA Responds to BCBS Proposal on Treatment of Cryptoasset Exposures

    The International Swaps and Derivatives Association (ISDA), along with several other associations, submitted a joint response to the Basel Committee on Banking Supervision (BCBS) consultation on preliminary proposals for the prudential treatment of cryptoasset exposures.

    September 21, 2021 WebPage Regulatory News
    News

    BIS Quarterly Review Discusses Developments in Fintech and ESG Space

    BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.

    September 20, 2021 WebPage Regulatory News
    News

    BCBS to Consult on Supervisory Practices for Climate Risks by Year-End

    The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards

    September 20, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7495