BNM Shariah Advisory Council Issues Ruling on MYOR-i Reference Rate
The central bank of Malaysia (BNM) issued an update on the calculation methodology for Malaysia Islamic Overnight Rate (MYOR-i).
The Shariah Advisory Council (SAC) of BNM finalized a ruling that the new Islamic reference rate MYOR-i and its calculation methodology for both normal and contingency situations are Shariah-compliant, as it includes only Shariah-compliant transactions. Under contingency situation, BNM will calculate and publish MYOR-i based on the average MYOR-i, adjusted for any changes in the Funding Facility Profit Rate (FFPR), over the preceding three publication days. SAC has agreed to the exclusion of qard-based overnight interbank money market transaction and its hibah rates from the MYOR-i calculation methodology under normal situation. SAC also agreed to allow temporary referencing to conventional term reference rate such as Kuala Lumpur Interbank Offered Rate (KLIBOR) or other conventional term reference rates on hajah basis, until a reliable Islamic term reference rate is available. The ruling is effective in accordance with the guidelines, which will be issued by BNM at a later date and is applicable to licensed Islamic financial institutions under the Islamic Financial Services Act 2013 (IFSA), licensed banks, and licensed investment banks approved under section 15(1) of the Financial Services Act 2013 as well as to the prescribed institutions approved under section 33B(1) of the Development Financial Institutions Act 2002.
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Keywords: Asia Pacific, Malaysia, Banking, Insurance, Securities, Islamic Banking, Lending, MYOR-i, KLIBOR, Interest Rate Benchmark, Interest Rate Risk, Alternative Reference Rates, Islamic Finance, Shariah Advisory Council, BNM
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