The Central Bank of Malaysia (BNM) announced the launch of Malaysian Overnight Rate (MYOR) as the new alternative reference rate for Malaysia. In conjunction with the launch, BNM has published a policy document on MYOR. The policy document sets out the benchmark design, methodology, and governance framework to ensure the integrity and credibility of MYOR. As per the policy, BNM will administer and calculate MYOR as the volume-weighted average rate of unsecured overnight Ringgit interbank transactions, including the overnight monetary operations of BNM (excluding Standing Facilities). BNM will conduct periodic reviews of the MYOR to ensure it remains robust and representative of conditions in the underlying market. This policy document came into effect on September 24, 2021.
BNM has published another policy document that sets out requirements to be observed by the Kuala Lumpur Interbank Offered Rate (KLIBOR) submitters and the designated KLIBOR distributor in undertaking the KLIBOR rate-setting process. This policy document comes into effect on September 30, 2021. In Malaysia, the MYOR will run in parallel to the existing KLIBOR, with periodic reviews to ensure that the financial benchmark rates remain robust and reflective of an active underlying market. This multiple-rate approach is supported by the Financial Stability Board (FSB) and adopted by many other jurisdictions. BNM also announced that it will discontinue, on January 01, 2023, the publication of the two- and twelve-month KLIBOR tenors, which are the least referenced rates in the market for financial contracts. The remaining one-, three-, and six-month KLIBOR tenors, which continue to reflect an active underlying market, will be reviewed in the second half of 2022. Any updates from the review will be communicated thereafter. The Financial Markets Committee will engage the International Swaps and Derivatives Association (ISDA) to ensure continuity of KLIBOR derivatives contracts in the event of a temporary or permanent discontinuation of KLIBOR publication.
As part of ongoing efforts to further develop the Islamic financial market, BNM, in collaboration with the Financial Markets Committee and the AIBIM-FMAM Islamic Market Technical and Development Committee, will develop a new Islamic benchmark rate (Malaysia Islamic Overnight Rate or MYOR-i) to replace the Kuala Lumpur Islamic Reference Rate (KLIRR) by the first half of 2022. In this regard, BNM has published an exposure draft that sets out the benchmark design, methodology, and governance framework to ensure the integrity and credibility of Malaysia Islamic Overnight Rate (MYOR-i). BNM is requesting responses on the exposure draft by October 25, 2021. In a separate joint statement, BNM and the Bank of Thailand (BOT) invited banking institutions from Malaysia and Thailand to indicate their interest to be a Qualified ASEAN Bank (QAB) in Malaysia and Thailand. Banking institutions have been invited pursuant to the bilateral arrangement under the Association of Southeast Asian Nations (ASEAN) Banking Integration Framework between BNM and BOT, which concluded in April 2019.
- Notification on MYOR
- Policy Document on MYOR (PDF)
- Policy Document on KLIBOR Rate Setting (PDF)
- Exposure Draft on MYOR-i (PDF)
- Press Release on ASEAN Banking Integration Framework
Comment Due Date: October 25, 2021 (MYOR-i)
Effective Date: September 24, 2021 (MYOR)/September 30, 2021 (KLIBOR rate-setting)
Keywords: Asia Pacific, Malaysia, Thailand, Banking, Securities, MYOR, KLIBOR, Interest Rate Benchmarks, Interest Rate Risk, Alternative Reference Rates, Islamic Finance, MYOR-I, ASEAN, Qualified ASEAN Bank, Benchmark Reforms, BOT, BNM
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