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KUALA LUMPUR: Bank Negara Malaysia (BNM) has introduced the Malaysia Overnight Rate (MYOR) as the new alternative reference rate (ARR) for Malaysia.

Globally, the ARRs are being introduced to improve the integrity of financial benchmark rates as part of a transition to transaction-based rates, in line with the London Interbank Offered Rate reforms after the global financial crisis.

The central bank said the ARRs aim to facilitate the usage of benchmark rates that are more robust and “based upon transactions in active, liquid markets.”

“In Malaysia, the MYOR will run in parallel to the existing Kuala Lumpur Interbank Offered Rate

(KLIBOR) with periodic reviews to ensure that the financial benchmark rates remain robust and reflective of an active underlying market,” it said in a statement today. “This multiple-rate approach is supported by the Financial Stability Board and adopted by many other jurisdictions.”

BNM said the availability of two financial benchmark rates provided market participants with the flexibility to choose the rate that best suits their needs and facilitates the development of MYOR-based products.

The offering of MYOR-based products would provide a wider array of hedging instruments that would support additional risk management strategies, it added.

In conjunction with the launch, BNM has published the MYOR Policy Document, which incorporates the key features and governance standards developed in collaboration with the Financial Markets Committee


It said the MYOR would be administered and calculated by the central bank as the volume-weighted average rate of unsecured overnight ringgit interbank transactions, including BNM’s overnight monetary operations.

“The publication of MYOR for a given Kuala Lumpur business day will be at 10 am on the following business day on the bank’s website. The bank will conduct periodic reviews of the MYOR to ensure it remains robust and representative of conditions in the underlying market,” it said.

The publication of the two- and 12-month KLIBOR tenors, “which are the least referenced rates in the market for financial contracts,” would be discontinued on Jan 1, 2023, the central bank said.

It said the remaining one-, three- and six-month KLIBOR tenors, which continue to reflect an active underlying market, would be reviewed in the second half of 2022.

“The FMC will engage the International Swaps and Derivatives Association to ensure continuity of KLIBOR derivatives contracts in the event of a temporary or permanent discontinuation of KLIBOR publication,” it said.

In other developments, BNM said a new Islamic benchmark rate would be developed to replace the Kuala Lumpur Islamic Reference Rate (KLIRR) by the first half of 2022. – Bernama

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