Malaysia – Financial Services Update.

Further liberalisation of foreign exchange administration policies

 

Bank Negara Malaysia (“BNM”) has announced that a Supplementary Notice No. 6 on Foreign Exchange Administration Rules will be issued and take effect on 30 August 2019 in respect of the following liberalisation of foreign exchange administration (“FEA”) policies:

 

1. Hedging flexibility

 

• residents may obtain BNM’s approval to hedge their foreign currency current account obligations up to their underlying tenure;

• treasury centres in Malaysia are free to hedge on behalf of their related entities via a licensed onshore bank to facilitate greater efficiency in centralised risk management operations;

• non-resident treasury centres outside Malaysia will be permitted to hedge on behalf of their related entities in Malaysia and overseas via a licensed onshore bank or an appointed overseas office (“AOO”) upon a one-time registration with BNM; and

• non-residents will be permitted to hedge on anticipatory basis via an AOO for settlement of trade in goods and services.

 

2. Exemption from the definition of “domestic ringgit borrowing“

 

credit facilities such as corporate credit card and other facilities of similar form which are used by corporates for miscellaneous expenses such as sundry and employees’ travel expenses are excluded from the definition of “domestic ringgit borrowing” under the applicable FEA policies on investment abroad.

 

Liberalisation of derivatives market rules

 

The rules and directives of Bursa Malaysia Derivatives Bhd and Bursa Malaysia Derivatives Clearing Bhd respectively have been revamped with effect from 15 August 2019.

 

The main objectives of the amendments to rules and directives include, without limitation:

 

• enhancement of business efficiency and flexibility of doing business in the Malaysian derivatives market;

• reduction of regulatory burden and accord greater flexibilities towards the participants’ dealings to manage and operate their business while ensuring adequate investor safeguards in place;

• clearer, more straightforward and streamlined rules to ease compliance. The rules are now updated and directives are consolidated to facilitate easy reading and understanding.

BNM issues exposure draft on Anti-Money Laundering and Counter Financing of Terrorism (“AML/CFT”) — Money Services Business (Sector 3) (Supplementary Document No. 2)

 

BNM had, on 9 August 2019, issued an exposure draft which sets out its requirements and expectations on money changers licensed under the Money Services Business Act 2011 which implements electronic Know Your Customer (“e-KYC”) for establishing business relationships and conducting consumer due diligence (“Reporting Institutions”).

 

Pursuant to the exposure draft:

 

• Reporting Institutions would be required to obtain the prior written approval of BNM to implement e-KYC for the provision of money changing business through online or mobile channels.

• Reporting Institutions would be required to implement and maintain the minimum requirements and standards prescribed by BNM in the policy document to ensure effective and robust AML/CFT controls and systems are in place to safeguard the safety and integrity of online and mobile money changing services.

• Paragraph 18 of AML/CFT — Money Services Business (Sector 3), issued on 15 September 2013, is superseded insofar as it applies to the Reporting Institutions.

   

The deadline for submission on feedback to the exposure draft is 8 September 2019.

 

BNM issues exposure draft to revise policy document on operating cost controls for life insurance and family takaful business

 

BNM is currently seeking industry comment for its exposure draft, which was issued on 31 July 2019, which will apply to:

 

• insurers licensed under the Financial Services Act 2013 to carry on life business; and
• takaful operators licensed under the Islamic Financial Services Act 2013 to carry on family takaful business.

 

The exposure draft:

 

1. is intended to come into effect on 1 January 2020;

2. when it comes into effect, it will supersede the existing policy document on Operating Cost Controls for Life Insurance and Family Takaful Business issued on 26 December 2018 (“Existing PD”);

3. seeks to set out the following:

    

• the roadmap for the deregulation of operating cost control limits; expectations on remuneration policies implemented by a licensed person for intermediaries;

• requirements relating to the implementation of the balanced scorecard framework (“BSC Framework”);

• the disapplication of, and adjustments to, operating cost controls for specific products and intermediaries;

•  enhancements to, and rationalisation of, requirements relating to agency structures and related expenses; and

• governance and reporting requirements.

•  

• The deadline for submission on feedback to the exposure draft is 30 September 2019.

 

 

BNM issues exposure draft to revise policy document on repurchase agreement transactions

 

An exposure draft was issued by BNM, on 20 August 2019, which seeks to revise the existing regulatory requirements on repurchase transactions (“Repo”) entered into by banks and investment banks licensed under the Financial Services Act 2013.

 

Amongst the revision sought to be made are:

 

• non-application of the policy document for any Repo entered into with BNM;

• extension of the maximum tenor of a Repo from 365 days to five years;

• the categories of “eligible securities” are no longer prescribed. Thus, market participants will have flexibility in terms of the types of securities to conduct Repo; and

• removal of the requirement to adopt a Malaysian Annex to the Global Master Repurchase Agreement for Repo involving Ringgit securities.

 

The deadline for submission on feedback to the exposure draft is 13 September 2019.