Bank Negara Malaysia has issued a policy document on Malaysia Islamic Overnight Rate (“MYOR-I”) which took effect on 25 March 2022.
According to Bank Negara Malaysia, the MYOR-i is the first transaction-based Islamic benchmark rate in the world and the Shariah Advisory Council of Bank Negara Malaysia confirmed that it is Shariah-compliant.
Pursuant to the policy document:
• MYOR-i replaces the Kuala Lumpur Islamic Reference Rate (“KLIRR”) which has been discontinued on 25 March 2022.
• MYOR-I is designed based on the International Organization of Securities Commissions (“IOSCO”) Principles for Financial Benchmarks.
• it applies to the following institutions which are approved by the Bank to deal in the interbank market, whether acting as principals or agents in the wholesale financial markets:
− licensed Islamic banks under the Islamic Financial Services Act 2013;
− licensed banks and licensed investment banks which are approved under paragraph 15(1)(a) of the Financial Services Act 2013 to carry on Islamic banking business;
− prescribed development financial institutions approved under subsection 33B(1) of the Development Financial Institutions Act 2002 to carry on Islamic financial business; and
− any other interbank institution which is a direct participant of the Real-Time Electronic Transfer of Funds and Securities System (“RENTAS”).
• MYOR-i is calculated as the volume-weighted average rate of return on Shariah-compliant unsecured overnight ringgit interbank placements, rounded to two decimal places. Eligible transactions such as:
− Unsecured placements between interbank institutions (either brokered or direct/bilateral); and
− Bank Negara Malaysia’s Islamic overnight monetary operations, which comprise tenders conducted through the Fully Automated System for Issuing/Tendering (“FAST”) or manual operations, and direct overnight placements between BNM and interbank institutions but excluding standing facilities that are based on an eligible instrument (presently, Commodity Murabahah instrument).
• the list of eligible instruments may be expanded subject to the instrument (i) being approved by the Shariah Advisory Council of Bank Negara Malaysia; and (ii)meeting all the requirements for MYOR-i as assessed by Bank Negara Malaysia.
• MYOR-i is published by 12 noon on the following business day on the official website of Bank Negara Malaysia.
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