31 August, 2018
Bank Negara Malaysia (“BNM”) had on 17 August 2018 issued a Supplementary Notice (No 4) on Foreign Exchange Administration Rules (“Supplementary Notice”) aimed at facilitating operational efficiencies and risk management by businesses and financial institutions.
Some of the key highlights are as follows:
Exporters may now automatically sweep export proceeds into their Trade Foreign Currency Account up to the higher of
(a) 25% of export proceeds and
(b) up to six months foreign currency obligation, subject to documentary proof. Any balance shall be converted into ringgit.
The “six months foreign currency obligation” refers to foreign currency import and loan repayment obligations, as well as current international transaction as illustrated in the Appendix of the Supplementary Notice.
Upon approval from BNM, residents may hedge:
- foreign currency obligations beyond six months; and
- foreign exchange exposures arising from invoices issued in foreign currency under international pricing practices for domestic trade in goods and services.
(a) Non-residents (other than non-resident banking institutions) and
(b) non-resident banking institutions which have a firm commitment are allowed to trade in ringgit-denominated interest rate derivatives via the Appointed Overseas Offices.
Notwithstanding the above, all interest rate derivatives embedded with buying and selling of ringgit against foreign currency (for example, cross currency interest rate swap) shall be subject to firm underlying.
For further information, please contact:
Cheryl Liew Xin Yi, Shearn Delamore & Co
cheryl.liew@shearndelamore.com
