|
Embargo: Not for publication or broadcast before 1800 hours on Wednesday, 21 March 2007
Liberalisation of the Foreign Exchange Administration Policies
Bank Negara Malaysia announced further liberalisation of the foreign exchange administration policies. The liberalisations are part of the Bank's continuous efforts to enhance Malaysia's competitiveness through reducing the cost of doing business, increasing efficiency of the regulatory delivery system, promote a progressive and competitive financial system, encouraging effective risk management activities while safeguarding economic and financial stability. With effect from 1 April 2007, the foreign exchange administration rules will be liberalised to facilitate further development of the financial and capital markets and provide greater flexibilities for businesses to actively manage financial risks. The liberalisation will expand the scope of licensed onshore banks' foreign currency business and facilitate investments in ringgit assets by non-residents. The measures will also promote greater flexibilities for business to manage and finance investment opportunities and also contribute to increasing the depth and breadth of Malaysia's capital market.
1. Facilitating the development of the domestic financial market
To provide greater flexibility to licensed onshore banks to undertake foreign currency business, the following policies have been liberalised:
- Abolish the net open position limit of licensed onshore banks. Previously, the open position limit was capped at 20% of the banks' capital base.
- Abolish the limits imposed on licensed onshore banks for foreign currency accounts maintained by residents.
- Allow investment banks in Malaysia to undertake foreign currency business subject to a comprehensive supervisory review on the capacity and capability of the investment banks.
2. Facilitating investments in ringgit assets by non-residents to promote Malaysia as an investment destination
To widen the investor base for ringgit assets and financial products, the following liberalisations are granted:
- Further flexibility for non-resident stockbroking companies and custodian banks to obtain ringgit overdraft facilities from licensed onshore banks to avoid settlement failure due to inadvertent delays by:
- Removing the previous overdraft limit of MYR200 million; and
- Expanding the scope on utilisation of the overdraft facility to include ringgit instruments settled through the Real Time Electronic Transfer of Funds and Securities (RENTAS) System and Bursa Malaysia. Previously, utilisation of the facility was confined only to shares traded on Bursa Malaysia.
- Abolish the limit on the number of residential or commercial property loans obtained by non-residents. Under the previous policy, non-residents were allowed to obtain a maximum limit of 3 property loans from residents to finance the purchase or construction of residential or commercial properties in Malaysia.
- Allow licensed onshore banks to appoint overseas branches of their banking group as a vehicle to facilitate the settlement of any ringgit assets of their non-resident clients.
- Remove restriction on Labuan offshore banks to transact in ringgit financial products on behalf of non-resident clients.
3. Enhancing business efficiency and facilitate development of the capital market
Further foreign exchange administration flexibilities are granted to residents to increase business efficiency by reducing the cost of doing business as well as enhancing the depth and breadth of the capital market as follows: -
- Increase the limit of foreign currency borrowing that can be obtained by resident corporations from licensed onshore banks and non-residents as well as through issuance of onshore foreign currency bonds, to MYR100 million equivalent in aggregate and on corporate group basis from the previous MYR50 million equivalent. The proceeds may be used for domestic purposes or offshore investment.
- Allow residents to hedge foreign currency loan repayment up to the full amount of underlying commitment.
- Enhance flexibilities for resident individuals and corporations to invest in foreign currency assets as follows:
- Increase the limit for resident individuals with domestic ringgit borrowing to invest in foreign currency assets up to MYR1 million per calendar year from the previous limit of MYR100,000; and
- Increase the limit for resident corporations with domestic ringgit borrowing to invest in foreign currency assets up to MYR50 million per calendar year from the previous limit of MYR10 million.
- Increase the limit for resident institutional investors to invest in foreign currency assets as follows:
- Unit trust companies: up to 50% of net asset value (NAV) attributable to residents from the previous 30% of NAV.
- Fund management companies: up to 50% of funds of resident clients with domestic credit facilities from the previous 30% level.
- Insurance companies and takaful operators: up to 50% of NAV of investment-linked funds marketed from the previous 30% of NAV.
- Allow resident and non-resident corporations to utilise proceeds from the listing of shares through Initial Public Offering on the Main Board of Bursa Malaysia abroad.
- Allow resident corporations to lend the foreign currency proceeds from their listing of shares on foreign stock exchanges to other resident corporations within the same corporate group in Malaysia.
- Abolish restrictions on payments in foreign currency between residents for settlement of foreign currency financial products offered onshore.
- Allow residents to open and maintain joint foreign currency accounts for any purpose. Previously, resident individuals were allowed to maintain joint foreign currency accounts only for purposes of education and employment overseas.
Detailed information on the foreign exchange administration rules can be obtained at http://www.bnm.gov.my/fxadmin
For any enquiries, please contact 603 26910772 or 603 26948731 or e-mail at info@bnm.gov.my or ecams_jppa@bnm.gov.my
Attachment 1
Foreign Exchange Administration Policies Liberalised with effect from 1 April 2007
1. Facilitating the development of the domestic financial market
| Policies |
Prior to 1 April 2007 |
With effect from 1 April 2007 |
| Net open position limit on a licensed onshore bank |
Net open position of a licensed onshore bank was capped at 20% of the bank’s capital base |
The net open position limit of licensed onshore banks is abolished |
| Limit imposed on a licensed onshore bank for foreign currency accounts maintained by residents |
A licensed onshore bank was granted specific aggregate overnight limit for foreign currency accounts maintained by residents |
The overnight limit of licensed onshore banks for foreign currency accounts maintained by residents is abolished |
| Dealing in foreign currency by an investment bank |
Specific approval was granted for investment bank for limited scope of foreign currency business |
Expand the scope of foreign currency business of the investment bank subject to supervisory review on the capacity and capability of investment banks |
2. Facilitating investments in ringgit assets by non-residents to promote Malaysia as an investment destination
| Policies |
Prior to 1 April 2007 |
With effect from 1 April 2007 |
| Ringgit overdraft facility obtained by a non-resident stockbroking company and custodian bank from a licensed onshore banks |
Non-resident stockbroking company and custodian bank were allowed to obtain ringgit overdraft facilities to avoid failure in ringgit asset trade settlement due to inadvertent delays:
- Up to MYR200 million up to two working days with no rollover option; and
- Utilisation only for shares traded on Bursa Malaysia
|
Ringgit overdraft facility to non-resident stockbroking company and custodian bank for the same purpose liberalised as follows:
- No limit on amount, up to two working days with no rollover option; and
- Utilisation extended also to ringgit instruments settled through RENTAS and Bursa Malaysia
|
| Ringgit property loans obtained by a non-resident from residents to finance the purchase or construction of residential and commercial properties in Malaysia |
A non-resident was allowed to obtained only up to three credit facilities from residents to finance the purchase or construction of residential or commercial properties in Malaysia |
A non-resident is free to obtain any number of credit facilities from residents to finance the purchase or construction of residential and commercial properties in Malaysia |
| Appointment of an overseas branch within the same banking group as a vehicle to facilitate settlement of investment in ringgit assets by non-resident investors |
Settlement of investment in ringgit assets undertaken through onshore financial institutions |
A licensed onshore bank is allowed to appoint its overseas branch of the same banking group to facilitate the settlement of ringgit assets for non-resident investors with firm underlying investment commitment. |
| Transaction in ringgit financial products by a Labuan offshore bank |
A Labuan offshore bank was allowed to transact in ringgit financial product only for its own account |
A Labuan offshore bank is allowed to transact in ringgit financial products for its own account as well as on behalf of non-resident clients |
3. Enhancing business efficiency and facilitate development of the capital market
| Policies |
Prior to 1 April 2007 |
With effect from 1 April 2007 |
| Foreign currency borrowing by a resident corporation |
A resident corporation was allowed to obtain foreign currency borrowing up to RM50 million equivalent in aggregate on a corporate group basis |
The limit of foreign currency borrowing by a resident corporation is increased to RM100 million in aggregate on a corporate group basis |
| Hedging of foreign currency loan repayments by a resident |
A resident was allowed to hedge foreign currency loan repayments only up to 24 months’ commitment |
A resident is allowed to hedge foreign currency loan repayments up to full commitment of the loans |
| Investment in foreign currency assets by a resident individual, corporation and an institutional investor |
General permission was granted up to the following limits:
Resident individual with domestic ringgit borrowing
Up to RM100,000 equivalent in aggregate per calendar year
Resident corporation with domestic ringgit borrowing
Up to RM10 million equivalent in aggregate per calendar year
Unit trust company
Up to 30% NAV of funds attributable to residents
Fund management company
Up to 30% of funds belonging to residents with domestic ringgit borrowing
Resident insurance company and takaful operator
Up to 30% NAV of investment- linked funds marketed
|
The limits for residents to invest in foreign currency assets are increased to the following:
Resident individual with domestic ringgit borrowing
Up to RM1 million equivalent in aggregate per calendar year
Resident corporation with domestic ringgit borrowing
Up to RM50 million equivalent in aggregate per calendar year
Unit trust company
Up to 50% NAV of funds attributable to residents
Fund management company
Up to 50% of funds belonging to residents with domestic ringgit borrowing
Resident insurance company and takaful operator
Up to 50% NAV of investment- linked funds marketed
|
Utilisation of funds abroad arising from the listing of shares on Bursa Malaysia by:
- resident corporations
- non-resident corporations
|
Subject to general investment abroad rules |
Resident and non-resident corporations listing shares through Initial Public Offering on the Main Board of Bursa Malaysia are allowed to utilise any amount of the proceeds abroad. |
| Lending in foreign currency between residents |
Lending and borrowing in foreign currency between residents require prior permission of the Controller of Foreign Exchange |
A resident company is allowed to lend the foreign currency proceeds from the listing of shares on foreign stock exchanges to another resident company within the same corporate group in Malaysia |
| Payments in foreign currency between residents |
Payments in foreign currency between residents require prior permission of the Controller of Foreign Exchange |
Payments in foreign currency between residents are allowed for settlement of foreign currency financial products offered onshore |
| Joint foreign currency accounts between resident individuals |
Joint foreign currency accounts between resident individuals were only allowed for overseas education and employment purposes |
Joint foreign currency accounts between resident individuals are allowed for any purposes |
Bank Negara Malaysia
21 March 2007
|
