KUALA LUMPUR (BERNAMA) – Bank Negara Malaysia (BNM) has introduced the Malaysia Overnight Rate (MYOR) as the new Alternative Reference Rate (ARR) for Malaysia.
Globally, ARRs are being introduced to improve the integrity of financial benchmarks as part of a transition to transaction-based rates, in line with post-crisis London Interbank Offered Rate (LIOR) reforms global financial.
The central bank said ARRs aim to facilitate the use of more robust benchmark rates “based on transactions in active and liquid markets.”
âIn Malaysia, MYOR will operate alongside the existing Kuala Lumpur Interbank Offered Rate (KLIBOR) with periodic reviews to ensure financial benchmarks remain robust and reflect an active underlying market,â he said. said Friday in a statement.
“This multi-rate approach is supported by the Financial Stability Board and adopted by many other jurisdictions.”
BNM said the availability of two financial benchmarks gives market participants the flexibility to choose the rate that best suits their needs and makes it easier to develop products based on MYOR.
The MYOR-based product offering would provide a wider range of hedging instruments that would support additional risk management strategies, he added.
Along with the launch, BNM published the MYOR policy document, which incorporates the main features and governance standards developed in collaboration with the Financial Markets Committee (FMC).
He said the MYOR would be administered and calculated by the central bank as the volume-weighted average rate of overnight unsecured ringgit interbank transactions, including overnight BNM monetary transactions.
âThe publication of MYOR for a given business day in Kuala Lumpur will be at 10 am the next business day on the bank’s website. The bank will conduct periodic reviews of MYOR to ensure it remains robust and representative of underlying market conditions, âhe said.
The publication of the tenors KLIBOR at 2 and 12 months, “which are the least referenced rates on the financial contracts market”, would be interrupted on January 1, 2023, said the central bank.
He said the remaining one, three and six-month KLIBOR maturities, which continue to reflect an active underlying market, will be reviewed in the second half of 2022.
“The FMC will engage the International Swaps and Derivatives Association to ensure the continuity of the KLIBOR derivative contracts in the event of a temporary or permanent disruption in the publication of KLIBOR,” he said.
In other developments, BNM said a new Islamic benchmark rate will be developed to replace the Kuala Lumpur Islamic benchmark rate (KLIRR) by the first half of 2022.