KUALA LUMPUR: Bank Negara Malaysia (BNM) is seeking feedback on a proposed three-year roadmap for the full transition to Malaysia Overnight Rate (MYOR) and Malaysia Islamic Overnight Rate (MYOR-i) alongside the cessation of the Kuala Lumpur Interbank Offered Rate (KLIBOR).
The central bank said the proposed timeline provides ample opportunity for market participants to prepare for and support the transition to new financial products, referencing MYOR/MMYOR-i.
In light of KLIBOR’s potential cessation, BNM advised market participants to consider adopting MYOR/MYOR-i for new financial contracts to avoid future transition issues.
Banks should also proactively engage with customers to educate them on MYOR/MMYOR-i and promote their usage, it said.
"For those who prefer to continue using KLIBOR, it is crucial to include appropriate contractual fallbacks to mitigate the risk of disruption in the event of KLIBOR’s cessation," the central bank added.
This announcement was made in a discussion paper on the proposed full transition to MYOR/MYOR-i and the cessation of KLIBOR for the Malaysian financial markets.
BNM introduced the MYOR in 2021 and MYOR-i in 2022 as new alternative reference rates (ARRs) amid global moves towards adopting more robust financial benchmarks.
The multiple-rate approach, where MYOR and MYOR-i coexist with KLIBOR, offers market participants flexibility to choose the rate most suitable for their needs.
KLIBOR, which was introduced in 1987, has long served as a reliable financial benchmark for the Malaysian interbank market, reflecting the rates at which KLIBOR submitters are willing to lend ringgit funds for specific tenors to other KLIBOR submitters.
During the transition, KLIBOR submissions shall continue to adhere to the guidelines outlined in ‘KLIBOR Rate Setting’ policy document issued by BNM on Sept 24, 2021, which may be updated from time to time.
To ensure a smooth transition from KLIBOR to transaction-based MYOR/MMYOR-i, BNM emphasised the need to develop term reference rates based on MYOR/MMYOR-i for 1-month, 3-month, and 6-month respectively, which will serve as the successors for KLIBOR.
BNM, in consultation with the Financial Markets Committee, invites feedback from all relevant stakeholders, including ministries, government agencies, financial institutions, regulators, and any other organisations or individuals with exposure to KLIBOR-linked financial products.
Stakeholders are encouraged to review the document and provide written feedback on the proposals, which must be submitted electronically to BNM through https://forms.office.com/r/BYriH3MTap by Oct 27, 2024.
Additionally, information related to KLIBOR-linked financial product exposure and legacy contracts, along with feedback forms should be completed and emailed to the financial benchmark review team at fbr@bnm.gov.my.
For specific queries, the financial benchmark review team can be contacted at fbr@bnm.gov.my. - Bernama
