Following the 2 December 2016 measures, the Financial Markets Committee (FMC) would like to announce the Appointed Overseas Office (AOO) Framework. This framework is intended to provide additional flexibilities on ringgit transactions where a non-resident financial institution appointed by a licensed onshore bank can undertake back-to-back transactions to facilitate settlement of trade and ringgit assets between non-resident with a resident.  This framework which was first introduced in 2007, is now expanded to include additional transactions such as foreign exchange hedging (own account/on behalf of client) for current and financial account based on commitment, opening of ringgit account (book keeping) and extension of ringgit trade financing.

By including non-resident financial institution outside the licensed onshore bank’s banking group, the expanded AOO framework allows non-resident traders and investors greater avenue to settle trade or investment in ringgit through an approved channel.

 The AOO Operational Framework:

FX transaction	Appointed Overseas Office	Appointed NRFI
Trade of goods and services with resident
Spot	Freely allowed	Upon approval from BNM
Forward (hedging)	Freely allowed	Upon approval from BNM
Ringgit Asset
Spot	Freely allowed	Upon approval from BNM
Forward (hedging)	Freely allowed	Upon approval from BNM
Dynamic Hedging
Up to 25% without documentary evidence	Subject to one-off registration with BNM by NR institutional investor	Upon approval from BNM
Trade Financing
Ringgit trade financing for settlement of trade of goods  and services with resident	Upon approval from BNM	Upon approval from BNM
Ringgit Account
Ringgit account for purposes of book-keeping	Upon approval from BNM	Upon approval from BNM
Interest Rate Swap
Ringgit-denominated Interest Rate Swap	Not allowed	Not allowed

Definitions:

Appointed Overseas Office refers to an appointed overseas parent company, subsidiary company, sister company, head office or branch of a licensed onshore bank’s banking group, excluding a licensed International Islamic Bank

Appointed Non-resident Financial Institution (NRFI) refers to an NRFI appointed by a licensed onshore bank and approved by Bank Negara Malaysia

“Upon approval from BNM” means an appointed overseas office or appointed NRFI requires written approval from Bank Negara Malaysia, while “freely allowed” means the appointed overseas office does not require approval from Bank Negara Malaysia.

 

Financial Markets Committee
6 December 2016

About Financial Markets Committee (FMC)

The FMC is a committee established by BNM in May 2016 and comprises representatives from Bank Negara Malaysia, financial institutions, corporations, financial service providers and other institutions which have prominent role or participation in the financial markets. The Chair of the FMC is BNM Assistant Governor Adnan Zaylani.
 

The objective of FMC is to broaden the industry engagement with a focus in reviewing and formulating comprehensive strategies for the wholesale financial markets to meet the diverse and complex demands of a more developed and internationally integrated economy.

For more information on the FMC, please refer to the following link:  http://www.bnm.gov.my/index.php?ch=en_fxmm_mo&pg=en_fxmm_fmc&ac=451&lang=en

 

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