Financial Markets Committee (FMC) Meeting
21 September 2026
Bank Negara Malaysia

The meeting discussed recent financial market developments, progress on the KLIBOR transition to MYOR/MYOR-i and updates from the Bond and Islamic Financial Market Subcommittees.

1. Membership Updates
   1. The FMC expressed its appreciation to outgoing FMC member Puan Latifah Mohamed Yusof and welcomed Encik Shahrul Azman Bin Mohd Mokhtar, Group Treasurer of FGV Holdings Berhad and president of the Malaysian Association of Corporate Treasurers (MACT), as a new member of the FMC.
       
2. Financial market developments
   1. Recent movements in the domestic financial markets were driven primarily by global factors, particularly the developments in the US policy rate. Growing prospects of higher US interest rates and the actual realisation of a rate hike by the US Federal Reserve led to a stronger US dollar and higher US Treasury yields. These in turn, resulted in broad based adjustments across global markets including regional currencies and bonds.
   2. FMC members noted that, after being largely stable in July and August, the ringgit moderated in September. Similarly, MGS yields also increased following a prolonged period of relative stability, amid a broader repricing of global interest rates expectations and higher global bond yields. Members observed robust interest in corporate bond issuance as well as increased hedging activity.
   3. Nevertheless, the domestic financial markets continued to adjust in an orderly manner, supported by balanced two-way flows that ensured effective price intermediation among market participants. Market conditions remained conducive for corporates to raise funds to meet their financing requirements.
   4. In addition, domestic developments have been encouraging. Members agreed that Malaysia’s macroeconomic fundamentals remain sound, as indicated by the strong 2Q 2026 GDP data that saw the economy expanding at 6.0% year-on-year, above market expectations of 5.8% year-on-year. Malaysia remains an attractive destination for foreign direct investment (FDI) while the domestic market has seen strong inflows from the services sector, including in AI and datacentres.
   5. Looking ahead, external factors such as geopolitical uncertainties, oil price volatility and an evolving global interest rate environment remain near-term headwinds for the domestic market. However, members noted that the recent increase in bond yields may present an attractive entry point for foreign investors, given that investor sentiment towards Malaysia continues to be favourable. These factors, alongside ongoing measures such as the Qualified Resident Investor (QRI) program as well as engagement with government-linked companies (GLCs), government-linked investment companies (GLICs) and corporates to repatriate and convert their foreign currency income, are expected to provide continued support to the FX and bond markets.
       
3. KLIBOR Transition to MYOR/MYOR-i
   1. The meeting noted the upcoming national milestone of 1 October 2026 for market participants to be ready to offer and trade MYOR/MYOR-i products and endorsed the transition progress, including the latest achievements and near-term deliverables of the KLIBOR Transition Working Groups.
      • A letter was sent to the CEOs of banks and insurance companies in May 2026, setting out BNM’s requirements and expectations for the transition, while quarterly reporting of KLIBOR, MYOR and MYOR-i exposures has been implemented to facilitate monitoring.
      • The Derivatives Working Group (DWG) recorded further progress in establishing the necessary infrastructure to support market readiness, including the publication of standardised market conventions for MYOR derivatives on the Financial Markets Investor Portal (FMIP) and launch of Bloomberg’s Overnight Index Swap (OIS) curves and calculators. Current efforts are focused on strategies to improve price discovery and liquidity in the nascent MYOR derivatives market.
      • The Cash Products Working Group (CWG) collaborated with the Financial Markets Association Malaysia (FMAM) to finalise recommended market conventions for interbank money market products, while several subgroups have been established to develop market conventions, fallback language and spread adjustments for various cash products including loans, capital market instruments and investment products. Members highlighted challenges on transition solutions for retail investment products while emphasising the importance of avoiding further inventory build-up and ensuring that banks uphold the principle of fair treatment of clients.
      • The Shariah Working Group (SWG) completed the feasibility study on market-making of Islamic profit rate swaps (IPRS), which is intended to improve liquidity in the Islamic derivatives market, for subsequent tabling to the Shariah Advisory Council (SAC). Concurrently, the Association of Islamic Banking and Financial Institutions Malaysia (AIBIM) is developing fallbacks for Islamic derivatives and cash products.
      • The Communications Working Group (CMWG) continued to raise market awareness on the KLIBOR transition through industry outreach initiatives, including participation in a recent Bloomberg Treasury Forum comprising representatives from BNM, the Working Groups and over 100 treasury professionals.
         
4. Subcommittee updates
   1. The Bond Market Subcommittee has published a report^[1] highlighting the resilience and attractiveness of Malaysia’s fixed income market, covering its depth and liquidity, diversified investor base and global leadership in sukuk. The subcommittee also deliberated on the merits of establishing an inter-Principal Dealer electronic trading platform to support market intermediation and liquidity.
   2. The Islamic Financial Market Subcommittee (IFMC) will convene an industry roundtable in October 2026 to facilitate the exchange of ideas between Islamic market participants on strengthening the adoption of MYOR-i and discuss recent developments in the Islamic financial markets and Shariah ecosystem.

[1] Malaysia Bond Market Report 2025: Assessing Development Priorities for Future Path