Foreign Exchange Policy
Initiative to Deepen the Interest Rate Swap (IRS) Market as a Liquid Hedging Instrument for Market Participants
Bank Negara Malaysia (BNM), in consultation with the Financial Markets Committee (FMC) members, has embarked on various market initiatives to promote deep and vibrant onshore financial markets in recent years.
In November 2020, a pilot programme was launched to provide flexibility for participating onshore banks and their Appointed Overseas Offices (AOOs) to trade ringgit-denominated interest rate swap (IRS) with non-resident banks without any underlying position. Based on the positive feedback and experience during the pilot, BNM is pleased to announce that effective 15 March 2021, non-resident banks may trade ringgit-denominated IRS without any underlying commitment with any onshore bank or its AOOs.
This flexibility will encourage the participation of non-resident banks in the onshore IRS market, thus promoting a more liquid domestic market to lower hedging costs for corporates and asset managers, and funding costs for onshore banks. BNM and FMC will continue to engage with market participants to promote a progressive and orderly onshore financial market.
Bank Negara Malaysia
10 March 2021