KUALA LUMPUR: Bank Negara Malaysia (BNM) today clarified its announcement last week on further refinements in its foreign exchange policy aimed at improving business efficiency and providing flexibility for corporates to better manage their foreign exchange risk exposure.
Of the five measures which come into effect immediately, the first two are unchanged:
The first is an exemption from the requirement for resident exporters to convert export proceeds below RM200,000 per transaction into ringgit.
“This flexibility will alleviate the administrative burden for exporters, particularly SMEs, to meet their foreign currency obligations,” the central bank said in a statement.
The second measure is that residents are free to hedge foreign currency loan obligations up to the underlying tenure.
Previously, residents could do this for up to 12 months only. This flexibility enables residents to better manage their forex risk arising from longer-term foreign currency loan exposure.
The third refinement in the policy is clarified to read: All entities are allowed to unwind their forward positions in managing their hedging costs except for portfolio investment in response to the changing market conditions.
Previously, residents and non-residents needed to seek BNM’s approval to unwind hedging positions.
The fourth and fifth refinements remain unchanged:
“Under the fourth refinement, residents are also free to obtain financial guarantees from non-residents. Before this, they could only obtain financial guarantees up to an aggregate limit of RM100 mil,” BNM said, noting that removal of the limit enables foreign investors to better support their entities operating in Malaysia.
Under the fifth measure, residents are free to issue financial guarantees to non-residents with some exceptions from the previous aggregate limit of RM50 mil. – May 4, 2020
