Bank Negara Malaysia (BNM) requires onshore banks to adhere to the current rules to prevent facilitation of offshore ringgit NDF market in line with the well-established policy of the ringgit. This is to protect the interest of the real sectors and genuine investors in the Malaysian financial market from undue ringgit volatility. Ringgit prices and its volatility had been affected by activities and prices in the offshore NDF market which is not necessarily reflective of economic fundamentals and underlying trade and investment activities.

Malaysian financial market remains open with the adherence effectively in place. Liquidity continues to be available supporting smooth and orderly functioning of Malaysian financial market in intermediating the needs of market participants. During the week 14-18 November, a total of RM39.7 billion and USD49.1 billion was transacted in the Malaysian bond and FX market. This compares to the RM17.8 billion and USD31.6 billion that was transacted in the preceding week, respectively. Non-residents participants, such as corporates, global asset and fund managers, as well as clearing and custodian banks continue to transact in the Malaysian financial markets. The transactions were intermediated by 58 Malaysian onshore banks, which include 19 foreign banks that are subsidiaries of regional and large global banks. A number of foreign banks have begun discussing with BNM on their financial market transaction needs to facilitate smooth transition during this period, without causing market disruption.

With reference to the Governor of Bank Negara Malaysia’s speech at the Financial Markets Association annual dinner on 18 November 2016, the Financial Markets Committee (FMC) members welcome the announced initiatives and strategies to further deepen the liquidity on the onshore market while providing more flexibility for market participants to manage foreign exchange risks with onshore banks. The FMC looks forward to carry through these initiatives and engage with the industry to support an efficient and effective implementation.

Financial Markets Committee
25 November 2016