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Malaysian Central Bank Liberalises FX Administration Policies

Bank Negara Malaysia, the country’s central bank, has announced further liberalisation of its foreign exchange administration policies to allow the further development of the financial and capital markets and provide greater flexibilities for businesses to actively manage financial risks.

 

From 1 April 2007, the rules will expand the scope of licensed onshore banks’ foreign currency business and facilitate investments in ringgit assets by non-residents.

 

Some of the new rules include allowing investment banks in Malaysia to undertake foreign currency business subject to a supervisory review on their capability in this area; abolishing the net open position limit of licensed onshore banks which are currently capped at 20% of their capital base; and abolishing the limits imposed on onshore banks for foreign currency accounts maintained by residents.

 

Other rules include increasing the limit for resident individuals, corporations and institutional investors to invest in foreign currency assets; increasing the limit of foreign currency borrowings; and providing further flexibility for non-resident stockbroking companies and custodian banks to obtain ringgit overdraft facilities.

 

Bank Negara imposed capital controls and fixed the ringgit to the US dollar during the Asian financial crisis of 1997/98. As a result, many Malaysian FX dealers moved to neighbouring Singapore in the late 90s and early 2000s for better career prospects. 

Over recent years, the foreign exchange administration policies have been progressively liberalised with the aim of enhancing Malaysia‘s competitiveness through reducing the cost of doing business and increasing the efficiency of the regulatory delivery system, the bank said in its Annual Report 2006, released last Wednesday (March 21).

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