Foreign Exchange Administration

Measures to broaden and deepen the onshore FX markets.

The Financial Markets Committee in collaboration with Bank Negara Malaysia (BNM) announced several measures to enhance and deepen the onshore foreign exchange market with effect from 5th December 2016. Presented herein are the measures which are broken into three distinct parts; Part A covers liberalization measures of onshore ringgit hedging market; Part B covers incentives and treatment of export proceeds; Part C covers incentives and treatment for investments in foreign currency assets.

Part A : Further Facilitate Foreign Exchange Risk Management.

Non-resident Institutional investor
If related to amount without documentary evidence	up to 25% of its invested ringgit-denominated assets with licensed onshore bank or an appointed overseas office for the purpose of managing its ringgit exposure
Forward Cancellation
Overlay hedge (netting)

Resident Institutional investor
If related to amount without documentary evidence	up to 25% of its invested ringgit-denominated assets with licensed onshore bank or an appointed overseas office for the purpose of managing its foreign currency exposure
Forward Cancellation
Overlay hedge (netting)

Resident
For USD/MYR and CNH/MYR pairs without documentary evidence	Up to aggregate net open limit of RM 6 million per client per licensed onshore bank.
Forward Hedge their foreign currency exposure
Cancel their hedging position

Part B : Promote Settlement of Trade and Investment in Ringgit

To broaden accessibility of foreign investor and corporate to onshore FX market, offshore non-resident financial institution may participate in the Appointed Overseas Office (AOO) framework which accords additional flexibility on ringgit transactions. The flexibilities.

• FX hedging (own account /on behalf of client) for current and financial account based on commitment
• Opening of ringgit account for book-keeping purposes for a non-resident
• Extension of ringgit trade financing

Part C : Enhance Depth and Liquidity of Onshore Financial Market

• Retention of up to 25% of new foreign currency proceeds from 5 Dec onwards from resident exporter’s export of goods. The balance of foreign currency proceeds from the exports of goods shall be converted into ringgit with a licensed onshore bank and be eligible for a Special Deposit Facility (SDF) yielding 3.25% p.a rate until 31 Dec 2017.
• Foreign Currency Account I and Foreign Currency Account II shall be replaced with Trade Foreign Currency Account and Investment Foreign Currency Account.
• A resident without domestic ringgit borrowing is allowed to undertake any amount of investment in foreign currency asset onshore for its own account or on behalf of clients
• A resident with domestic ringgit borrowing is allowed to undertake investment abroad and investment in foreign currency asset onshore up to RM 50 million equivalent in aggregate per calendar year via its Investment Foreign Currency Account.
• A resident individual, sole proprietor or general partnership with domestic ringgit borrowing is allowed to undertake investment abroad and investment in foreign currency asset onshore
  – Up to RM10 million equivalent of foreign currency borrowing from licensed onshore bank or a non-resident.
  – Up to RM1 million equivalent in aggregate per calendar year using funds from conversion of ringgit, swapping of financial assets and transfer from Trade FCA.

For further details on the FEA Rules, kindly refer to Bank Negara Malaysia’s website at www.bnm.gov.my

• 
  Supplementary Notice on FEA Rules – Measures to Promote The Development of Malaysian Financial Market
  Click here
• 
  Statement by Financial Markets Committee
  Click here