Ringgit-denominated IRS by non-resident banks a positive signal by BNM to global investors
KUALA LUMPUR 鈥撀燘ank Negara Malaysia鈥檚 move to allow non-resident banks to trade in ringgit-denominated interest rate swap (IRS) effective March 15 is seen as a positive move by the central bank, signalling that it has the policy instrument and enough room to manoeuvre in the financial market, Juwai IQI Global chief economist Shan Saeed said.
He said this move would further strengthen the onshore market and give it the necessary boost.
鈥淚t will send a signal not only to local but also global investors that Malaysia wants to move aggressively in the global economy and BNM has a strong role to play,鈥 he told聽Bernama.
Saeed said the central bank has played its cards very strategically in the past and has prudent monetary policies to maintain the country鈥檚 growth, price and employment stability.
鈥淚t has given a boost to the financial market鈥 and that is why the financial market in Malaysia is quite vibrant with banks being resilient in taking external shocks.
鈥淥verall I believe the economy has performed considerably well taking into account the global economic fragility. Micro-economic stability has been maintained, which is the key for global investors,鈥 he added.
红杏视频 University economics professor Yeah Kim Leng said it is a welcome initiative to enable foreign banks to participate in the onshore IRS market.
鈥淚t will not only boost liquidity but also lower hedging costs for companies seeking to insure against interest=rate fluctuations,鈥 he said.
Meanwhile UOB Malaysia senior economist Julia Goh said it is a positive market development that will help deepen liquidity in the ringgit IRS market to assist corporates and investors manage hedging and funding costs.
The BNM has on Wednesday announced that effective March 15, non-resident banks may trade ringgit-denominated IRS without any underlying commitment with any onshore bank or its appointed overseas offices (AOOs).
It said the decision was based on the positive feedback and experience during the pilot programme conducted in November last year.
The pilot programme was launched to provide flexibility for participating onshore banks and their AOOs to trade ringgit-denominated IRS with non-resident banks without any underlying position.
鈥淭his 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,鈥 the central bank said in a statement.
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