Bank Negara Malaysia has issued a policy document on the Malaysia Islamic Overnight Rate (MYOR-i), which took effect on 25 March 2022.
According to Bank Negara Malaysia, the MYOR-i is the first transaction-based Islamic benchmark rate in the world, and the Shariah Advisory Council of Bank Negara Malaysia confirmed that it is Shariah-compliant.
According to the policy document:
- MYOR-i replaces the Kuala Lumpur Islamic Reference Rate, which was discontinued on 25 March 2022;
- MYOR-i is designed based on the International Organization of Securities Commissions Principles for Financial Benchmarks;
- it applies to the following institutions which are approved by Bank Negara Malaysia to deal in the interbank market, whether acting as principals or agents in the wholesale financial markets:
- licensed Islamic banks under the Islamic Financial Services Act 2013;
- licensed banks and licensed investment banks that are approved under paragraph 15(1)(a) of the Financial Services Act 2013 to carry out Islamic banking business;
- prescribed development financial institutions approved under subsection 33B(1) of the Development Financial Institutions Act 2002 to carry out Islamic financial business; and
- any other interbank institution that is a direct participant of the real-time electronic transfer of funds and securities system;
- MYOR-i is calculated as the volume-weighted average rate of return on Shariah-compliant unsecured overnight ringgit interbank placements, rounded to two decimal places. Eligible transactions include:
- unsecured placements between interbank institutions (either brokered or direct/bilateral); and
- Bank Negara Malaysia's Islamic overnight monetary operations, which comprise tenders conducted through the Fully Automated System for Issuing or Tendering or manual operations, and direct overnight placements between Bank Negara Malaysia and interbank institutions – but excluding standing facilities that are based on an eligible instrument (presently, a Commodity Murabahah instrument);
- the list of eligible instruments may be expanded subject to the instrument:
- being approved by the Shariah Advisory Council of Bank Negara Malaysia; and
- meeting all the requirements for MYOR-i as assessed by Bank Negara Malaysia; and
- MYOR-i is published on the official website of Bank Negara Malaysia by 12 noon on the following business day.
For further information on this topic please contact Pamela Kung at Shearn Delamore & Co by telephone (+60 3 2027 2911) or email ([email protected]). The Shearn Delamore & Co website can be accessed at www.shearndelamore.com.