Bank Negara Malaysia invites feedback on RENTAS Modernisation Plan
06 March 2024
Bank Negara Malaysia (“
BNM”) issued a
Discussion Paper on RENTAS Modernisation Plan (“
Discussion Paper”) on 23 February 24 to seek feedback from RENTAS Participants on its proposed plans to modernise the RENTAS system, Malaysia’s real-time gross settlement system of large value payments.
1
Recognising that many other central banks are taking steps to modernise their respective real time gross settlement (“
RTGS”) systems, BNM has embarked on the RENTAS modernisation exercise as outlined in BNM’s
Financial Sector Blueprint 2022-2026.
The proposed initiatives for RENTAS modernisation are divided into two themes, each having two proposals as follows:
Theme 1 : Futureproofing RENTAS
- Proposal 1 : Supporting near 24/7 operations - Ensuring system readiness to support an extension of RENTAS operating hours and to pursue the roll-out of near real-time retail payment settlement.
- Proposal 2 : Enabling open access - Facilitating open and flexible connectivity through alternative access channels to RENTAS, ensuring flexible data retrieval and facilitating future integration with other financial market infrastructures and asset ledgers.
Theme 2 : Enhancing risk management and user functionality
- Proposal 3 : Data provisioning and analytics capabilities – Improving business analytics functionality with additional indicators and real-time access to data, focusing on essential metrics, with participants envisioned to have direct access to transactional data for their own personalised data analytics.
- Proposal 4 : Redesigning of Liquidity Savings Mechanism - Enhancing the Liquidity Savings Mechanism in RENTAS with the aim to optimise liquidity use, support crisis preparedness and promote better payment behaviour.
Further details of these themes and proposals are set out in the Discussion Paper.
The Discussion Paper also outlines other future considerations by BNM in addition to the proposed initiatives for RENTAS. These include:
- Embarking on Phase 2 of the central bank digital currency (“CBDC”) exploration (Domestic Wholesale CBDC). This project aims to explore innovative solutions using wholesale CBDC and distributed ledger technology (DLT) to enhance and futureproof RENTAS. According to BNM in the Discussion Paper, one of the use cases involves testing the potential of smart contracts to address compliance bottlenecks for RENTAS transactions, in addition to exploring tokenisation of securities and settlement using CBDC.
- Futureproofing the debt securities issuance system, namely the Fully Automated System for Issuing/ Tendering (FAST). This initiative is scheduled to kick off later in 2024.
- Considering the synchronisation functionality in the RTGS systems that has been enabled or is being proposed to be enabled by other jurisdictions, which allows cash movements to synchronise with the movement of other assets (e.g. house purchase). BNM has also noted in the Discussion Paper that a central bank is looking into the linking of RTGS between jurisdictions particularly ASEAN countries, upon successful implementation of cross-border linkages for retail payment.
Suggestions by RENTAS Participants on additional initiatives to be considered in the RENTAS modernisation exercise are welcomed by BNM.
Feedback on the Discussion Paper is to be submitted
electronically to BNM by
22 March 2024.
Alert by Lee Ai Hsian (Partner) of the Banking and Finance Practice of Skrine.
1 “RENTAS” is the acronym for Real-Time Electronic Transfer of Funds and Securities Settlement.
This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.