Bank Negara issues Policy Document on Repurchase Agreement Transactions (Update)

On 21 August 2019 we issued an Alert on the Exposure Draft of the Policy Document on Repurchase Agreement Transactions issued by Bank Negara Malaysia (‘BNM’).
 
BNM has on 12 November 2019 issued the Policy Document on Repurchase Agreement Transactions (‘Repo Policy Document’) which came into effect on 12 November 2019.
 
The Repo Policy Document applies to licensed banks and licensed investment banks and supersedes the Policy Document on Repurchase Agreement Transactions (BNM/RH/PD 032-3) issued on 31 July 2015 (‘Superseded Document’).
 
There does not appear to be any substantive amendments to the Exposure Draft of the Repo Policy Document except for the omission from paragraph 8.6 of the Repo Policy Document of the guidance that the minimum market lot for Ringgit Repo is RM100,000.
 
As mentioned in our earlier Alert, the main changes introduced under the Repo Policy Document are as follows –
 
  1. the maximum tenor of a repurchase transaction has been extended from 365 days to five years;
  1. the standard lot for an inter-bank Ringgit repurchase transaction has been increased from RM 1 million to RM 10 million;
  1. the securities that are eligible for a repurchase transaction have been expanded to accord greater flexibility to market participants in their conduct of repurchase transactions by the removal of section 9 of the Superseded Document which sets out the criteria for securities that are eligible for a repurchase transaction; and
  1. the requirement under the Superseded Document for a repurchase agreement to be subject to the Malaysian Annex issued by the Persatuan Pasaran Kewangan Malaysia (PKKM) will be removed.