Bank Negara Malaysia issues new Foreign Exchange Policy Notices (2024)

Bank Negara Malaysia issued a set of new Foreign Exchange Policy Notices on 1 June 2022 (‘FEP Notices’) that came into effect immediately in place of the Foreign Exchange Notices issued on 15 April 2021 (‘Superseded Notices’).

The main changes introduced under the FEP Notices are highlighted below.

Notice 1 : Dealings in Currency, Gold and Other Precious Metals

  1. The restrictions imposed under paragraph 6(1)(a) of Notice 1 of the Superseded Notices on the purposes for which a Non-Resident is allowed to buy or sell Foreign Currency for his own account on a spot-basis with a Licensed Onshore Bank (‘LOB’) or an Appointed Overseas Office (‘AOO’) have now been removed (paragraph 6(1)(a) of Notice 1 of the FEP Notices).
  2. The restrictions imposed under paragraphs 6(1)(b) and 6(1)(c) of Notice 1 of the Superseded Notices on the purposes for which a Non-Resident is allowed to buy or sell Foreign Currency for his own account on a forward-basis with a LOB or an AOO have been merged into paragraph 6(1)(b) of Notice 1 of the FEP Notices and made subject to identical restrictions.
  3. Paragraphs 8 and 9 of Notice 1 of the Superseded Notices which allow a Non-Resident Entity to buy and sell Foreign Currency against Ringgit with a LOB or an AOO on behalf of a member of its Group which is a Resident Entity and a Non-Resident Entity have been consolidated into paragraph 8 of Notice 1 of the FEP Notices. It is to be noted that different requirements apply where a Principal is a Resident and where it is a Non-Resident.

Notice 2 : Borrowing, Lending and Guarantee

Paragraph 21 of Notice 2 of the Superseded Notices allows a non-bank Resident guarantor to give a Financial Guarantee in the circumstances specified in that paragraph. The following changes have been introduced to the foregoing under paragraph 21 of Notice 2 of the FEP Notices:

  1. in addition to the two existing circumstances where a non-bank Resident Guarantor is allowed to give a Financial Guarantee in any amount in Ringgit or Foreign Currency to secure a borrowing by a non-Resident, paragraph 21 of Notice 2 of the FEP Notices now clarifies that a non-bank Resident Guarantor is also allowed to give a Financial Guarantee of any amount to secure a Borrowing in Foreign Currency by a Non-Resident from a Non-Resident Financial Institution (‘NRFI’); and
  2. the exceptions in paragraphs 21(a) and 21(b) to the general permission given under the main paragraph 21 of Notice 2 of the Superseded Notices have been varied in the following respects:
  • in addition to not allowing a non-bank Resident guarantor to give a Financial Guarantee to secure a Borrowing obtained by a Non-Resident borrower which is a Special Purpose Vehicle, paragraph 21(a) of Notice 2 of the FEP Notices now also states that a non-bank Resident guarantor is not allowed to give a Financial Guarantee to secure a Borrowing which is to be utilised by the non-bank Resident guarantor; such a guarantee is deemed to be a Borrowing by the non-bank Resident guarantor who is then required to comply with Part A or Part B of Notice 2 (Borrowing by Resident); and
  • paragraph 21(b) of the Superseded Notices which disallows a non-bank Resident guarantor from giving a Financial Guarantee where the Resident guarantor has entered into a formal or informal arrangement to make repayment of a Borrowing in Foreign Currency ‘other than for an event of default’ has been redrafted by substituting the aforesaid phrase with ‘other than under a call-upon by the lender in the event of default’; Notice 2 clarifies that a ’call upon’ of a Financial Guarantee is to be initiated by the lender in writing to the guarantor, and not by the guarantor. If a Financial Guarantee is to be repaid other than under a ‘call-upon’ by the lender, or is liquidated at the instruction of the guarantor, such repayment or liquidation is deemed to be an investment in a Foreign Currency Asset under Notice 3 of the FEP Notices.

Notice 4 : Payment and Receipt

  1. Paragraph 4(d)(iii) of Notice 4 of the FEP Notices introduces a new category of permitted payments. It allows a Resident to make or receive payment in Foreign Currency, to or from another Resident for the settlement of a miscellaneous expense (i.e. a Current Account Transaction of a reasonable amount of an infrequent nature, including holiday or medical expenses incurred abroad and payments for purchase of goods and services abroad) incurred outside Malaysia between a Resident Individual residing in Malaysia and a Resident Individual residing outside Malaysia.
  2. Paragraph 14 of Notice 4 of the FEP Notices allows a Resident Individual to open and maintain a Foreign Currency Account (‘FCA’) with a LOB or a NRFI, individually or jointly with another Resident Individual or a Non-Resident Individual. The previous requirement under paragraph 14(b) of Notice 4 of the Superseded Notices that the Non-Resident Individual with whom the Resident Individual opens a joint-account must be an Immediate Family Member of the Resident Individual has been removed.
  3. Paragraph 18 of Notice 4 of the FEP Notices allows a Non-Resident to open and maintain a FCA with a LOB, individually or jointly with a Resident Individual or another Non-Resident. The requirement under paragraph 18(b) of Notice 4 of the Superseded Notices that the Resident Individual with whom Non-Resident opens a joint-account must be an Immediate Family Member of the Non-Resident has been removed.

Notice 7 : Export of Goods

  1. The requirement under paragraph 4 of Notice 7 of the Superseded Guidelines that a Resident exporter whose annual gross Export of Goods exceeds RM250 million equivalent in the preceding year must submit a quarterly report on Export of Goods to BNM has been liberalised and replaced with a requirement for such Resident exporter to submit a report on Export of Goods only as and when required by BNM. The FAQs to Notice 7 of the FEP Notices issued by BNM on 1 June 2022 clarify that if a Resident exporter is required to submit a report on Export of Goods, such requirement will be communicated to the Resident exporter via a letter from BNM.
  2. Paragraph 5 of Notice 7 of the FEP Notices introduces a new requirement that an Exporter of Goods who has not received any proceeds from the Export of Goods within 24 months from the shipment date is to notify BNM on the outstanding proceeds from the Export of Goods within 21 days from after the end of each calendar year.

As an expert in financial regulations and foreign exchange policies, I can confidently delve into the intricacies of the article you provided regarding the new Foreign Exchange Policy Notices issued by Bank Negara Malaysia on June 1, 2022. My extensive knowledge in this field allows me to decipher the changes and implications introduced under the FEP Notices.

Let's break down the information related to each concept mentioned in the article:

1. Notice 1: Dealings in Currency, Gold, and Other Precious Metals

  • Changes in Purpose Restrictions: The FEP Notices have removed restrictions on the purposes for which a Non-Resident can buy or sell Foreign Currency on a spot-basis with a Licensed Onshore Bank (LOB) or an Appointed Overseas Office (AOO).

  • Forward-Basis Restrictions: Previous restrictions on the purposes for buying or selling Foreign Currency on a forward-basis have been merged and are now subject to identical restrictions under paragraph 6(1)(b).

  • Consolidation of Entity Transactions: Non-Resident Entity transactions involving buying and selling Foreign Currency against Ringgit have been consolidated into paragraph 8, with different requirements for Resident and Non-Resident Principals.

2. Notice 2: Borrowing, Lending, and Guarantee

  • Expansion of Financial Guarantee Circumstances: Changes under paragraph 21 now allow non-bank Resident Guarantors to provide financial guarantees in any amount in Ringgit or Foreign Currency to secure a Borrowing in Foreign Currency by a Non-Resident from a Non-Resident Financial Institution (NRFI).

  • Variations in Exceptions: Exceptions in paragraphs 21(a) and 21(b) have been modified. Notably, a non-bank Resident guarantor is not allowed to give a Financial Guarantee to secure a Borrowing for its own use. The definition of 'call-upon' in the event of default is clarified.

3. Notice 4: Payment and Receipt

  • New Category of Permitted Payments: Paragraph 4(d)(iii) introduces a new category allowing Residents to make or receive payments in Foreign Currency for the settlement of miscellaneous expenses incurred outside Malaysia between Residents residing inside and outside Malaysia.

  • Changes in Foreign Currency Account (FCA) Requirements: Requirements for joint accounts between Resident and Non-Resident Individuals have been eased, removing the previous necessity for the Non-Resident Individual to be an Immediate Family Member of the Resident Individual.

4. Notice 7: Export of Goods

  • Reporting Requirements for Resident Exporters: The requirement for Resident exporters with an annual gross Export of Goods exceeding RM250 million to submit quarterly reports has been liberalized. Instead, they are now required to submit a report only as and when requested by BNM.

  • Notification for Outstanding Proceeds: A new requirement has been introduced, mandating Exporters of Goods who have not received any proceeds within 24 months from the shipment date to notify BNM within 21 days after the end of each calendar year.

These changes indicate a significant shift in Malaysia's foreign exchange policies, aiming to streamline processes, facilitate transactions, and ensure compliance with global financial standards.

Bank Negara Malaysia issues new Foreign Exchange Policy Notices (2024)
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