Bank Negara Malaysia issues new exchange policy notices

Bank Negara Malaysia issued a series of news Exchange Policy Notice June 1, 2022 (‘FEP Notice’) which entered into force immediately in place of the exchange notices published on April 15, 2021 (‘Reviews superseded‘).

The main changes introduced as part of the EFF notices are highlighted below.

Notice 1: Transactions in currencies, 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 The restrictions imposed under paragraph 6(1)(a) of Notice 1 of the Superseded Notices on the purposes for which a non-resident is permitted to buy or sell foreign currency for its own account on a one-time basis from of a licensed onshore bank (‘LOB‘) or a designated office abroad (‘AOO‘) have now been deleted (paragraph 6(1)(a) of communication 1 of the EFF communications).
  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 The restrictions imposed under paragraphs 6(1)(b) and 6(1)(c) of Notice 1 of the Superseded Notices on the purposes for which a non-resident is permitted to buy or sell foreign currency for its own account on a futures with a LOB or an AOO have been merged in paragraph 6(1)(b) of Notice 1 of the FEP Notices and subject to identical restrictions.
  3. Paragraphs 8 and 9 of notice 1 of the superseded notices which permit a non-resident entity to buy and sell foreign currency for ringgits with a LOB or AOO on behalf of an affiliate that is a resident entity and a non-resident The entity has been consolidated in paragraph 8 of notice 1 of the FEP notices. It should be noted that different requirements apply when a principal is a resident and when he is a non-resident.

Note 2: Borrowing, Loan 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Paragraph 21 of Notice 2 of the Superseded Notices allows a non-bank resident guarantor to give a financial guarantee in the circumstances specified in that paragraph.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 made to the above pursuant to paragraph 21 of Notice 2 of the EFF Notices:

  1. in addition to the two existing circumstances in which a non-bank resident guarantor is permitted to give a financial guarantee of 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 resident non-bank guarantor is also permitted to post a financial guarantee of any amount to secure a foreign currency borrowing 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 authorization granted under main paragraph 21 of Notice 2 of the Superseded Notices have been modified in the following respects:
  • in addition to not permitting a resident non-bank guarantor to post a financial guarantee to secure a loan obtained by a non-resident borrower that is a securitization vehicle, paragraph 21(a) of Notice 2 of the EFF Notices now states also that a resident non-bank guarantor is not allowed to give a financial guarantee to guarantee a loan which must be used by the resident non-bank guarantor; such guarantee shall be treated as Borrowing by the Resident non-bank guarantor who shall then be required to comply with Part A or Part B of Notice 2 (Borrowing by a Resident); and
  • paragraph 21(b) of the Superseded Notices which prohibits a resident non-bank guarantor from giving a financial guarantee where the resident guarantor has entered into a formal or informal agreement to effect repayment of a foreign currency loan “other than for a default” has been reworded by replacing the above phrase with “otherwise than pursuant to a call by the lender in the event of default”; Notice 2 clarifies that a “call” on a financial guarantee must be initiated by the lender in writing to the guarantor, not by the guarantor. 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 EFF Notices introduces a new category of permitted payments. It allows a Resident to make or receive a 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 overseas and payments for the purchase of goods and services overseas) 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 EFF Notices allows a resident individual to open and maintain a foreign currency account (“CIF‘) with a LOB or an NRFI, individually or jointly with another Resident Individual or a Non-Resident Individual. The former 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 an FCA with a LOB, either individually or jointly with an Individual Resident or another Non-Resident. The requirement under paragraph 18(b) of notice 4 of the superseded notices that the resident individual with whom the 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 the equivalent of RM250 million in the previous year must submit a quarterly report on the export of goods to the BNM has been liberalized and replaced with a requirement that resident exporter must submit a report on the export of goods only as required by the BNM. The FAQ for Notice 7 of the EFF Notices issued by the BNM on June 1, 2022 clarifies that if a resident exporter is required to submit a report on the export of goods, this requirement will be communicated to the resident exporter through of a letter from the BNM.
  2. Paragraph 5 of Notice 7 of the EFF Notices introduces a new requirement that an exporter of goods who has received no proceeds from the export of goods within 24 months from the date of shipment must notify BNM unpaid proceeds from the export of goods within 21 days from the end of each calendar year.