Revised Exchange Policy Notices – Commentary

Notice 1: Transactions in currencies, gold and other precious metals
Opinion 2: Borrowing, loan and guarantee
Notice 4: Payment and Receipt
Notice 7: Export of goods

On June 1, 2022, Bank Negara Malaysia (BNM) issued revised Foreign Exchange Policy Notices (FEP Notices), which became effective on the same date. The EFF notices that had been in effect since April 15, 2021 have been repealed and replaced. This article discusses the major changes that BNM has introduced as part of the new EFF notices.

Notice 1: Transactions in currencies, gold and other precious metals

A non-resident is permitted to buy or sell foreign currency against the ringgit spot and forward from a designated overseas office (AOO) of the banking group of the licensed onshore bank for the purposes set out in paragraph 6(1). )(b) ) of Notice 1. Previously, a non-resident could only buy and sell foreign exchange against ringgit forwards with AOO for:

  • the settlement of international exchanges of goods or services with a resident on the basis of a firm commitment or anticipation; Where
  • other purposes from a firm commitment basis.

Notice 2: Borrowing, lending and guarantee

Leaflet 2 contains the following three key elements:

  • A resident non-bank guarantor is permitted to post a financial guarantee of any amount to secure a loan obtained by a non-resident from a non-resident financial institution.
  • A resident non-bank guarantor may not post a financial guarantee to secure a foreign currency loan obtained by a non-resident borrower from a non-resident financial institution if the underlying loan is or will be used by the resident guarantor.
  • A non-bank resident guarantor may not give a financial guarantee to guarantee a foreign currency loan obtained by a non-resident borrower when the resident guarantor has entered into a formal or informal agreement to make a repayment of the foreign currency loan other than within the framework of a “call on demand”. “(1) by the lender in the event of default.(2)

Notice 4: Payment and Receipt

Notice 4 contains the following three key elements:

  • A resident is free to pay or receive foreign currency to or from another resident for the settlement of a miscellaneous expense (must be 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 Malaysia.
  • A resident natural person is authorized to open a foreign currency account jointly with a non-resident natural person. Previously, this authorization was limited to cases where the non-resident person was an immediate family member.
  • A non-resident is allowed to open a foreign currency account jointly with a resident individual. Previously, this authorization was limited to cases where the resident person was an immediate family member.

Notice 7: Export of goods

Note 7 contains the following two key elements:

  • A resident exporter whose annual gross merchandise exports exceed RM 250 million is now only required to submit a report when required by the BNM. Previously, the obligation was to submit a quarterly report to the BNM.
  • A resident exporter under paragraph 5 of Notice 7 who receives no proceeds from the exportation of goods (as defined in paragraph 1(c) of Part A) within 24 months from the date of shipment must notify the BNM of the pending export of the goods within 21 days of the end of each calendar year.

For more information on this subject, please contact Pamela Kung at Shearn Delamore & Co by phone (+60 3 2027 2911) or email ([email protected]). The Shearn Delamore & Co website can be accessed at www.shearndelamore.com.

Endnotes

(1) A financial guarantee “call” must be initiated by the lender in writing to the resident guarantor. The resident guarantor cannot initiate a “call” of a financial guarantee.

(2) The event of default preceding the “call” of a financial guarantee by the lender shall be treated by the lender in accordance with the requirements of International Financial Reporting Standards or any equivalent accounting standard adopted by the lender.