Bank Negara Malaysia, the country's central bank, has announced further liberalisation of its foreign exchange administration (FEA) policy aimed at providing greater flexibility and efficiency for businesses to better manage their foreign exchange (FX) risk and conduct their daily operations.

Hedging flexibility

A number of the rule changes impact the flexibility of hedging. Firstly, residents can hedge their foreign currency current account obligations up to their underlying tenure. The bank says that this move is to promote sound risk management and business efficiency. Residents need to obtain approval from the bank in order to do this.

Resident treasury centres can now hedge on behalf of their related entities via a licensed onshore bank. The bank says that this change is being made to facilitate greater efficiency in centralised risk management operations.

The new policy also has something for non-resident treasury centres, which can now hedge on behalf of their related entities, via a licensed onshore bank or appointed overseas office (AOO), upon a one-time registration with Bank Negara Malaysia

Flexibility for non-residents to hedge on an anticipatory basis via an AOO, for settlement of trade in goods and services, was also announced.

Revised definition of domestic ringgit borrowing

Credit facilities that are used by corporates for miscellaneous expenses such as sundry and employees’ travel expenses are to be excluded from domestic ringgit borrowings under applicable FEA policies on investment abroad. This is to facilitate the management of operational expenses by residents without impacting their investment activities.

All of the new measures from the bank will be effective from 30 August 2019. Further details on the above liberalisation will be provided in the Supplementary Notice No. 6 on Foreign Exchange Administration Rules issued by the Bank on the same date.