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Malaysia’s central bank to launch alternative reference rate By Reuters

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© Reuters. FILEPHOTO: This is a general view of Bank Negara Malaysia’s Central Bank of Malaysia in Kuala Lumpur (Malaysia), July 31, 2019. Image taken July 31, 2019 REUTERS/Lim Huey Teng

KUALA LUMPUR (Reuters) – Malaysia’s central bank will launch an alternative to its interbank benchmark rates that will offer market participants more flexibility and hedging options, it said on Friday.

Bank Negara Malaysia stated that the Malaysia Overnight rate (MYOR) will be used in conjunction with the Kuala Lumpur Interbank Offered Rat (KLIBOR).

It stated that the MYOR rate would be reviewed periodically to make sure “the financial benchmarks rates remain robust” and reflect an active underlying marketplace.

According to the central bank, this alternative rate is part of an international effort to facilitate “use of benchmark rates more robust and based on transactions in active, liquidity markets.”

This new rate, which will be administrated and calculated by central banks as the volume-weighted median rate of overnight ringgit interbank transaction including overnight monetary operations, will be applied to the market.

Bank Negara said that it would create a new Islamic benchmark rates to replace Kuala Lumpur Islamic Reference Rat (KLIRR), by 2022’s first half.

The publication of 12- and 2-month KLIBOR rates, it stated, will be discontinued by 2023.

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