Bank Negara Malaysia (BNM) has introduced the Malaysia Islamic Overnight Rate (MYOR-i), noted to be the first transaction-based Islamic benchmark rate to be rolled out globally.

According to the central bank said, the new benchmark is expected to drive the development of innovative shariah-compliant financial products, which will then expand Malaysia’s Islamic financial market. Market players will also be able to better negotiate and standardise their financial contracts with more transparency, and in turn, price their financial instruments more efficiently.

BNM also said that MYOR-i is developed in accordance with the Principles for Financial Benchmarks, and has been certified to be shariah-compliant by the central bank’s Shariah Advisory Council (SAC). “BNM has also collaborated with the Financial Markets Committee (FMC) and the AIBIM-FMAM Islamic Market Technical and Development Committee (IMTDC) on the development of MYOR-i,” the central bank further said.

The central bank further clarified that it will be responsible for calculating and administrating MYOR-i, and that the benchmark will be a volume-weighted average rate of return on shariah-compliant unsecured overnight ringgit interbank transactions. This includes BNM’s Islamic overnight monetary operations.

Furthermore, MYOR-i is currently based on the Commodity Murabahah instrument, but new shariah-compliant instruments may be added soon. The rates for any given Kuala Lumpur business day will be published on BNM’s website on the following business day, at 12pm.

Finally, BNM stated that MYOR-i will replace the Kuala Lumpur Islamic Reference Rate (KLIRR) with immediate effect. The KLIRR had been adopted as a reference rate by the Islamic interbank market since its introduction in 2006, but its usage was noted to have remained limited.

MYOR-i also has a conventional counterpart in the form of the Malaysia Overnight Rate (MYOR), which was launched back in September 2021. MYOR serves as an alternative reference rate for Malaysia, and exists alongside the Kuala Lumpur Interbank Offered Rate (KLIBOR) to provide the market with the flexibility to choose the rate that best suits their needs.

(Sources: BNM, The Star)

• TAGS:
• Bank Negara Malaysia
• BNM
• Kuala Lumpur Interbank Offered Rate (KLIBOR)
• Kuala Lumpur Islamic Reference Rate (KLIRR)
• Malaysia Islamic Overnight Rate (MYOR-i)
• Malaysian Overnight Rate (MYOR)
• Shariah Advisory Council (SAC)
• Transaction-Based Benchmark Rates