Member Article

SC and Bursa extend temporary margin financing flexibilities

On 28 September 2020, the Securities Commission Malaysia (“SC”) and Bursa Malaysia Berhad (“Bursa”) extended the temporary relief measures relating to margin financing to 31 December 2020. The relief measures, which took effect on 27 March 2020 via Participating Organisations’ Circular No. R/R 6 of 2020, were initially due to expire on 30 September 2020.

The relief measures allow brokers to exercise discretion whether or not to impose force selling measures on clients and accept other types of collateral from investors such as bonds, unit trusts, gold and immovable properties for purposes of margin financing. Previously, brokers were required to automatically liquidate their clients’ margin accounts if the equity value in those accounts falls below 130% of the outstanding balance.

The announcement on the extension is available here.

Currency Act 2020 in force from 1 October 2020

The Currency Act 2020 (the “Act”) came into force on 1 October 2020¹. The Act provides for the management of currency of Malaysia, regulation of currency processing business and currency processing activities and for related matters.

The Currency (Processing Fees for Application of Registration of Currency Processing Business)Regulations 2020 (the “Regulations”) also came into force on 1 October 2020. The Regulations prescribe a RM500 processing fee for an application for registration to carry on currency processing business under paragraph 25(1)(c)of the Act. The Regulations are available at https://tinyurl.com/y3raahw5.

^{1 P.U.(B) 476/2020 dated 29 September 2020 is available at https://tinyurl.com/y4hx7f2r.}

Exposure Draft on Transitional Arrangements for Regulatory Capital Treatment of Accounting Provisions

On 1 October 2020, BNM released the Exposure Draft on Transitional Arrangements for Regulatory Capital Treatment of Accounting Provisions (the “Exposure Draft”), applicable to prescribed Development Finance Institutions (“DFIs”). DFIs which elect to apply the transitional arrangements are allowed to add back a portion of the Stage 1 and Stage 2 provisions for expected credit losses to Tier 1 Capital over a four-year period from financial year beginning 2020 or a three-year period from financial year beginning 2021.

The proposals are intended to be consistent with the guidance issued by the Basel Committee of Banking Supervision on “Regulatory treatment of accounting provisions — interim approach and transitional arrangement” (March 2017), and “Measures to reflect the impact of Covid-19” (April 2020).

The Exposure Draft is to be read together with the policy document on Capital Framework for Development Financial Institutions. Feedback on the Exposure Draft must be submitted to BNMby 30 October 2020.

For further information regarding financial services matters, please contact our Financial Services Practice Group.