Central bank to pay RM4b dividend to government

Axing export conversion rule among measures in further liberalisation of FEP

KUALA LUMPUR: Bank Negara Malaysia has set aside RM4 billion as dividend payment to the government after posting more than RM10 billion in net profit last year.

The central bank, which generates income from investments of the country’s international reserves, saw its net profit rise to RM10.23 billion from RM8.93 billion in 2019.

Of the RM10.23 billion, RM6.23 billion will be transferred to its general reserve fund, said Bank Negara in its annual report.

Bank Negara generated a total income of RM13.49 billion (up from RM11.13 billion in 2019) net of costs associated with managing the international reserves portfolio and conducting monetary operations.

“Against this, we incur expenses to manage and administer our day-to-day operations and also expenses to finance developmental and long-term projects in line with our principal objects and functions.”

This included expenditure incurred for the central bank’s currency operations and to maintain Malaysia’s payment infrastructure last year, it said, adding that these expenditures amounted to RM3.22 billion last year.

Bank Negara’s assets stood at RM488.04 billion as at Dec 31 last year, up from RM458.97 billion in 2019, with the RM432.37 billion of international reserves portfolio constituting the bulk (89 per cent) of the assets.

Its liabilities arise mainly from deposits by financial institutions (RM146.03 billion) and currency in circulation (RM130.42 billion).

BANK Negara Malaysia has announced further liberalisation of the foreign exchange policy (FEP) to provide greater flexibility to businesses.

The measures, which include axing the export conversion rule and allowing settlement of domestic trade in foreign currency, are effective April 15.

Bank Negara governor Datuk Nor Shamsiah Mohd Yunus said this is part of the central bank’s efforts to strengthen Malaysia’s position in the global supply chain and foster a conducive environment in attracting foreign direct investment.

“The gradual liberalisation process over the recent years has been consistent with Malaysia’s stronger external position and a more resilient financial market.

“Therefore, these measures will provide greater flexibilities to the export-oriented industries to better support the economic recovery,” she said at a virtual press conference on Bank Negara’s Annual Report 2020, Economic and Monetary Review 2020 and Financial Stability Review Second Half 2020.

Bank Negara will now allow resident exporters to manage the conversion of export proceeds according to their foreign currency cash flow needs. Residents exporters can also settle domestic trade in foreign currency with other residents involved in the global supply chain.

“Recognising Malaysian exporters’ vital position in the global supply chain, this measure will facilitate the natural hedge for resident exporters and their business partners along the supply chain to better manage the foreign exchange risk,” the central bank said.

Bank Negara said resident exporters can extend the period for repatriation of export proceeds beyond six months under exceptional circumstances.

While the six-month rule remains in place, this flexibility eliminates the need for exporters to seek Bank Negara’s approval in repatriating their export proceeds beyond the six-month period for reasons beyond the exporters’ control.

“For other purposes, approval from Bank Negara is still required,” it said.

Resident exporters can also net-off export proceeds against permitted foreign currency obligations.

“With this flexibility, exporters no longer need to seek approval from Bank Negara for netting arrangements involving export proceeds. This would enhance business efficiency and cash flow management for exporters.”

Bank Negara said resident corporates can also undertake commodity derivatives hedging directly with non-resident counterparties.

“In addition to the current access to resident futures brokers for their commodity hedging needs, resident corporates are allowed to transact commodity derivatives with non-resident futures brokers directly.”

Further details will be provided in the revised Foreign Exchange Notices on April 15.