KL's central bank to crack down on forex offences

KUALA LUMPUR • Malaysia's central bank will crack down on wrongdoing in the foreign currency market, such as fixing of the exchange rate, to ensure stability in the ringgit, Governor Muhammad Ibrahim said.

From next year, the authorities plan to name and shame banks that have been found guilty of misconduct, he told reporters in Kuala Lumpur on Thursday.

In addition to naming the errant institution, Bank Negara Malaysia will also disclose the amount of penalty imposed and the reason for the fine, he said.

"We will be very strict," the governor said. Banks were told about the new measure - which comes into effect in January next year - earlier on Thursday, he added.

In January, Bank Negara Malaysia said it imposed a RM1.4 million (S$442,000) fine on a lender, which it did not name, related to a case of currency fixing.

The central bank has also clamped down on foreign banks using offshore forwards to bet against the ringgit.

The ringgit has dropped about 5 per cent against the greenback since a rally in the United States currency following Mr Donald Trump's election victory and amid a slump in sentiment against emerging markets.

To bring more stability to the Malaysian currency, the central bank also imposed rules in December that capped the amount of foreign currency proceeds exporters can hold at 25 per cent.

The ringgit's volatility has reduced by half since the bank imposed measures to curb currency speculation, helping small enterprises in making business transactions, the governor said.

The central bank will introduce new steps to further help business owners, including plans to make it easier for small and medium-sized enterprises to hedge their exposure, he said.

The financial market committee will make the announcement once those measures are discussed with the companies, he added.

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A version of this article appeared in the print edition of The Straits Times on March 25, 2017, with the headline 'KL's central bank to crack down on forex offences'. Print Edition | Subscribe