Highlight Zeti : Bank Negara mulls new BLR framework

Highlight Zeti : Bank Negara mulls new BLR framework
Business & Markets 2013
Written by Chong Jin Hun of theedgemalaysia.com
Wednesday, 18 December 2013 13:46

KUALA LUMPUR (Dec 18): Bank Negara Malaysia (BNM) will outline its new framework for the country's base lending rate (BLR) early next year, BNM governer Tan Sri Dr Zeti Akhtar Aziz says.

Zeti said given the highly dynamic environment, it is important to ensure that the BLR continues to be relevant.

"As part of the review of the interest rate framework, the bank will issue a consultative paper outlining the new reference rate framework to the industry in early January 2014.

"This is part of the continued evolution of our financial system to which the industry needs to adjust and progress to ensure that it better serves the economy," Zeti said in her speech at the launch of the Asian Banking School today.

She said, as the Malaysian economy continues to transform, it is imperative that the banking sector continues to meet its objectives.

This is to provide effective financial intermediation and to serve the economy.

"Improving the efficiency of this intermediation process throughout the entire economic cycle needs to be an important part of this agenda.

"Key in this process is the role of the reference rate or the base lending rate (BLR),"

The governer is mindful of indications that the BLR as a reference rate has become less relevant.

She noted that the BLR has become less meaningful as a basis for pricing loans, pointing out that retail lending rates on new loans are at a substantial discount to the BLR.

"In general, such a reference rate needs to serve three important roles. First, it needs to allow banks to vary the floating lending rates to reflect changes in funding costs.

Second, the reference rate needs to reflect changes in monetary policy. And third, the reference rate should be a basis for the pricing of retail loans.