BNM, Singapore’s Monetary Authority in cross-border collateral deal

KUALA LUMPUR (Nov 28): Bank Negara Malaysia and the Monetary Authority of Singapore (MAS) have signed an MoU for a cross-border collateral arrangement to enhance liquidity facilities to financial institutions in both countries.

The central banks said in a joint statement issued out of Singapore on Monday this collaboration reflected the growing significance of regionally active financial institutions and the increased bilateral financial inter-linkages, particularly in trade, investment and financial services.

“Under this arrangement, eligible financial institutions operating in Singapore may obtain Singapore dollar (SGD) liquidity from MAS by pledging Malaysian ringgit (MYR) or Ringgit-denominated sovereign and central bank securities with MAS.

“Similarly, eligible financial institutions operating in Malaysia may obtain MYR liquidity from BNM by pledging SGD or SGD-denominated sovereign and central bank securities,” they said in the statement.

BNM and MAS expected this collaboration to enhance both countries’ overall monetary and financial stability of both countries and the confidence of financial institutions in carrying out their business in the two markets. They added this move would further strengthen both central banks’ domestic liquidity management.

BNM governor Tan Sri Dr Zeti Akhtar Aziz said:“This new initiative will facilitate more effective liquidity management by our financial institutions. The arrangement will also serve to reinforce the greater regional orientation of our financial institutions which will in turn support the economic potential of our two economies.”

Her counterpart, MAS managing director Ravi Menon described the cross-border collateral arrangement with BNM as “a valuable addition to the existing network of bilateral arrangements that MAS has with other central banks”.

The arrangement, Menon said, would help build confidence among financial institutions operating in the two markets.