presentation icm money market scrbld

8/6/2019 Presentation ICM Money Market Scrbld

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ISLAMIC CAPITAL MARKET

Money Market in Malaysia


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MONEY MARKET IN MALAYSIA

OVERVIEW OF FINANCIAL MARKETS


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MONEY MARKET DEFINITION

A segment of the financial market in which financial instruments with high

liquidity and very short maturities are traded.

The money market is used by participants as a means for borrowing and

lending in the short term, from several days to just under a year


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THE FUNCTION OF MONEY MARKET

Facilitate Islamic financial institutions to effectively manage their asset liability

mismatch;

Enable Islamic financial institutions to participate as both investors (providers of

funds) and borrowers (providers of assets);

Provide short-term liquid, tradable, asset-backed instruments where Islamic

financial institutions can invest their surplus liquidity;


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THE FUNCTION OF MONEY MARKET

Provide short-term investment opportunities that are more competitively priced;

Enable Islamic financial institutions to assume term risk, securities and liquidate

such assets to improve the quality of their portfolio; and

Endeavour to create secondary market activity with designated market makerswhere such instruments can be actively traded.


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OVERVIEW LEGAL FRAMEWORK OF ISLAMIC


BANK NEGARA

MALAYSIA

CENTRAL BANKING ACT

2009

ISLAMIC BANKS ISLAMIC MONEY

MARKET

ISLAMIC WINDOWS


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ISLAMIC BANKS ISLAMIC WINDOWS ISLAMIC MONEY MARKET

y Enactment of Islamic

Banking Act 1983 (IBA)

administer carrying on of

Islamic banking business

Confers power to BNM toregulate & supervise Islamic banks

Granted a universal banking licence

Accords flexibility to Islamic banks to

undertake broad range of Shariah-

compliant banking business

Provision under Banking and Financial

institution 1989 (BAFIA)

Administer carrying on of

Islamic banking or financial

business by conventionalbanks

S. 32 and S. 124 of BAFIA:

allow conventional banks to carry out

trade activities under Islamic banking

business

Permitted banking institutions to

conduct Islamic banking business

Enactment of Government Funding Act

1983 (GFA)

GFA provide powers to Government

of Malaysia to issue government

bonds based on Islamic principles

Enable Islamic banks to manageliquidity requirements & surplus

funds

Establishment of Islamic Inter Bank

Money Market

to provide a ready source of short-

term investment outlets based on

Syariah principle.


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Government Investment Issues

Islamic Inter-bank Money Market

Interbank Trading


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MONEY MARKET INSTRUMENT

Bankers' Acceptance

Negotiable Certificate of Deposits

Repurchase Agreements (REPO)

Commercial Paper

Treasury Bills


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MONEY MARKET PRODUCT IN MALAYSIA

Non Islamic Products of Money Market Banker's Acceptance

Short Term Revolving Credit

Repurchase Agreement

Negotiable Instrument Of Deposit

Fixed Deposit

Foreign Currency Account

Investment Products


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Islamic Products of Money Market Al-Mudaraba Interbank Investment

Islamic Inter bank Cheque Clearing System

Government Investment Certificate (GIC)/ GII

(Government Investment Issues)

Cagamas Mudharabah Bonds


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Islamic Products of Money Market Islamic Accepted Bills (IAB)

Green Bankers Acceptance

Repurchase Agreements

Islamic Private Debt Securities


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Allince Bank Money Market Product

Banker's Acceptance (BA)


Fixed Deposit


Investment Products


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Banker's Acceptance (BA)


Fixed Deposit


Investment Products


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Islamic Money Market Index:

Trailing Returns(%) 2011-03-25

YTD Return 0.36

1 Year 2.36

3 Years Annualised 2.56

5 Years Annualised 2.81


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Hong Leong Money Market Products Islamic

Special Investment Account - Islamic (SIA)

Acceptance Bills - Islamic (AB-I)

Islamic Negotiable Instruments (INI)


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THE WAY FORWOARDS

With respect to Islamic monetary instruments, the BNM willintroduce new instruments that are structural variations of the

BNMN-i issuances in 2011, namely the Bai Bithaman Ajil (deferred

payment) and Istithmar (investment based on a combination of

Murabahah and Ijarah). These new structures would appeal to a

wider base of investors given the stricter compliance with Shariah

requirements of different jurisdictions. In line with the vision ofMalaysia being an Islamic Financial Centre, the Bank would

continue to develop new and flexible Islamic monetary instruments

that are widely acceptable amongst global investors.


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CONCLUSION

There has always been a close link between monetary policyand financial stability.

First, extremely loose monetary policy for a prolonged period can

be at the root of financial imbalances.

Second, a well functioning and resilient financial system is

necessary for the effective transmission of monetary policy.

Third, financial imbalances have implications for macroeconomic

stability, whereby a disorderly correction of imbalances may lead

to a contraction in economic activity.

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