Malaysia’s central bank on Tuesday extended the maximum tenor for a repurchase agreements, or repo, to five years, as it looks to boost liquidity and avoid a downgrade by global index provider FTSE Russell.
Malaysia remained on a watchlist on FTSE Russell’s World Government Bond Index (WGBI) after a September review, six months after it was flagged on liquidity concerns.
Bank Negara Malaysia announced the change in a statement here, releasing a policy document that set out the revised requirements and expectations of the bank on market participants which enter into repo transactions involving ringgit and non-ringgit repo and reverse repo transactions.
The previous maximum tenor for repurchase agreements was 365 days.
A repo is a form of short-term borrowing for dealers in government securities.
The central bank said dealers will also be given access to a broader range of eligible securities under repo transactions, and will face less red tape in conducting cross-currency repo transactions with ringgit securities.
In August, the central bank issued revised repo guidelines for industry consultation, which proposed “new flexibilities” such as a longer tenor limit and wider range of repo securities.
The revised guidelines were part of BNM’s response to FTSE Russell putting Malaysian government bonds on its watchlist in April.
Reuters | KUALA LUMPUR