The Edge

Malaysia’s central bank takes action against currency manipulators

Action marks first enforcement since bank toughened its stance

PUBLISHED : Wednesday, 04 January, 2017, 3:31pm
UPDATED : Tuesday, 14 March, 2017, 2:28pm

By Supriya Surendran

Bank Negara Malaysia (BNM) has initiated enforcement actions against a financial institution for its dealers’ misconduct involving fixing of the US dollar/ringgit exchange rate.

This marked the first enforcement move involving currency manipulation taken by BNM since the central bank reiterated in November that offshore trading of the ringgit is not recognised.

BNM announced the reinforcement of existing rules that have been in place to prohibit facilitation of ringgit non-deliverable forwards (NDFs), which is a form of offshore trading of the currency.

The move by BNM was done to avoid speculative trading of the ringgit. Year to date, the ringgit has weakened by 4.3 per cent to 4.4792 against the US dollar.

BNM said it had initiated the enforcement actions under the Financial Services Act 2013 (FSA) against the financial institution for failure to promptly notify the central bank of a significant audit finding in relation to its dealers’ misconduct.

“The finding indicates that there were communications with traders from other foreign financial institutions which included inappropriate references to the fixing rate submission process.

“In this regard, Bank Negara has commenced the due process as stipulated under the FSA,” the central bank said in a statement.

It did not name the financial institution in question.

Meanwhile, BNM said it views such reporting breaches seriously, especially on financial institutions’ involvement in the offshore ringgit NDF market or any activities that relate to market manipulation.

“[Bank Negara] will not hesitate to take appropriate enforcement actions against any other financial institutions which have breached provisions under the FSA.

“Enforcement actions may include the imposition of monetary penalties, issuance of a written order to comply, making public reprimands and issuance of a written order to mitigate or remedy such breaches.

“[Bank Negara] would like to remind all financial institutions to observe reporting obligations imposed under the FSA, in particular the requirement to promptly notify the [central] bank of any significant findings,” it said.