Foreign Exchange Policy Notices (2024)

Appointed overseas office/AOO

a) a Holding/Parent Entity, subsidiary Entity, sister Entity, head office or branch outside Malaysia within a LOB’s banking group and its overseas office outside the LOB’s banking group approved by BNM.

Borrowing

a) any utilised or unutilised credit facility or financing facility;

b) any utilised or unutilised trade financing facility, including but not limited to, trade guarantee or guarantee for payment of goods;

c) redeemable preference share or Islamic redeemable preference share; or.

d) Corporate Bond or Sukuk.

Notwithstanding the above, the following areexcludedfrom the

definition of Borrowing —

i. a trade credit term extended by a supplier for any goods or services;

ii. a credit limit that a LOB apportions for its client to undertake a Forward Basis transaction, excluding a transaction that involves—

A. exchanging or swapping of Ringgit or foreign currency debt for another foreign currency debt; or

B. exchanging of foreign currency debt for a Ringgit debt;

iii. a Financial Guarantee or Non-Financial Guarantee;

iv. an operational leasing facility;

v. a factoring facility without recourse;

vi. a credit card or charge card facility obtained by an Individual from a Resident and used for payment for retail goods or services only; or

vii. a credit facility or financing facility obtained by a Resident Individual from a Resident to purchase one (1) Residential property and one (1) vehicle.

Note:For clarity purposes, the transactions in paragraphs (ii)(A) and (ii)(B) shall be considered as Borrowing

Direct Investment Abroad or DIA

a) An investment in Foreign Currency Asset Offshore by a Resident resulting in at least 10% equity ownership or control of a Non-Resident Entity outside Malaysia or a Labuan entity;

b) An inter-company lending by a Resident Entity to a Non-Resident Entity within the Resident Entity’s Group where the Non-Resident Entity is outside Malaysia or a Labuan Entity or;

c) A capital expenditure by a Resident investor in an unincorporated Entity outside Malaysia or a project outside Malaysia by an agreement with no establishment created, where the Resident investor —

i. Contributes capital of at least 10% of the cost of the project;

ii. Is entitled to at least 10% of profits from the unincorporated Entity or project; or

iii. Have management control of the unincorporated Entity or project.

Direct Shareholder

A shareholder with at least 10% effective shareholding in a Resident Entity.

Domestic Ringgit Borrowing

a) Any Borrowing in Ringgit obtained by a Resident from another Resident; or

b) Any obligation considered or deemed as Domestic Ringgit Borrowing under any of the FEP Notices.
Note: For purposes of determining the Domestic Ringgit Borrowing status of a Resident Entity—

a) The Resident Entity is deemed to have a Domestic Ringgit Borrowing when another Resident Entity with Parent Subsidiary Relationship has a Domestic Ringgit Borrowing; and

b) The following shall not be considered as Domestic Ringgit Borrowing —

i. A Borrowing obtained from another Resident Entity with Parent-Subsidiary Relationship;

ii. A Borrowing obtained from its Direct Shareholder; or

iii. Any facility including credit facility or financing facility which is used for Sundry Expenses or Employees’ Expenses only.

“Sundry Expenses” refers to small and infrequent expenses for office supplies (e.g. stationaries), ancillary services (e.g. software and online subscription) and other minor expenses to facilitate daily business operation.

“Employees' Expenses” refers to business-related expenses which may include, but not limited to, travel (e.g. lodging and transportation), entertainment, health, insurance, takaful and other employees' expenses, excluding investment.

“Borrowing” refers to the definition of “Borrowing” above.

Entity

a) Any corporation, statutory body, local authority, society, cooperative, limited liability partnership and any other body, organization, association or group of persons, whether corporate or unincorporated, in or outside Malaysia; or

b) The Federal Government, any State Government or any other government.

External Account

An account in Ringgit opened with any Financial Institution in Malaysia —

a) By a Non-Resident—

i. Individually;

ii. Jointly with another Non-Resident; or

iii. Jointly with a Resident, excluding

· For a joint venture in Malaysia;

· A husband and wife; or

b) By a person who operates the account in trust for or on behalf of a Non-Resident. The designation of the account shall be determined based on the residency of the beneficiary.

Financial Guarantee

A guarantee, indemnity or undertaking to secure the repayment of a Borrowing.

Firm Commitment

A commitment arising from -

a) An obligation to make or a right to receive, any payment under any agreement or arrangement;

b) A holding of an asset or a property; or

c) A holding of a debt, obligation or liability.

Foreign Currency Asset Onshore

a) Foreign Currency-denominated securities or Islamic securities offered in Malaysia by a Resident as approved in writing by Bank Negara Malaysia;

b) Foreign Currency-denominated Financial Instrument or Islamic Financial Instrument offered in Malaysia by a Resident as approved in writing by Bank Negara Malaysia excluding a derivative or Islamic derivative transaction entered with Firm Commitment;

c) Deposit in Investment FCA with a LOB or an approved Financial Institution as specified in Notice 3; or

d) Any instrument offered by a LOB with foreign currency delivery at maturity.

Foreign Currency Asset Offshore (previously referred to as “Investment Abroad”)

a) A financial asset in Malaysia swapped for a financial asset in a Labuan Entity or outside Malaysia;

b) Foreign Currency Borrowing given to a Non-Resident;

c)Working capital arising from the set-up of any business arrangement outside Malaysia (including a joint venture project where no Entity is created or established);

d) Deposit in a Foreign Currency Account maintained with a Labuan Entity or outside Malaysiaexcludingreasonable amount of deposit for education, employment or migration outside Malaysia; or

e) Foreign Currency-denominated—

i. asset (tangible or intangible) offered by a Non-Resident or any person whose residency cannot be determined;

ii. asset (tangible or intangible) in or maintained with a Labuan Entity, or outside Malaysia;

iii. Financial Instrument or Islamic Financial Instrument (excluding Exchange Rate Derivatives) without Firm Commitment offered on a Specified Exchange under the CMSA outside Malaysia undertaken by a Resident through a Resident futures broker; or

iv. Financial Instrument or Islamic Financial Instrument (excluding Exchange Rate Derivatives) without Firm Commitment issued or offered by a Non-Resident.

Global Supply Chain

A business activity where Resident imports goods or services to support production or distribution of goods or services by Resident exporters for Resident exporter’s export activities. This includes domestic trade in goods or services between the Resident importer and the Resident exporter undertaken through Resident intermediate entity.

Group

An Entity's -

a) Ultimate or direct Holding/Parent Entity;

b) Head office;

c) Branch;

d) Subsidiary company where theEntity owns more than 50% of ordinary shares in the subsidiary company;

e) Associate company where the Entity owns between 10% and 50% of ordinary shares in the associate company; or

f) Sister company where the Entity and its sister company have a common shareholder with minimum of 10% of ordinary shares in both the Entity and its sister company.

Immediate Family Member

A legal spouse, parent, legitimate child (including legally adopted) or legitimate sibling of an Individual.

Labuan entity

An Entity which is created, incorporated, licensed or registered under any of the following legislation:

a) Labuan Companies Act 1990 [Act 441];

b) Labuan Trust Act 1996 [Act 554];

c) Labuan Financial Services and Securities Act 2010 [Act 704];

d) Labuan Islamic Financial Services and Securities Act 2010 [Act 705];

e) Labuan Foundations Act 2010 [Act 706]; or

f) Labuan Limited Partnerships and Limited Liability Partnerships Act 2010 [Act 707].

Licensed Onshore Bank or LOB

a) A licensed bank or a licensed investment bank under the FSA; and

b) A licensed Islamic bank under the IFSA.

Miscellaneous Expense

A Current Account Transaction that is of reasonable amount and infrequent in nature, including but not limited to holiday expenses abroad, medical expenses abroad and advance or reimbursem*nt for purchase of goods and services abroad on behalf of a Resident Individual residing in Malaysia.

Parent-Subsidiary Relationship

A relationship between a Resident Entity and its direct or indirect —

a) Resident Holding/Parent Entity; or

b) Resident subsidiary.

For the avoidance of doubt, this includes a relationship between a Resident subsidiary of a Non-Resident Holding/Parent Entity with the Resident subsidiary’s ultimate Resident Holding/Parent Entity.

Real Estate Abroad

The real estate is for the Resident Individual’s own accommodation or the Resident Individual’s Immediate Family Member’s accommodation only.

Real Sector Activity

An activity relating to -

a) Construction or purchase of a Residential or commercial property,excludingpurchase of land which will not be utilized for construction or production of goods or services; or

b) Production or consumption of goods or services,excluding -

i. Activity in financial services sector, whether Islamic or otherwise;

ii. Purchase of securities or Islamic securities; or

iii. Purchase of Financial Instrument or Islamic Financial Instrument.

Ringgit Asset

a) Ringgit-denominated security or Islamic security issued in Malaysia by a Resident;

b) Ringgit-denominated security or Islamic security issued by a Non-Resident as approved by the Bank Negara Malaysia;

c) Ringgit-denominated Financial Instrument or Islamic Financial Instrument as approved by BNM;

d) Ringgit deposits with a Financial Institution in Malaysia; including deposit-like instrument with only Ringgit delivery at the inception and maturity; or

e) Any property in Malaysia.