The following changes and practical implications are particularly noteworthy:

•  “Financial guarantee” is now defined as “any guarantee, indemnity or undertaking to secure repayment of a Borrowing”. The previous FX Notices defined “financial guarantee” as “a guarantee or any form of undertaking to secure the repayment of a debt or liability”. The wide scope of the phrase “debt or liability” gave rise to many queries to BNM on whether a particular obligation to repay monies due from another person was a “financial guarantee”. The removal of the phrase “debt or liability” and its replacement with a defined term “a Borrowing”, gives certainty to the definition of a “financial guarantee”. This is because certain debt obligations such as factoring agreements and operational leases are excluded from the definition of a “Borrowing”. It is now clear that guarantees to secure payment obligations under factoring facilities and operational leases are outside the definition of “financial guarantees”.

• A new term “Foreign Currency Asset”, which is defined as including “Foreign Currency Asset Offshore” and “Foreign Currency Asset Onshore” replaces the terms “Investment Abroad” and “Foreign Currency Denominated Asset” which were in the previous FX Notices.

• “Non-resident Financial Institutions” (“NRFI”) is now a defined term and it covers “Non-Resident Entities undertaking financial services, including custodian bank and trust bank”. The use of the word “entities” means that NRFIs would cover all entities providing financial services, not just limited to “banks”.

The new FX Notice 1 expressly regulates NRFIs, purchasing and selling foreign currency against Ringgit when the NRFI is:

(a) acting on behalf of a Non-Resident Client; and

(b) acting as a custodian or trustee managing Ringgit Assets for its Resident or Non-Resident client with Malaysian Ringgit Assets.

BNM’s approvals may still be required for financial guarantees in two limited circumstances:

One material change for FX Notice 3 is in Paragraph 2(b), which states that there is no limit in the amount that a Resident Individual, sole proprietorship or General Partnership with Domestic Ringgit Borrowing may invest in a Foreign Currency Asset in the form of real estate outside Malaysia, if the investment is for the purpose of:

(a) education;

(b) employment; or

(c) migration.

The footnote to Paragraph 2(b) of FX Notice 3, provides that the real estate must be for the Resident Individual’s own accommodation only or the Resident Individual’s Immediate Family Member’s accommodation only. The FX Notices defines “Immediate Family Member” as the legal spouse, parent, legitimate child (including legally adopted) or legitimate sibling of an individual.

(a) by a NRFI on behalf of its Non-Resident clients in facilitating settlement of international trade in goods or services;

(b) by a Non-Resident Intermediary and an NRFI acting as custodians or trustees on behalf of its resident and non-resident clients; and

(c) by a Non-Resident Intermediary or NRFI acting as a custodian or trustee managing Ringgit Assets for its clients.

(a) permission for a Resident licensed insurer or takaful operator to issue or offer an insurance product or a takaful product involving or linked to a Financial Instrument denominated in Malaysian Ringgit to a Non-Resident; and

(b) both Residents and Non-Residents are allowed to subscribe for, as well as transfer, a security or Financial Instrument issued or offered in accordance with the new FX Notice 5. Previously, the permission referred to only a transfer. This express allowance is subject to compliance with FX Notice 4, in addition to FX Notice 2 and FX Notice 3.

• Retain up to the equivalent of RM200,000 in export proceeds in foreign currency. Previously, exporters had to convert the entire export proceeds that the exporters receive into Malaysian Ringgit.
• Receive export proceeds up to 24 months from the date of shipment where the amount of export proceeds does not exceed RM200,000 equivalent per invoice, if, inter alia, the exporter has no control over the delay in the receipt of export proceeds. Under the previous FX Notice 7, the deadline was six months.