Malaysia Guidelines on Statutory Reserve Requirement – An Overview and Summary of Requirements

• By: Staff Editor
• Date: May 20, 2013

• Banking institutions should maintain balance equivalent to at least 4% of EL in their SRA at the BNM.
• Banking institutions should observe the SRR based on the average daily amount of the EL over a fortnightly period (the base period).
• Maintenance of balances in the SRA is flexible, with a daily variation from the SRR within a band, which currently stands at ±20% of the prevailing SRR rate.
• Banking institutions are required to comply with the SRR at two levels:

1. On a fortnightly basis (1st to the 15th and 16th to the last day of a month), the average daily balances maintained in the SRA must be at least equal to the SRR rate.
2. On a daily basis, balances maintained in the SRA must be within the 20% daily variation band around the prevailing policy rate.

• The EL base consists of ringgit denominated deposits and non-deposit liabilities, net of interbank assets and placements with the Bank.
• Additional adjustments made to the EL base:

1. Exclusion from EL base:
   
   • The entire proceeds amount of Tier 1 housing loans/financing sold to Cagamas Berhad.
   • 50% of the proceeds of Tier 2 housing loans/financing sold Cagamas Berhad.
2. Deduction from EL base
   
   • Banking institutions can deduct from the EL base holdings of RM marketable securities in their trading book.
   • Principal Dealers (PD) and Islamic Principal Dealers (i-PD) can deduct from their EL base the daily holding of specified RENTAS securities in their trading and banking books.

• A deduction from the EL base can however only be effected after the banking institution has undertaken the following:

1. i. Submission of Trading Book Policy Statement (TBPS)
2. ii. Confirmation by the banking institution that the segregation of RM marketable securities between the banking book and trading book, controls and all other requirements have been put in place.

• Banking institutions should ensure that the amount of RM marketable securities deducted from EL is reflective of the actual amount as reported in the trading book.

• Any banking institution which fails to comply with the minimum SRR requirement is liable to pay a penalty.
• The penalty payable is determined as the sum of the scaled penalty amount and the monetary benefit subject to the maximum penalty (MP)
• The computation of the maximum penalty is as follows:
  • The scaled penalty amount is calculated as a percentage of the maximum penalty dependent on the number of non-compliances committed by the banking institution, defined as the higher of

1. the average number of offences in the last three complete calendar years; and
2. the total number of offences in the current incomplete calendar year:

• The monetary benefit arising from the non-compliance is computed as follows:

Additional Resources

Read the guidelines in full here.