Review Questions – Chapter 19
1. What is the role of BNM in relation to the money and foreign exchange markets?
Role under the Central Bank Ordinance 1958 to promote monetary stability and sound financial
structure.
Role in –
i) Transmission of monetary policies
a. Ensure bank credit and monetary supply are adequate to promote growth in the
economy
b. Reduce inflationary pressures
c. Use a broad range of instruments to achieve these objectives
d. To closely monitor and regulate foreign exchange, to moderate fluctuations as a
result of movements of funds in and out of the country, and not to affect supply and
demand
ii) Develop a well organized market that is efficient and proactive to the varied needs of
the participants
a. Financial structure as well as financial markets operate orderly, innovatively and
efficiently
b. Money and foreign exchange market operates with an efficient information and
settlement system (reduce transaction costs, increase speed of transactions,
introduce new instruments to absorb risks).
c. SPEEDS – IFTS and SSTS, as well as BIDS
d. Code of Conduct for Principals and Brokers in Wholesale Money and Foreign
Exchange Markets.
2. What is the purpose of ECM Notices? What are the significant ECM Notices that affect dealings
in the money and foreign exchange markets?
Administration of the exchange control regime as per the Exchange Control Act of 1953. The
purpose is to:-
a. Enable BNM to monitor settlement of payments and receipts in international transactions
b. Encourage the use of the nation’s financial resources for productive purposes within the
country
Includes 16 ECM Notices. Significant ECM notices relevant to money and foreign exchange
markets are:-
ECM 1 – Dealing in Gold and Foreign Currency
ECM 4 – Relates to making payments in any foreign currency or ringgit
ECM 6 – Credit facilities extended to non-residents
ECM 7 – Relates to the holding of foreign currency by residents
ECM 12 – Relates to securities, bearer certificates and coupons etc.
ECM 13 – Import and export of currency notes, bills of exchange, assurance policies.
3. A foreigner walks through customs at the airport with a brief case containing US Dollars,
Singapore Dollars and Deustche Marks. Is he subject to exchange control restriction?
(As accessed from http://www.bnm.gov.my/microsites/fxadmin/0002_faqs.htm#00_q03)
What is the policy for a resident traveller to carry in person or baggage foreign currency or ringgit
notes in or out of Malaysia?
There is no restriction for a resident traveller to bring into Malaysia any amount of foreign currency notes,
including traveller’s cheques.
The amount of ringgit notes that a resident traveller can carry into Malaysia is only up to the equivalent of
USD10,000.
A resident traveller is allowed to carry ringgit notes, foreign currency notes and traveller’s cheques up to the
aggregate amount equivalent of USD10,000, when travelling out of Malaysia.
For a resident to bring in or out ringgit or foreign currency notes exceeding the limits stated above, prior
permission must be obtained by applying to the Foreign Exchange Administration Department. Permission
can be obtained within 1 working day upon full information received.
The resident traveller is no longer required to complete Travellers' Declaration Form which has been
discontinued since 31 March 2006.
Also covered by the ECM 13.
5. What are the objectives of the Malaysian Code of Conduct for Principals and Brokers in the
Wholesale Money and Foreign Exchange Market?
Objective of the code is to:-
- Ensure all market participants in the Malaysian Wholesale financial markets maintain the
highest standard of professionalism
- Protect the credibility of oral contracts
- Avoid misunderstandings and errors that may arise because agreements are oral.
Includes rules for dealers and brokers, principals and money broking companies, responsibilities of
employees, confidentiality, and dealing principles and procedures.
5 Schedules of the code:-
Schedule 1 – list of financial products covered by the Code
Schedule 2 – list of standard amounts for approved interbank market
transactions
Schedule 3 – Guidelines for exhanging standard settlement instructions (SSI)
Schedule 4- Market terminology and definitions
Schedule 5 – Market conventions
