BNM launches first transaction-based Islamic benchmark rate in the world

20 April 2022

On 25 March 2022, Bank Negara Malaysia (“BNM”) announced the launch of the Malaysia Islamic Overnight Rate (“MYOR-i”), the first transaction-based Islamic benchmark rate in the world, that is based on the International Organization of Securities Commission’s (IOSCO) Principles for Financial Benchmarks. The MYOR-i aims to drive Islamic financial product innovation and create transparency for market players to negotiate and standardise their financial contracts, to achieve efficient pricing across all financial instruments. The MYOR-i replaces the Kuala Lumpur Islamic Reference Rate (KLIRR) which has now been discontinued.

BNM released a policy document setting out the benchmark design, methodology and governance framework of the MYOR-i. The policy document notes, in particular, that:

• MYOR-i is administered and calculated by BNM. It is a volume-weighted average rate of return on Shariah-compliant unsecured overnight Ringgit interbank transactions. This includes BNM’s Islamic overnight monetary operations.
• MYOR-i is currently based on the Commodity Murabahah instrument. New Shariah-compliant instruments may be included in the future.
• MYOR-i for any given Kuala Lumpur business day will be published on BNM’s website at 12 p.m. on the following business day.
• BNM will conduct periodic reviews of MYOR-i to ensure that it remains robust and representative of conditions in the underlying market.