Risk and Regulation,

Risk and Regulation,

Bank Negara Malaysia wishes to announce the decrease in the Statutory Reserve Requirement (SRR) Ratio from 4.00% to 3.50%, effective from 1 February 2016.

The decision to reduce the SRR is undertaken as part of a comprehensive effort by Bank Negara Malaysia to ensure sufficient liquidity in the domestic financial system, and to support the orderly functioning of the domestic financial markets. Since early 2015, Bank Negara Malaysia has relied on its monetary operations, including the reverse repo facility, to provide liquidity to the banking system as net external outflows reduced the amount of liquidity in the system. As at 21 January 2016, this has amounted to RM40 billion¹.

The SRR is an instrument to manage liquidity and is not a signal on the stance of monetary policy. The Overnight Policy Rate (OPR) is the sole indicator used to signal the stance of monetary policy, and is announced through the Monetary Policy Statement released after the Monetary Policy Committee meeting.

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1 Refers to the amount of liquidity provided by Bank Negara Malaysia through its monetary operations since early 2015

Re-disseminated by The Asian Banker