KUALA LUMPUR (Jan 19): AmBank Group and Malayan Banking Bhd (Maybank) have jointly entered the country's first Malaysia overnight rate (MYOR) interest rate swap (IRS) transaction, with a notional value of RM500 million.

In a joint statement, the groups said this transaction marked the first time the new MYOR reference rate — introduced by Bank Negara Malaysia in September last year — was used as an alternative to the Kuala Lumpur Interbank Offered Rate (KLIBOR) for an IRS transaction.

“Globally, alternative reference rates such as MYOR have been introduced to improve the integrity of financial benchmark rates as part of a transition to transaction-based rates, arising from the London Interbank Offered Rate (LIBOR) reforms following the global financial crisis. These alternative reference rates are meant to be more robust benchmark rates and based upon transactions in active and liquid markets.

“This collaboration between Maybank and AmBank is a step towards introducing MYOR-based products to the market with the aim of providing hedging instruments that can support varying risk management strategies,” said both banking groups.

AmBank’s group treasurer and deputy managing director of wholesale banking Jamzidi Khalid said the transaction complements ongoing efforts to further develop and deepen the Malaysian financial market, in line with industry-led initiatives set out by the central bank’s Financial Markets Committee and the Financial Markets Association of Malaysia (FMAM).

“We are grateful and indeed honoured to work on this landmark MYOR IRS transaction with Maybank. This represents a major milestone in the Malaysian financial market, and we look forward to seeing further development as we move a step closer towards embracing the reform.

“The transaction demonstrates the bank’s enthusiasm and commitment to deliver timely effective solutions that suit our customer’s needs and at the same time, contribute to market breadth and liquidity in developing the local interest rates landscape,” he said.

Meanwhile, Maybank managing director of global markets and transaction banking Md Farid Kairi said the transaction marked a major milestone for the development of the MYOR benchmark, which was critical to enhance the robustness of interest rates benchmarks and provide clients with greater flexibility of timely and relevant financial solutions.

“We would like to thank AmBank for their partnership in this transaction and we look forward to continue to support Bank Negara’s initiatives in enhancing the MYOR market,” he added.