Kuala Lumpur, 27 March 2007
Joint Information Note on the Issuance of Foreign Currency-Denominated Bonds and Sukuk in Malaysia
Bank Negara Malaysia and the Securities Commission today released a Joint Information Note on the facilitative regulatory framework for the issuance of foreign currency-denominated bonds and sukuk in Malaysia.
The Joint Information Note outlines the procedures for the issuance of foreign currency-denominated bonds and sukuk by qualified issuers. Qualified issuers include the Malaysian Government, foreign governments, multilateral development banks (MDBs), multilateral financial institutions (MFIs), agencies or national corporations of the Malaysian Government or foreign governments, foreign multinational corporations (MNCs) and resident corporations.
Specific flexibilities are accorded under the Securities Commission’s Practice Note 1A to expedite the issuance of foreign currency-denominated bonds (Practice Note 1A on Issuance of Foreign Currency-Denominated Bonds Malaysia) and sukuk (Practice Note 1A on Issuance of Foreign Currency-Denominated Islamic Securities or Sukuk in Malaysia). Under this facilitative approval process, a submission to the Securities Commission by an issuer with a credit rating of at least single ‘A-‘ will be deemed approved upon filing of the prescribed documents with the Securities Commission at least two working days prior to the issuance of the bonds or sukuk. In addition, international credit ratings will be acceptable. International legal documentation governed by the laws of England or the United States will also be allowed. Under the facilitative regulatory framework, both resident and non-resident issuers are free to utilise the proceeds from the issuance onshore and offshore. The issuers are also free to hedge to the full amount of the underlying commitment.
Non-resident investors are free to invest in foreign currency-denominated bonds and sukuk onshore and there are no restrictions on the repatriation of capital, profits and income earned from Malaysia, including any coupon or profit earned from their investments. Investments by resident investors will be in accordance to the prevailing foreign exchange administration policy on investment in foreign currency assets. Both resident and non-resident investors are also free to hedge to the full amount of the underlying commitment. Resident investors are exempted from payment of income tax on the profits received from foreign currency-denominated sukuk issued in Malaysia. Similarly, profits or income on non-residents’ investments in foreign currency-denominated sukuk issued in Malaysia are also fully exempted from withholding tax.
The foreign currency denominated bonds and sukuk shall be issued on a scripless basis through the Fully Automated System for Issuing/Tendering (FAST) and deposited with the Real Time Electronic Transfer of Funds and Securities (RENTAS) System with Bank Negara Malaysia as the Central Depository agency and Authorised Depository Institutions as the Sub-Depositories.
Further information may be obtained from the Joint Information Note which is posted on the Bank Negara Malaysia’s website at http://www.bnm.gov.my and the Securities Commission’s website here.