BNM has published an exhibition project that outlines the revised expectations of the banks granted and the investment banks granted that contract pension transactions (repo). This strategy document applies to repurchase transactions on ringgit and non-ringgit-repo securities and repurchase transactions, including all pension securities sold or purchased directly, with the intention of redeeming or reselling them at a later date. The response period for the consultation ends on September 13, 2019. A master buy-back contract regulates the repurchase transaction. An agreement should reflect the following characteristics: Guarantees: the underlying security of a pension contract is security. Guarantees for pension transactions are short-term and liquid. Typical guarantees are U.S. Treasury bonds (for example. B U.S. Treasuries) and Treasury Bonds (z.B. Farm Credit Banks, Home Loan Banks).
Public authorities should be aware of the risk factors of the underlying pension hedging instrument and refer to their investment policies to ascertain whether these guarantee instruments can be used for the buyback transaction. Securities purchased (assets) to guarantee the pension contract should retain a market value higher than that of the pension contract (margin, «haircut» or over-enitling). In general, the policy document provides that the policy document is available on the BNM website www.bnm.gov.my or by clicking here. On November 12, 2019, Negara Malaysia Bank («BNM») released a strategy document entitled «Repurchase Agreement transactions».- It came into effect that day. Master`s buyout contract. A master buy-back contract is the contractual contract entered into by a public body with a bank or counterparty. A form of agreement, also known as a lump sum agreement, can be obtained on the website of the Securities Industry and Financial Markets Association (SIFMA), formerly known as The Bond Market Association (TBMA). However, public authorities can adapt the form of SIFMA`s master buyout contract to the specifics of their respective transactions. Conservation: In order to protect public funds, public authorities should ensure appropriate securitisation practices when using pension transactions for investments. Custody must be carried out by an independent custodian or by an external custodian.
The custodian`s obligations (direct or tripartite parts) should be described in a written custody agreement. Although the public authorities are not bound by the Financial Accounting Standards Board (FASB), FASB`s Statement 140 affects counterparties to buy back transactions with governments. FASB`s statement No. 140, «Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities,» generally provides that the purchaser of the pension (i.e. the public body) has the right to sell or replace the securities, the pension seller (i.e. the bank or trader) has no right to replace them or terminate the short-term contract. The buyer is required to register both securities as well as any obligation to return the securities. The recruit is required to reclassify securities from a portfolio of securities or an investment account to a securities security account on their balance sheet. As a result, the underlying type of pension transaction can move from a buyback transaction to a secured loan. This change in the treatment of pension transactions as secured loans would make them illegal for local governments in many states. This document replaces the pension amortization document (BNM/HR/PD 032-3) published on 31 July 2015.