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Policy Document On Repurchase Agreement Transaction

This document replaces the pension amortization document (BNM/HR/PD 032-3) published on 31 July 2015. The revised strategy document will come into effect on the day the final policy is issued. This strategic document is to be read with other BNM documents and policy directions, in particular the capital adequacy framework published on 03 May 2019 (Basel II – Risk Weighted Assets); The requirements for limiting the exposure of a counterparty, adopted on July 9, 2014; Foreign exchange management rules The Code of Conduct for Malaysian Wholesale Financial Markets, published on 13 April 2017; Net financial stability requirements adopted on July 31, 2019; STATsmart reporting obligations. 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. The policy document is available on the BNM website www.bnm.gov.my or by clicking here. 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.