Netting of Financial Agreements Act 2015 comes into force Monday
Published on: Tuesday, March 31, 2015
Kuala Lumpur: The Netting of Financial Agreements Act 2015, which provides a legal framework governing close-out netting for financial transactions in Malaysia, comes into force, effective Monday.Close-out netting is an important risk management mechanism which is used by financial institutions and other financial market participants in financial derivative transactions and repurchase transactions, said the Ministry of Finance in a statement.It said the Act, which was in line with international practices, provided assurance that the close-out netting mechanism for financial transactions was enforceable under the law.
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The enforceability of close out netting would provide credit risk reduction benefits by allowing counter parties to net off credit risk exposures instead of having gross exposures and hence improve operational efficiency and reduce systemic risk of the financial system.With the Act coming into force, financial markets' efficiency in Malaysia would be enhanced as Malaysian banks would be able to deal more competitively with foreign counter parties globally.Stay up-to-date by following Daily Express’s Telegram channel.
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