KUALA LUMPUR: Bank Negara Malaysia will replace the Base Lending Rate with the Base Rate from Jan 2, 2015 as the main reference rate for new retail floating rates.
The central bank said on Wednesday the new reference rate framework would provide a more transparent reference rate so consumers could make better decisions when choosing the many loan products offered by financial institutions.
“The new reference rate will also better reflect changes in cost arising from monetary policy and market funding conditions, while encouraging greater discipline and efficiency among financial institutions in the pricing of retail financing products,” it said.
BNM said the Base Rate would be determined by the financial institutions’ benchmark cost of funds and the Statutory Reserve Requirement (SRR).
Other factors in the loan pricing are borrower credit risk, liquidity risk premium, operating costs and profit margin which will be reflected in a spread above the Base Rate.
The Base Rate will be used for new retail floating rate loans and the refinancing of existing loans extended from Jan 2, 2015 onwards.
BNM pointed out the shift towards the new reference rate framework should not have an impact on the effective lending rates charging to retail borrowers.
“It is also important to note that the changes do not represent a change in the bank’s (BNM) monetary policy stance,” it said.
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