MALAYSIA Law and Practice Contributed by: Samantha Chiang Xin Li, Yee Yik Shien and Tay Zi Li, Zi Li & Partners
Zi Li & Partners A1-17-13A, Arcoris Business Suites 10 Jalan Kiara 50480 Mont Kiara Kuala Lumpur Malaysia Tel: +603 9078 3866 Email: general@zililegal.com Web: zililegal.com
1. Loan Market Overview 1.1 The Regulatory Environment and
broader sustainability trend across the Malaysian loan market. 1.2 Impact of Global Conflicts The BNM commented that heightened global policy uncertainty and trade tensions could weigh on Malay- sia’s external sector and growth, even as domestic demand remains resilient. In its recent monetary policy statement, the BNM highlighted escalating trade ten- sions and a cloudy global outlook as headwinds for Malaysia’s corporate bonds and sukuk market remains heavily skewed towards investment-grade issuers and local institutional demand. New long-term corporate bonds and sukuk issuance in 2024 was approximate- ly MYR124.2 billion, and the SC reported no public- market issuer defaults, underscoring the high-quality bias. The key rating agencies in Malaysia, RAM Rating Services Berhad and Malaysian Rating Corporation Berhad, similarly reported no defaults in their rated corporate portfolios for 2024. 1.4 Alternative Credit Providers activity and financial markets. 1.3 The High-Yield Market Alternative credit channels have seen notable growth in recent years, driven by new entrants such as digital banks and fintech lenders, alongside a strong regula- tory push to expand consumer and SME access to credit while strengthening oversight. Digital Banks Five digital bank licences were awarded by the BNM in 2022, with all five banks commencing operations
Economic Background Macroeconomic Cycles
The Central Bank of Malaysia ( Bank Negara Malaysia or BNM) reduced the Overnight Policy Rate (OPR) by 25 basis points to 2.75% on 9 July 2025 and main- tained it at 2.75% on 4 September 2025, reflecting easing inflation and steady domestic demand. These moves are intended to lower funding costs and sup- port loan growth. Reference Rate Reform A key structural change in the loan market has been the transition from KLIBOR to MYOR/MYOR-i as the primary reference rate. The BNM issued a 2024 dis- cussion paper and roadmap, confirming a phased cessation of KLIBOR in new contracts ahead of its eventual discontinuation. Most new syndicated and bilateral loans now incorporate MYOR-based pricing or fallback language, aligning Malaysia with global benchmark reform trends. Capital Market Depth The Securities Commission Malaysia (SC) reported that the Malaysian capital market achieved a record MYR4.2 trillion in 2024, driven by strong growth in cor- porate bonds and sukuk issuances. Malaysia’s well- established base of domestic institutional investors complements the banking system and provides bor- rowers with refinancing alternatives. The SC contin- ues to promote Sustainable and Responsible Invest- ment (SRI) bonds and sukuk, which contribute to the
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