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September 1998
All Treasury Managers,
NOTES OF MEETING ON SETTLEMENT
OF MALAYSIAN RINGGIT (MYR)
DEALS
Following the announcement
of exchange controls in
Malaysia on 1st Sep 98,
the Singapore Foreign Exchange
Market Committee held a
meeting with market participants
on this matter. As a follow-up,
a meeting was held on 2nd
Sep 98 to discuss settlement
of outstanding MYR transactions.
The list of banks represented
is in Appendix 2.
The meeting noted that
the market for MYR had
been severely disrupted
by the recently announced
measures, giving rise to
potential risk exposures.
Market participants generally
agreed that the following
guidelines could be adopted
as recommended practice
for closing outstanding
MYR transactions:
- Banks should close-out
MYR-related transactions
with counterparties
by netting all outstanding
trades and settling
the difference in US$.
- It was noted that the
freely traded market
for
MYR ceased as of approximately 10.30am,
1st Sep 98. As
such it is proposed that the
representative rate prevailing at that
time be used as
the guideline for bilateral settlement.
For this purpose,
a spot US$/MYR rate of 4.00,
a benchmark yield curve,
an option volatility
structure and other technical matters
listed in Appendix
1 is a fair and equitable basis
for valuing future
payments with a view towards determining
discounted future
cash flows.
- Close-out settlement
should be effected as
soon as possible and no later
than 9th Sep 98.
All affected parties should exert their best efforts to reach an appropriate close-out arrangement. A practical date for making the net payment would be
8th Sep 98.
VICTOR LIEW
CHAIRMAN
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