MYOR, MYOR-i and KLIBOR: Malaysia's move to overnight reference rates

What is KLIBOR?

KLIBOR was introduced in June 1987 as a reference rate for pricing loans and other products and as an indicator of interbank conditions. It is submission-based: it represents the rates at which the KLIBOR submitting banks are willing to lend ringgit to each other for set tenors.

BNM's Financial Stability Review for the first half of 2025 counted 11 submitters. Each bases its submission first on its own concluded arm's-length transactions, then on its executable bids and offers, and finally on expert judgment. The fixing is a trimmed average: the highest and lowest submissions are removed and the remaining nine are averaged. KLIBOR is published for the 1-, 3- and 6-month tenors.

What are MYOR and MYOR-i?

Because they are overnight rates, MYOR and MYOR-i are normally used as compounded averages over an interest period. BNM notes that compounded rates are more stable than forward-looking term rates such as KLIBOR, which can be affected by factors on a single fixing day, such as quarter-end or year-end volatility.

• MYOR: launched on 24 September 2021 as Malaysia's alternative reference rate. It is the volume-weighted average rate of unsecured overnight ringgit interbank transactions, including BNM's overnight monetary operations but excluding standing facilities. It is published by 10.00am on the next business day.
• MYOR-i: launched on 25 March 2022 as the world's first transaction-based Islamic benchmark rate, replacing the Kuala Lumpur Islamic Reference Rate (KLIRR). It is the volume-weighted average rate of return on Shariah-compliant unsecured overnight ringgit interbank placements, currently based on Commodity Murabahah, and is published by 12.00 noon on the next business day. BNM's Shariah Advisory Council has confirmed it is Shariah-compliant.
• Both are administered and calculated by BNM, which publishes the aggregate transaction volume alongside each rate and reviews both rates periodically.

Why is Malaysia moving away from KLIBOR?

When MYOR was launched, it ran in parallel with KLIBOR so that users could choose either rate. BNM's Financial Stability Review for the first half of 2025 explains why that multiple-rate approach was reassessed. The share of term tenors in the interbank volume behind KLIBOR has fallen, and the overnight tenor now makes up 62% of the volume in KLIBOR's underlying and related markets. That increases reliance on submissions that are not based on transactions.

BNM also cited feedback that some submitters might withdraw if the KLIBOR framework were reviewed, and found that KLIBOR's continued availability was slowing the adoption of MYOR and MYOR-i. In its September 2024 discussion paper, 93% of respondents supported the transition. BNM describes the move as a pre-emptive step, and states there have been no notable concerns about KLIBOR's integrity.

Which KLIBOR tenors have been discontinued?

• 9-month KLIBOR: phased out from 1 January 2018, after a transitional period that began on 1 January 2017.
• 2-month and 12-month KLIBOR: discontinued from 1 January 2023, as the least referenced tenors in financial contracts.
• 1-, 3- and 6-month KLIBOR: still published, until the final publication date of 31 December 2028.

What is the KLIBOR to MYOR transition timeline?

BNM, in consultation with the Financial Markets Committee as steering committee, published a roadmap with these milestones:

• Second half of 2025: a KLIBOR Transition Coordination Subcommittee and four industry-led working groups (derivatives, cash products, Shariah and communication) established.
• 1 October 2026: market participants expected to be operationally ready to offer and trade MYOR and MYOR-i products as part of their standard offering.
• 1 July 2027: KLIBOR to cease being used in new trades across all products, although exceptions may be granted for specific purposes such as managing risk on existing positions. BNM also plans to mandate MYOR-i for all new Islamic financial products from this date.
• 30 June 2028: all legacy KLIBOR contracts to be converted to MYOR or MYOR-i where possible; any remaining contracts must have robust fallback provisions.
• 31 December 2028: final publication of KLIBOR. All tenors cease permanently from 1 January 2029.

What does the transition mean for loans and derivatives?

Most KLIBOR exposure is in derivatives. A survey of Financial Markets Association of Malaysia (FMAM) members put KLIBOR exposures at RM1.5 trillion as of March 2025, 89% of it in derivatives such as interest rate swaps and cross currency swaps; the rest was cash products such as non-retail loans, unsecured interbank lending and floating-rate securities. Under BNM's Reference Rate Framework, new floating-rate retail loans are priced against the Standardised Base Rate, and older ones against the Base Rate or base lending rate.

KLIBOR-linked loans and financial products made up 3.2% of total outstanding loans at the end of 2024. BNM says borrowers with these products may see rate adjustments, depending on the margin over MYOR or MYOR-i. Based on other jurisdictions, a converted loan may combine compounded MYOR or MYOR-i, the existing KLIBOR margin and an adjustment spread for the difference between the two rates.

For derivatives, FMAM has recommended conventions for MYOR interest rate swaps, SOFR-MYOR cross currency swaps and MYOR-KLIBOR basis swaps. A standard MYOR swap compounds MYOR in arrears, resets quarterly, uses Act/365 and pays two business days after the period ends, and MYOR is included in the ISDA interest rate derivatives definitions.

How should banks and borrowers prepare?

BNM expects market participants and users of benchmark rates to prepare in proportion to the scale and complexity of their exposures, including by:

• setting up internal governance to oversee the move of operations and business lines to MYOR and MYOR-i;
• reviewing and updating contracts for the transition, including fallback language;
• upgrading treasury and loan systems for the new calculations and reporting; and
• allocating enough resources to staff training and customer engagement.

Reference rate training with Ogos Learning

The revised PKMC Module 2 syllabus covers MYOR and the move from LIBOR to risk-free rates such as SOFR and SONIA, while Module 4 covers interest rate swaps and the role of ISDA. Ogos Learning offers self-paced e-learning for PKMC Module 2 (The Money Market) and Module 4 (Risk Management & Basic Derivatives), and treasury and derivatives training for bank teams. Founder and principal trainer Jin Yoong Chong, CFA, is an HRD Corp accredited trainer who has run accredited CPE courses for capital market licence holders since 2010. He has served as President of the CFA Society Malaysia and authored the PKMC Module 2, 3 and 4 textbooks with AICB.