Moec Final

Topics: Foreign exchange market, Currency, United States dollar Pages: 6 (2214 words) Published: February 26, 2013
Question 1
The BNM is comes under the Board of Directors and under it got 3 Boards Committee. The Governor of BNM is Tan Sri Dr. Zeti Akhtar Aziz which controls the whole BNM. There are 2 Deputy Governor under her which control of different kind of departments and tasks. Besides that, there are 7 Assistant Governors to control different sub-department. The Foreign Exchange Administration (FEA) department is led by Shamsuddin bin Mohd Mahayidin. The role of FEA is to enhance the competitiveness of the Malaysian Economy. FEA help in provide a more supportive environment for trade, business and investment activities. FEA have implemented several measures and rules in the domestic financial markets. The first is productive direct investment abroad. This is one of the measures that help in the presence of domestic businesses globally; it allowed resident companies that fulfill the requirement to have flexibility to commence any amount of investment abroad. This is one of the strategic that pushes towards a full cross-border capital movement for productive purposes that will benefit the Malaysian economy. The second is access to competitive financing. This is to facilitate the expansion of the private sector’s productive capacity abroad and to enhance the efficiency of financial management, greater freedom has been given to resident companies in managing financial resources within their company. This allows a company to get any amount of company loans from its related resident and the non-resident companies will further enhance their business efficiency. The third is effective risk management. This gives greater flexibility for resident to undertake asset and liability management because having well risk management practices to the financial health is important. This process is by switching the Ringgit Malaysia (RM) or foreign currency debt into debt in another foreign currency. The next is greater product innovation. As domestic firms grow rapidly and become increasingly integrated with the global markets, having a wide-ranging, healthy and active domestic financial market is crucial to support the expansion of the Malaysian economy. The FEA rules were to support the domestic financial market firms in innovating and proposing new financial products to meet the diverse needs Malaysian economy. The fifth is to promote Treasury Management Operations. This is to support in creating a more active and developed economy while also promote and facilitate the setting up of Treasury Management Centres (TMCs) in Malaysia. FEA also give the flexibilities to TMCs to manage their financial resources effectively. The last one is strengthening Malaysia’s competitive position. This is to enhance the efficiency and reduce the cost of doing business as well as improve the competitiveness of Malaysian economic. This also strengthening the bank and enhance domestic cooperation while ensuring the monetary and financial stability.

Question 2
Exchange control regime is the control imposed by government on resident or nonresident on purchasing currency. The reason to imposed exchange control is because the nature of foreign assets and income of them are concerned. This implies the regulation by the government of payments from one monetary area into all others. In exchange control countries the residents cannot purchase foreign currency in the free market unless get approval. The supply and demand for foreign exchange will be controlled by exchange rate and is usually higher rate than it would be in a free market. Exchange control regime let government control over the disposition of all foreign exchange resources, allowing it to control spending abroad according to the country’s general concern. Exchange control is usually used to prevent adverse in the country’s capital accounts and also prevent capital flight. Prior to 1973, the Malaysian Dollar was introduced to replace the old Sterling-linked Straits Dollar which also including the changing of...
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