31 July 2026

Kuala Lumpur Interbank Offered Rate (KLIBOR) Cessation for Use in New Trades from 1 July 2027 & Permanent Cessation from 1 January 2029 Onwards

 

Dear Valued Customers,

Kindly be informed that, as announced by Bank Negara Malaysia (BNM) on 16 October 2025, Malaysia will gradually replace the Kuala Lumpur Interbank Offered Rate (KLIBOR) with two new reference rates: the Malaysia Overnight Rate (MYOR) and the Malaysia Islamic Overnight Rate (MYOR-i).

This transition forms part of broader efforts to strengthen the integrity and robustness of Malaysia’s domestic financial market benchmarks, in line with regulatory guidance and industry best practices.

As part of this transition, affected financial contracts will have to be updated to reflect the new benchmark rates in line with the applicable terms. Bank Islam Malaysia Berhad (Bank Islam or the Bank) is committed to supporting its clients and counterparties throughout this process to ensure a smooth and orderly transition.

Thank you for your continued support.

Frequently Asked Questions

1. What is KLIBOR?

KLIBOR, introduced in June 1987, has long served as a key benchmark rate in the Malaysian financial market.
It is a submission-based indicative rate, representing the rate at which participating banks are willing to lend or finance Ringgit funds to one another for specified time periods.

2. What will replace KLIBOR?

KLIBOR will be replaced by two transaction-based benchmark rates administered by BNM:

  • MYOR (Malaysia Overnight Rate) is based on actual unsecured overnight MYR interbank transactions between banks in Malaysia.
  • MYOR-i is the Islamic version, the Shariah-compliant rate based on the Shariah-compliant unsecured overnight MYR interbank placements between banks.

3. How is MYOR/MYOR-i different from KLIBOR?

MYOR and MYOR-i are transaction-based overnight benchmark rates, derived from actual interbank transactions in the overnight unsecured money market. In contrast, KLIBOR is a forward-looking term rate based on submissions. This makes MYOR/MYOR-i more robust and transparent.

4. What does the transition mean for Bank Islam and our clients?

BNM announced that the MYOR-I will become the mandatory reference rate for Islamic financial products beginning 1 July 2027. Therefore, as Bank Islam is a full-fledged Islamic bank, this would mean that any new financing, treasury, investment or financial market contracts that currently reference KLIBOR will progressively migrate to MYOR-i. Clients with existing KLIBOR-linked contracts may be contacted by the Bank to discuss the necessary amendments and transition arrangements.

5. What is Bank Islam doing to safeguard our clients’ interests during this transition?

Bank Islam is committed to ensuring a fair, transparent, and orderly transition from KLIBOR to MYOR/MYOR-i. We are reviewing all affected products, contracts, and operational processes to align with the new benchmark framework. Clients will be informed well in advance of any required changes, and guidance will be provided throughout the transition process. Bank Islam will continue to adhere to regulatory requirements and industry standards to ensure that clients’ interests remain protected and that the transition is implemented with minimal disruption.

6. Will client’s existing financing or investment contract be affected?

Clients with contracts that reference KLIBOR will be affected by the benchmark transition. Where changes are required, Bank Islam will engage affected clients and advise on the appropriate transition approach in accordance with the relevant contractual terms and regulatory guidance.

7. Will the transition affect my payment obligations or financing amount?

The transition to MYOR-i is intended to replace the benchmark reference rate and does not automatically change the commercial intent of the original contract. Any adjustments arising from the transition will be communicated to affected clients and implemented in accordance with applicable contractual terms and industry standards.

8. Do clients need to take any action now?

Most clients do not need to take immediate action. If your financing, treasury, investment or other financial contract is linked to KLIBOR, Bank Islam will contact you if any action or contractual amendment is required. Clients may also contact their Relationship Manager for further clarification.

9. What are the key dates clients should be aware of?

Key Dates

Description
1 July 2027 KLIBOR will no longer be used for new contracts across all financial products.
Prior to 1 July 2028 All existing KLIBOR-linked contracts should be actively transitioned where possible. Any contracts that cannot be transitioned in time must incorporate robust fallback provisions.
1 January 2029 onwards KLIBOR will be permanently discontinued.

10. Where can I obtain more information?

Clients may contact their Relationship Manager or Bank Islam representative for further information regarding the transition. Additional information may also be obtained from Bank Negara Malaysia’s publications on the transition from KLIBOR to MYOR/MYOR-i.