OCBC M’sia raises BLR to 6.92%

By Stephanie Jacob

OCBC Bank Malaysia has raised its base lending rate (BLR) from 6.85% to 6.92% with effect from Jan 7, 2015.

The move comes as a surprise given that the overnight policy rate (OPR) has not been increased since Bank Negara Malaysia (BNM) raised the rate back in July 2014 by 25 basis points to 3.25%.

This is the second increase in roughly 18 months for OCBC Bank Malaysia. On July 14, 2014, it announced an increase of BLR and base financing rate (BFR) by 25 basis points to 6.85% per annum effective July 16, 2014. However, that increase followed an upward revision of 25 basis points in BNM’s OPR at the time, the last OPR hike to-date.

The central bank’s Monetary Policy Committee (MPC) determines the OPR. It makes its decision based on the state of the global economy and on its objectives for the economy.

At its last meeting in November 2015, the MPC said the current OPR level remains “accommodative and supportive” of economic activities.

“The MPC recognises that there are heightened risks in the global economic and financial environment,” it said at the time. “These risks are being carefully monitored to assess their implications on macroeconomic stability and the prospects of the Malaysian economy. This is to ensure that the monetary policy stance is consistent with the sustainability of the overall growth prospects.”

While the BLR is set by the banks and not by the central bank, the BLR and the OPR usually move in tandem. According to iMoney.com, BLR is commonly understood to be the base interest rate banks refer to internally before deciding how much interest to charge on a loan.

However, it said the more accurate definition is that it is “a rate determined by each bank based on how much it costs to borrow the money to be lent to borrowers. The cost to borrow money is determined by the Overnight Policy Rate (OPR) – the interest rate at which other banks lend to each other”.

BNM’s Monetary Policy Committee will meet for its first meeting for 2016 from Jan 21 to Jan 22. It has not indicated if it will raise the OPR then as BNM does not offer forward guidance on this issue.

Given that the US Federal Bank raised its interest rate in mid-December 2015, the MPC will have to decide if the impact of the move should lead to an increase in the OPR here as well.