March 19, 2020 / 10:11 AM / in 19 days

UPDATE 1-Malaysia's central bank cuts statutory reserve ratio to 2.00%

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KUALA LUMPUR, March 19 (Reuters) - Malaysia’s central bank cut its statutory reserve ratio (SRR) on Thursday by 100 basis points to 2.00%, releasing 30 billion ringgit ($6.81 billion) into the banking system, as the economy grapples with a coronavirus outbreak and plunging oil prices.

The cut takes the SRR, a financial tool used by Bank Negara Malaysia to manage liquidity, to its lowest since the global financial crisis in 2009, when it was brought down to 1%.

Thursday’s cut is the second in four months, and it comes just weeks after the bank slashed its key interest rate to 2.5%, its lowest rate in 10 years, to soften the blow from the virus to Malaysia’s exports and tourism.

Until March 31, the central bank said, it would also allow each principal dealer to recognise up to 1 billion ringgit ($227 million) in Malaysian government bonds, as part of compliance measures with the statutory reserve ratio.

“These combined measures will release approximately 30 billion ringgit worth of liquidity into the banking system,” BNM said in a statement.

On Wednesday, Malaysia adopted curbs on travel and business to rein in a spike in virus infections, which totalled 900 by Thursday. The health ministry has linked more than half to a mosque gathering of 16,000 people in Muslim-majority Malaysia.

The restricted movement order will run till the end of March, but could be extended if it does not halt the virus spread, the government said on Thursday. ($1 = 4.4070 ringgit) (Reporting by Joseph Sipalan; Editing by Jason Neely and Clarence Fernandez)

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