Eight banks appointed forex dealers

Bank Negara says direct trade in three currencies now allowed under frameworks

KUALA LUMPUR: Bank Negara has appointed CIMB, Malayan Banking, Public Bank and RHB Bank to act as forex dealers under the regional settlement frameworks with Thailand and Indonesia.

Bank Negara governor Tan Sri Muhammad Ibrahim said yesterday the other appointed banks were Hong Leong Bank Bhd, Bangkok Bank Bhd, United Overseas Bank and Bank of Tokyo-Mitsubishi.

The framework will allow direct trade with three currencies and bypass the US dollar conversion.

He was speaking at the launch of local currency trade settlement between Bank Indonesia and Bank Negara and the Bank of Thailand in Jakarta.

Muhammad said the implementation of these frameworks will complement their existing close partnership and cooperation as neighbours with common objectives and shared aspirations.

Hence, they can use the rupiah, baht and the ringgit for cross-border settlement of trade between Indonesia and Malaysia, and Thailand and Malaysia, respectively, he added.

According to the a joint statement released by Bank Indonesia (BI), Bank Negara and Bank of Thailand (BoT), the framework is between Bank Indonesia and Bank Negara; and between Bank Indonesia and Bank of Thailand.

This was in accordance with two bilateral memorandums of understanding on local currency settlement framework that were signed between the three central banks, respectively, on Dec 23, 2016.

These initiatives are part of the continuous effort to promote a wider use of local currencies to facilitate and boost trade and investment in these countries.

The establishment of these frameworks mark a key milestone in strengthening region- al financial cooperation

Negara and BoT.

Muhammad said intra-Asean partnership was critical for regional integration in support of the economies and financial systems.

He pointed out cross-border settlements using local currencies to settle trade and direct investments have taken shape.

“We expect this to be strengthened further, supported by the strong growth of intra-Asean trade.

“The data looks very promising. In 2016 intra-regional trade contributed US$521bil or 23.5% of total trade.

“Intra-Asean investments rose to a record level of US$24bil in 2016 and accounted for 25% of total FDI flows into the region.

“Within the region, Indonesia and Thailand are important partners to Malaysia both in trade and direct investments where there is continuous growth propelled by inter-compa- among BI, Bank ny linkages and cross-border investments.

In 2016, Malaysia shared a bilateral trade volume of US$13.8bil with Indonesia and US$13bil with Thailand.

“However, only 5.8% and 11.4% of our trade with Indonesia and Thailand, respectively were settled in local currencies. This is an enormous business opportunity for the financial sector, which has yet to be realised,” he said.

BI and BoT had also appointed the following banks in Indonesia and Thailand to support the operationalisation of the rupiah-baht framework.

They are PT. Bank Rakyat Indonesia (Persero), Tbk; PT. Bank Mandiri (Persero), Tbk; PT. Bank Central Asia, Tbk and PT. Bank Negara Indonesia (Persero), Tbk .

As for Thailand, they are Bangkok Bank PCL, Bank of Ayudhya PCL; Kasikornbank PCL; Krung Thai Bank PCL and Siam Commercial Bank PCL.