Bank Negara Malaysia (BNM) issued a media release today announcing that it, Bank Indonesia (BI) and Bank of Thailand (BOT) have concluded the signing of three bilateral Memoranda of Understanding (“MOUs
”) that are the Framework for Cooperation to Promote Bilateral Transactions in Local Currencies between Malaysia, Indonesia and Thailand.1
The MOUs supersede the memoranda of understanding on local currency settlement framework signed between the three central banks on 27 August 2015 and 23 December 2016.
According to the media release, the central banks of the three countries are committed to strengthening cooperation in the use of local currencies for bilateral transactions. To this end, the MOUs expand the scope of the framework to include more eligible cross-border transactions beyond trade and direct investment that are to be implemented gradually and will strengthen cross-border economic activities, enhance regional financial market stability, and deepen local currency markets in the three countries.
According to the media release, the new framework will also synergise with cross-border payment initiatives for more accessible and efficient local currency settlements.
The implementation of initiatives pursuant to the MOUs will represent further steps by Malaysia, Indonesia and Thailand to reduce dependence on, and exposure to, the United States Dollar as the currency for financial transactions.
Alert by Kok Chee Kheong (Partner) of the Corporate Practice of Skrine.