KUALA LUMPUR: The central banks of Indonesia, Malaysia, the Philippines and Thailand had on Friday signed letters of intent to promote a local currency settlement framework.
A joint statement issued by Bank Indonesia, Bank Negara Malaysia, Bangko Sentral ng Pilipinas and Bank of Thailand said they had signed three pairs of bilateral letters of intent (LOIs) on the framework.
“The three LOIs represent the mutual interests in the potential establishment of local currency settlement frameworks between the respective countries of the four central banks,” they said in the statement issued out of Chiang Rai, Thailand.
Bank Indonesia and Bank of Thailand have agreed to start exploring the possibility of expanding the scope of their existing local currency settlement framework.
“The use of local currencies in settlement of trade and other areas intends to reduce transaction costs and foreign exchange risks particularly amidst the current volatility faced by currencies in advanced economies,” the statement said.
The central banks also stated the wider use of local currencies in the Asean Economic Community enhances economic and financial integration, as well as spurs further development of the foreign exchange and financial markets, within the region.
“The progress towards greater financial integration in the region is a welcome development as we witness the expansion of similar arrangements that were launched in 2017 namely, the MoUs concluded between Bank Indonesia and Bank Negara, and between Bank Indonesia and Bank of Thailand,” they said.
An LOI was signed between Benjamin E. Diokno, Governor of Bangko Sentral ng Pilipinas and Perry Warjiyo, Governor of Bank Indonesia.
Diokno and Datuk Nor Shamsiah Yunus, Governor of Bank Negara also signed and LOI. This was followed by a signing of an LOI by Diokno with Veerathai Santiprabhob, Governor of the Bank of Thailand.