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Malaysian banks authorised to act as FX dealers

Malaysian banks authorised to act as FX dealers

(15 December 2017 – Malaysia) Bank Negara Malaysia has appointed CIMB, Malayan Banking, Public Bank and RHB Bank which can act as forex dealers under the regional settlement frameworks with Thailand and Indonesia.

The framework will allow direct trades between the 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 Jakarata.

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

The banks can use Indonesian rupiah, Thai baht and the ringgit for cross-border settlement of trade between Indonesia and Malaysia, and Thailand and Malaysia, respectively, he added.

According to the joint statement released by Bank Indonesia (BI), Bank Negara and Bank of Thailand (BOT), the framework was 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 regional financial cooperation between BI, Bank 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$521 billion or 23.5 percent of total trade. Intra-Asean investments rose to a record level of US$24 billion in 2016 and accounted for 25 percent 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-company linkages and cross-border investments.

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

“However, only 5.8 percent and 11.4 percent 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.

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