JAKARTA (TheInsiderStories) – Bank Indonesia today (BI) and Japanese ministry of finance officially started the implementing of local bilateral settlement in both’ trade transactions and direct investment starting today, said the central bankon Monday (08/31). This framework is prepared based on the memorandum of understanding signed by the two parties on Dec. 5, 2019.
BI says, this initiative is part of an ongoing effort to encourage the wider use of local currencies in trade transactions and direct investment between the two countries. The implementation of this framework is an important milestone in efforts to strengthen financial cooperation between BI and the Japanese ministry of finance, adds by the Bank.
This framework includes, among other things, efforts to encourage the use of direct quotations in transactions between Rupiah and Japanese Yen currencies, as well as relaxation of certain regulations to encourage the use of local currencies in the settlement of trade and direct investment between both countries.
To support the operationalization of this framework, BI and the Japanese ministry of finance have appointed several banks in their respective countries to act as Appointed Cross Currency Dealers (ACCD). These banks are deemed to have met the requirements and have the ability to facilitate transactions between Rupiah and Yen according to the framework agreed by both parties.
The banks in Indonesia designated by the central bank as ACCD are MUFG Bank, Ltd (Jakarta Branch), PT Bank Tabungan Pensiunan Nasional Tbk (IDX: BTPN), PT Bank Central Asia Tbk (IDX: BBCA), PT Bank Mandiri Tbk (IDX: BMRI), PT Bank Mizuho Indonesia, PT Bank Negara Indonesia Tbk (IDX: BBNI), and PT Bank Rakyat Indonesia Tbk (IDX: BBRI).
There are also banks in Japan appointed by the Japanese ministry of finance namely Mizuho Bank Ltd.,MUFG Bank Ltd., Bank Negara Indonesia (Tokyo Branch), Resona Bank Ltd., and Sumitomo Mitsui Banking Corporation.
Beside Japan, Bank Indonesia and Bank of Korea (BoK) has signed a renewal of a bilateral local currency swap arrangement (BCSA). The arrangement allows the central banks exchange of local currencies up to KRW10.7 trillion or Rp101.15 trillion (US$6.95 billion). The effective period of the facility will be three years, from March 6, 2020 to March 5, 2023, which could be extended by mutual consent of both sides.
Beside, the central bank and the Monetary Authority of Singapore agreed to extend bilateral swap agreements with worth of $10 billion for another year. This cooperation includes bilateral swap agreements in local currency and repo in US Dollar, which both was signed in November 2018.
With Bank Negara Malaysia, BI has signed the local currency bilateral swap agreement, which will enable both central banks to access foreign currency liquidity from each other if needed. Both also signed memorandum of understanding to forge closer cooperation on innovation in payments and digital financial services, as well as surveillance on anti-money laundering and counter financing of terrorism.
With the agreement, allows the central banks to exchange local currencies up to Rp28 trillion. This will complement efforts to support the wider usage of local currencies to facilitate cross-border economic activity between Malaysia and Indonesia. The effective period of the arrangement is three years and it can be extended by mutual agreement of the central banks.
The central bank also has signed Local Currency Settlement agreement with Thailand’ central bank and gave positive impact on bilateral trade between the two countries. Total transactions in the first two months of 2019 reached THB272 million ($8.73 million). The transactions increased sharply from the same period last year amounting to THB69.5 million.
In February of 2020, BI has inked a deal with Bangko Sentral ng Pilipinas to boost their ties in improving payment systems and digital financial innovation. The deal complements the previous central banks’ cooperation related to anti-money laundering and preventing terrorism financing in the field of payment systems and final settlement in 2018.
The deal aimed to “provide a framework of closer cooperation between the two central banks” in order to attain a “more secure, efficient and reliable payment system, and to promote digital financial innovation. Last April, the central bank and United States’ Federal Reserves has signed foreign and international monetary authorities or repo lines with worth of $60 billion.
US$1: KRW0.0081, THB31.14, Rp14,550
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