JAKARTA (TheInsiderStories) - Indonesian Financial Services Authority (OJK) has signed Letter of Intent (LoI) with the Bank of Thailand (BOT) as a preparation of the Bilateral Agreement to implement the ASEAN Banking Integration Framework (ABIF) between the two countries.
The signing of the letter of intent made by the Chairman of the Board of Commissioners of OJK Muliaman D. Hadad and BOT Governor Veerathai Santiprabhob in Bangkok, Thailand on March 31.
Hadad said at the signing of the LoI that this cooperation will pave the way for Indonesia’s financial services industry to develop their business in Thailand through the presence of banking institutions in both jurisdictions, as well as to improve the trade relations between the two countries.
Bilateral Agreement is part of the implementation process ABIF, where the two ASEAN member countries will negotiate, based on the principle of reciprocity, related to the establishment of Qualified ASEAN Banks (QABs), and market access and operating flexibility given.
The implementation ABIF will refer to the principles agreed by the banking supervisory authorities in all member countries of ASEAN on ABIF Guidelines, which is oriented output, comprehensive, progressive accordance readiness of each member, as well as inclusive and transparent.
One of the main features is the flexibility for QAB ABIF to gain market access and operating flexibility of the authority of the host (host authority) based on the principle of reciprocity. Furthermore, QAB can enjoy equal treatment with local banks in the jurisdiction of the host authority.
“The potential is very big business in Thailand because Indonesia is a trading partner of Thailand no.3. We support the Indonesian financial industry players to develop business to Thailand to support trade between Indonesia and Thailand, “he said.
According to Hadad, the FSA supports the efforts of banking institutions to expand to Thailand through the preparation of Bilateral Agreement, and will be followed by the preparation of a Memorandum of Understanding between OJK in the area of cross border supervision, in the near future.
Last year, OJK has also signed similar agreement with Bank Negara Malaysia (BNM). It expects to sign similar agreements as part of ABIF with Vietnam, Myanmar, Singapore and Cambodia this year.
The memorandum of understanding is a mandate of Law Number 21 Year 2011 on the Financial Services Authority (OJK Law), which mandates the OJK to cooperate with the supervisory authority of the Institute of Financial Services in other countries, and international organizations and other international institutions, among other activities institutional capacity building, and information exchange in the field of regulation and supervision of the Financial Services Institute to emphasize the principle of reciprocal and balanced.
Indonesia has agreed to support the banking integration in ASEAN, which is an important step towards ASEAN economic integration. Indonesia has approved the ASEAN Banking Integration Framework (ABIF) guidelines, which will become a reference for ASEAN member countries to implement the principles of banking integration to support the ASEAN Economic Community (AEC).
The Asean Economic Community (AEC) has become effective since January 1, 2016, while the integration of banks in the AEC will take place much later. ASEAN members have earlier agreed to to liberalize their financial industries by 2020 as part of the ASEAN Economic Community agenda. (*)