By The Nation
Governors of the central banks of four Southeast Asian nations signed letters of intent on Friday outlining a framework for local-currency settlements.
At the Asean Finance Ministers and Central Bank Governors Meeting in Chiang Rai on Friday, Benjamin Diokno of Bangko Sentral ng Pilipinas signed separate letters with Perry Warjiyo of Bank Indonesia, Nor Shamsiah Yunus of Bank Negara Malaysia and Veerathai Santiprabhob of the Bank of Thailand.
The letters formalise the banks’ shared interest in the potential establishment of local currency-settlement frameworks between the banks’ respective countries.
Indonesia and Thailand agreed to begin exploring the possibility of expanding the scope of their existing framework, according to a joint statement.
The use of local currencies in settlement of trade and other matters is seen as reducing transaction costs and foreign-exchange risks, particularly amid current volatility in advanced economies.
Moreover, the wider use of local currencies enhances economic and financial integration in Southeast Asia and spurs development of the foreign exchange and financial markets.
“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 Memoranda of Understanding concluded between Bank Indonesia and Bank Negara Malaysia and between Bank Indonesia and Bank of Thailand,” according to the statement.