Thailand, Malaysia launch local currency settlement framework
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THE CENTRAL BANKS of Thailand and Malaysia have commenced the operation of a local-currency settlement framework as part of the two countries’ effort to promote the use of ringgit and baht for settlement of bilateral trade, with six Thai and Malaysian ent
Thai and Malaysian businesses will be able to source ringgit and baht from Bangkok Bank’s Malaysian arm, CIMB Bank and Malayan Banking Berhad (Maybank) as well as in Thailand from Bangkok Bank, CIMB Thai Bank and Kasikornbank.
The bilateral framework, based on a memorandum of understanding signed by the two countries last August, will provide greater efficiency for exporters and importers to obtain baht in Malaysia and ringgit in Thailand to settle their trade accounts.
The framework also covers baht- and ringgit-denominated financial services such as deposits and foreign-exchange hedging.
Currently, businesses in Thailand cannot engage in financing and deposit transactions in ringgit with Thai banks, but the new framework allows the appointed banks to offer a range of financial services in ringgit, including hedging, financing and deposits.
The appointed banks will also provide direct baht/ringgit quotes for buying and selling the currency pair and provide trade financing, hedging and other facilities in respective currencies.
