Bank Negara to work closer with regional central banks

Governor Datuk Muhammad Ibrahim said the central bank had long been a strong supporter of financial economic integration in ASEAN and Asia.

"We continue to believe that this is the path forward for the region and one that requires our institutions to further deepen our already strong ties in building capacities to manage risks in a more challenging environment.

"We look forward to closely collaborate with Bank Indonesia, the Bank of Thailand and other central banks in the region," he said at the signing ceremony of the Memoranda of Understanding (MoU) between BNM, Bank Indonesia and the Bank of Thailand on local currency settlement framework in Bangkok, Thailand today.

The text of his speech was made available in Kuala Lumpur.

Muhammad said the MoU was part of BNM's continuous efforts to provide institutional and policy framework to promote orderly financial market conditions and support the efficient management of financial risks.

"These arrangements will enable exporters and importers in the countries to better manage foreign exchange risks by using local currencies to settle trade and investment activities.

"In addition to improving cost efficiencies for businesses, the increased demand for local currency financial products will also contribute towards deepening the region's financial markets, which is key to further strengthen conditions for regional financial stability," he said.

Muhammad said when BNM and the Bank of Thailand operationalised the arrangement in March 2016, both saw the potential and benefits for local currencies to play a more important role in enhancing regional trade linkages.

"The expansion of the arrangement today to include our close trade partner, Indonesia, underscores the potential," he said.

Muhammad said following the conclusion of the ASEAN Banking Integration Framework, BNM was confident that financial institutions in both countries would be able to collaborate towards realising the objective of facilitating greater cross-border trade and investments.