Bank Indonesia, Bank Negara Malaysia, and the Bank of Thailand have reportedly concluded three bilateral Memorandum of Understanding (MoUs) on 25 August 2023.
These MoUs are the Framework for Cooperation to Promote Bilateral Transactions in Local Currencies between the countries. The scope of the framework is “expanded to include more eligible cross-border transactions beyond trade and direct investment.” These MoUs are set to strengthen cross-border economic activities, “enhance regional financial market stability, and deepen local currency markets in the signing countries.”
Bank Indonesia (BI), Bank Negara Malaysia (BNM), and the Bank of Thailand (BOT) concluded “the signing of three bilateral Memorandum of Understanding (MoUs) on 25 August 2023.” These MoUs are the Framework for Cooperation “to Promote Bilateral Transactions in Local Currencies between the countries.”
Bank Indonesia Governor Perry Warjiyo, Bank Negara Malaysia Governor Abdul Rasheed Ghaffour, and Bank of Thailand Governor Sethaput Suthiwartnarueput signed the bilateral MoUs.
The signing took place on “the sidelines of the ASEAN Finance Ministers and Central Bank Governors’ Meeting in Jakarta, Indonesia.”
The three central banks are “committed to strengthening cooperation in the use of local currencies for bilateral transactions.” The scope of the framework is now expanded to include more eligible cross-border transactions “beyond trade and direct investment which would be implemented gradually.”
The new framework will also “synergize with cross-border payment initiatives for more accessible and efficient local currency settlements.”
The MoUs are set “to strengthen cross-border economic activities, enhance regional financial market stability, and deepen local currency markets in the three countries.” They supersede the MoUs on local currency settlement framework “signed between the three central banks on 27 August 2015 and 23 December 2016.”
In another update, it was noted that the Thai banking system “remains resilient with robust levels of capital, loan loss provisions, and liquidity.”
In the second quarter of 2023, the banking system’s loans marginally “contracted 0.4% YoY due to the gradual repayment of businesses loans, following accommodative growth of liquidity facilities during the COVID-19 period, particularly from SMEs (including soft loan facility) and government, combined with large corporates’ fund switching to bond issuance and banks’ portfolio management.”
Nonetheless, bank lending continued “to expand mainly in large corporate loans from holding businesses, mortgage loans, and personal loans.”
Loan quality slightly deteriorated “in SMEs and consumer loans.”
However, banks continued “with their loan portfolio management and debtor assistance program through debt restructuring.”
As a result, the banking system’s gross non-performing loans (NPL or stage 3) “declined to 492.3 billion baht, equivalent to the NPL ratio of 2.67%.” Meanwhile, the ratio of loans with significant increase “in credit risk (SICR or stage 2) stood at 6.08%, slightly increasing from 6.00% in the previous quarter.”