Central Banks of Malaysia, Indonesia and Thailand said Monday they will harmonize and broaden the scope of local currency Transaction Framework to encourage transactions in local currencies.

Bank Negara Malaysia (BNM), Bank Indonesia (BI) and the Bank of Thailand (BOT) announced in a statement the adoption of a harmonized local currency transaction framework operational guidelines (LCTF OG) and the expansion of eligible cross-border transactions under the framework.

According to the statement, the harmonized LCTF OG enhances consistency, scalability and efficiency in facilitating local currency transactions across the three countries.

It consolidates bilateral guidelines previously established between the countries and allows for streamlined processes with greater transparency for participating financial institutions and their users.

The harmonized LCTF OG sets out operating parameters that are applicable to all participating countries while accommodating specific local regulatory requirements of each jurisdiction.

The latest framework also includes portfolio investments as eligible underlying transactions, in addition to trade in goods and services and direct investments.

Investors now have greater opportunities to conduct transactions in local currencies while mitigating exchange rate risks.

Following this latest expansion, BNM, BI and BOT welcome additional qualified commercial banks to participate in and support the expanded LCTF.

These banks will play a vital role in facilitating local currency transactions, leveraging their expertise, operational strength and cross-border networks.

It is noted that Malaysia, Indonesia and Thailand have witnessed an upward trend in local currency transactions for bilateral trades since the implementation of the LCTF.

This harmonized framework and operation will provide businesses with enhanced options for cross-border transactions.

It also reaffirms the countries’ commitment to promote the use of local currencies in regional trade and investment, said the statement.

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