RI-Malaysia Agrees to Leave the US Dollar!

Jakarta, CNBC Indonesia – Bank Indonesia (BI) and Bank Negara Malaysia (BNM) have officially agreed to strengthen the framework for settlement of transactions using Rupiah-Ringgit. This means that the two central banks have agreed to no longer use the dollar exchange rate for transactions.

The strengthening of the transaction settlement framework is commonly known as Local Currency Settlement (LCS). By definition, the LCS framework is the settlement of trade transactions between two countries carried out in the currencies of each country where the transaction settlements are carried out within the jurisdiction of the respective countries.

BI in its official broadcast explained that the LCS between Indonesia and Malaysia had been implemented since January 2, 2018.

The strengthening of the LCS cooperation framework which originally only covered trading transactions is now expanded to include underlying LCS transactions by adding direct investment and income transfers (including remittances).

The income transfer in question consists of primary income, including labor compensation and investment income, and secondary income, including the government sector and other sectors (personal transfers/remittances and other transfers).

In addition, strengthening the LCS cooperation between BI and BNM also includes easing foreign exchange transaction rules, including the expansion of hedging instruments and an increase in the transaction value threshold without underlying documents up to US$ 200,000 per transaction.

“The strengthening of the LCS framework in the Rupiah-Ringgit will take effect on August 2, 2021,” said BI in its official broadcast, Monday (2/8/2021).

The strategy for strengthening the SCS cooperation framework, BI said, is a continuing commitment from the joint efforts by the two central banks in encouraging the wider use of local currencies for businesses and individuals to facilitate and increase trade and direct investment between Indonesia and Malaysia.

BI and BNM have appointed several additional banks in each country as Appointed Cross Currency Dealers (ACCD) to support the implementation of strengthening the LCS framework using Rupiah and Ringgit.

In general, the appointed Bank has a sufficient level of resilience and soundness, experience in facilitating trade or the capacity to provide various financial services, and has a good working relationship with banks in partner countries.

List of LCS Supporting Banks Bank Indonesia and Bank Negara Malaysia

The appointed banks are as follows:

Malaysia

ACCD Bank Supplement:

1. HSBC Bank Malaysia Berhad

2. MUFG Bank Malaysia Berhad

Current ACCD Banks:

1. CIMB Bank Berhad

2. Hong Leong Bank Berhad

3. Malayan Banking Berhad

4. Public Bank Berhad

5. RHB Bank Berhad

Indonesia

ACCD Bank Supplement:

1. PT Bank HSBC Indonesia

2. MUFG Bank Ltd, Jakarta branch

Bank ACCD saat in:

3. PT Bank Rakyat Indonesia (Persero) Tbk

4. PT Bank Mandiri (Persero) Tbk

5. PT Bank Central Asia Tbk

6. PT Bank Negara Indonesia (Persero) Tbk

7. PT Bank CIMB Niaga Tbk

8. PT Bank Maybank Indonesia Tbk

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