ASIATODAY.ID, BALI – Bank Indonesia (BI) and Bank of Korea (BOK) held a high level meeting (HLM) at The Apurva Kempinski Bali, Nusa Dua, Badung Regency, Bali, Sunday, December 10 2023.
Both agreed to encourage the use of local currency in financial and economic transactions (Local Currency Transaction/LCT) by 2024.
This agreement is a follow-up to the signing of a Memorandum of Understanding (MoU) on cooperation on the use of local currency between the two central banks which was agreed in May 2023.
In preparation for implementation, BI and BOK will develop an LCT framework in an Operational Guidelines or operational guidelines. The LCT framework will facilitate the settlement of cross-border payment transactions in the trade area and is expected to minimize exchange rate risk exposure and costs for business actors and other users.
When implemented, banks in Indonesia and South Korea can quote exchange rates directly so that exchange rate risks and costs arising from these transactions can be reduced, as well as increasing efficiency which is expected to encourage trade transactions between Indonesia and Korea. This can also deepen financial markets in local currencies in both countries.
Bank Indonesia Governor Perry Warjiyo said that wide use of local currency would strengthen macroeconomic stability and bilateral financial cooperation between Korea and Indonesia.
“Through the implementation of this LCT cooperation framework, trade between countries can use direct exchange rate quotations provided by Appointed Cross Currency Dealer (ACCD) banks, thereby providing options for the business world in conducting trade transactions and increasing transaction efficiency,” said Perry.
BOK Governor Rhee Chang-yong added that the LCT initiative is expected to have a positive impact on economic development through increasing bilateral trade and utilizing the local currencies of the two countries.
This LCT cooperation framework agreement is also a form of Bank of Korea’s support for the financial integration efforts of a number of countries in the region, especially ASEAN, to facilitate wider use of local currencies.
“Based on Indonesia’s successful experience in implementing the LCT framework with a number of countries in recent years, it is hoped that the LCT framework between Korea and Indonesia will also be successfully formed and implemented. To achieve this goal, both central banks are committed to providing their best efforts,” said Rhee. (AT Network)
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