Indonesia And China Use Local Currencies For Bilateral Transactions, These Are The Banks Designated As 'Dealers'

Illustration (Photo: Doc. Antara)

JAKARTA - Today, Monday, September 6, Bank Indonesia (BI) and the People's Bank of China (PBC) have officially started the implementation of cooperation in the settlement of bilateral transactions with local currencies (local currency settlement (LCS) between Indonesia and China.

The framework for this cooperation includes the use of direct quotations and relaxation of certain regulations in foreign exchange transactions between Rupiah and Yuan.

"This cooperation framework was prepared based on a memorandum of understanding that was agreed and signed by BI Governor Perry Warjiyo with PBC Governor Yi Gang on September 30, 2020," BI said in a release today, Monday, September 6.

In addition to China, the national monetary authority also has a framework for SCS cooperation with several other partner countries, namely Japan, Malaysia, and Thailand.

"The implementation of this cooperation is part of Bank Indonesia's ongoing efforts to encourage a wider use of local currency in the settlement of trade transactions and direct investment with various partner countries," said BI.

The expansion of the use of LCS is expected to support the stability of the Rupiah through its impact on reducing dependence on certain currencies in the domestic foreign exchange market.

BI claims that the use of LCS provides many direct benefits to business actors, including more efficient conversion costs of transactions in foreign currencies, availability of alternative trade financing and direct investment in local currencies.

Then, the availability of alternative hedging instruments in local currency, and diversification of currency exposure used in the settlement of foreign transactions.

"To support the operationalization of the LCS framework using Rupiah and Yuan, BI and PBC have appointed several banks in their respective countries to act as Appointed Cross Currency Dealers (ACCD)," said BI.

Meanwhile, banks appointed as ACCD must have a good level of resilience and health, have experience in facilitating trade/investment transactions, have the capacity to provide various financial services, and have good cooperative relationships with banks in partner countries.

The following is a list of banks designated as ACCD in Indonesia:- PT Bank Central Asia, Tbk- Bank of China (Hongkong), Ltd- PT Bank China Construction Bank Indonesia, Tbk- PT Bank Danamon Indonesia, Tbk- PT Bank ICBC Indonesia- PT Bank Mandiri (Persero), Tbk- PT Bank Maybank Indonesia, Tbk- PT Bank Negara Indonesia (Persero), Tbk- PT Bank OCBC NISP, Tbk- PT Bank Permata, Tbk- PT Bank Rakyat Indonesia (Persero), Tbk- PT Bank UOB Indonesia

Meanwhile, the banks designated as ACCD in China are: - Agriculture Bank of China - Bank of China - Bank of Ningbo - Bank Mandiri Shanghai Branch - China Construction Bank - Industrial and Commercial Bank of China - Maybank Shanghai Branch - United Overseas Bank ( China) Limited