by FARA AISYAH/ pic by MUHD AMIN NAHARUL
BANK Negara Malaysia (BNM) and the Bank of Korea (BoK) have entered into an agreement to renew the bilateral South Korean won/ Malaysian ringgit swap arrangement first installed in 2013.
“The size of this arrangement is maintained at five trillion South Korean won/RM15 billion, the same amount under the previous arrangement established on Jan 25, 2017,” the central bank said in a statement yesterday.
The swap arrangement is for a period of three years and can be extended by mutual agreement between the two central banks.
“This arrangement is designed to promote bilateral trade for economic development of the two countries. This will further strengthen the financial cooperation between the countries,” BNM added.
In 2017, both central banks renewed the bilateral currency swap agreement, maintained at a size of RM15 billion, the same amount under the initial arrangement established on Oct 20, 2013.
The swap arrangement was also for a period of three years, and was intended to “promote greater use of local currencies in settlement of trade” which would then further strengthen financial cooperation between the two countries, BNM said.
On May 26, 2014, BNM and BoK announced the activation of the Malaysia-Korea Currency Swapfinanced Trade Settlement Facility, whereby up to RM15 billion or five trillion South Korean won will be made available to facilitate trade settlements between firms of both countries using their respective currencies.
The facility was developed arising from the Malaysia-Korea Currency Swap Arrangement agreement that was signed between the two central banks on Oct 20, 2013.
BNM has said it will provide Korean won funds to banks in Malaysia which in turn will facilitate Malaysian firms’ use of Korean won for trade settlement.
Likewise, BoK will facilitate Korean firms’ use of Malaysian ringgit for their trade settlement by providing Malaysian ringgit funds to banks in Korea.
The two central banks’ support for the trade settlement facility will accelerate the use of both countries’ currencies for cross-border trade between the two countries, BNM stated.
This would then benefit importers and exporters of both countries by reducing the risk of currency mismatches and potentially lower transaction costs in international trade between the two nations.
Then-BNM governor Tan Sri Dr Zeti Akhtar Aziz said the currency swap arrangement would contribute towards further strengthening the economic and financial interlinkages between the two countries amid greater regional integration.
The arrangement would provide both Malaysian and South Korean firms with greater flexibility to use local currency for settlement of their bilateral trade and investment activities, she said.