Malaysia and three neighbours sign local currency settlement pact
The agreement brings the Philippines into a framework intended to lower foreign exchange risks and the costs of repeated currency conversions.
The central banks of Malaysia, Indonesia, Thailand and the Philippines agreed on Nov 13 to promote cross-border trade and investment settlements using their own currencies, according to Bank Negara Malaysia (BNM).
BNM said the arrangement aims to limit foreign exchange risks and reduce transaction costs arising from multiple currency conversions. The framework allows bilateral transactions to be settled in the participating countries’ respective currencies.
The agreement replaces bilateral memorandums of understanding signed in August 2023 by Malaysia, Indonesia and Thailand, extending the arrangement to include the Philippines. The participating institutions are BNM, Bank Indonesia, Bank of Thailand and Bangko Sentral ng Pilipinas.
The four central banks said they would jointly develop and implement the framework. They expect its use to expand gradually, supporting economic activity while reinforcing regional financial cooperation and resilience.
Earlier changes included harmonised operating guidelines introduced in February 2025, when the original three participants added portfolio investments to the framework’s existing coverage of goods, services and direct investment. They subsequently designated more commercial banks as cross-currency dealers to help businesses obtain local currency liquidity and carry out settlements.
