Malaysia’s central bank said today it had signed a memorandum of understanding with the Bank of Thailand to enhance liquidity facilities to financial institutions in both South-East Asian countries.

The central banks will enter into a pact to facilitate reciprocal operational arrangements, Bank Negara Malaysia said in a statement.

Under the terms, financial institutions in Malaysia can get ringgit currency liquidity from Bank Negara by pledging Thai baht or Thai government and central bank debt securities.

The same applies to financial institutions in Thailand who can acquire Thai baht liquidity from the Bank of Thailand via ringgit and Malaysian central bank and government debt securities.

“This initiative will further strengthen cross-border liquidity management in our financial systems and reinforce our financial and economic ties,” Malaysian central bank governor Zeti Akhtar Aziz said.

“This arrangement will also support the expanding regional activities of our financial institutions and will further enhance our regional financial linkages,” she said.

Bank of Thailand governor Prasarn Trairatvorakul said the arrangement “will serve as a basis upon which further financial and economic collaboration can be established.”

He also called it “another important step as part of our plan towards further regional and global financial integration”.

In December, Thailand’s central bank signed a bilateral currency swap agreement worth 70 billion yuan (US$11 billion) with its Chinese counterpart to facilitate bilateral trade and investment.

- Reuters