ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Economy

Malaysia, Indonesia sign pact to mutually give greater access to their banks

 (placeholder image)
The headquarters of Bank Negara Malaysia in Kuala Lumpur.   © Reuters

KUALA LUMPUR (NewsRise) -- Malaysia's central bank and the financial services regulator of Indonesia signed a bilateral agreement that will give the lenders greater access and flexibility to operate in each other's markets.

The move, part of a broader economic integration initiative among the 10-member bloc of Southeast Asian countries, is expected to deepen cross-border financial links and boost regulatory cooperation between Malaysia and Indonesia.

"Under the agreement, it is envisaged that both Malaysian and Indonesian banks will have a greater role in facilitating cross-border trade and investment between both countries," Bank Negara Malaysia said in a statement to announce the pact with Indonesia's Otoritas Jasa Keuangan.

Malaysia is home to 27 local and foreign commercial banks that compete aggressively in a nation of 30 million people. That compares to 120 commercial banks in Indonesia catering to a population of over 250 million people.

Indonesian banks have long complained of restriction to freely operate in its more-prosperous neighbor even as several Malaysia banks, including Malayan Banking and CIMB Group holdings, have made headways in expanding in the archipelago.

Malaysia's central bank, which also regulates the banking industry, imposes relatively stricter rules that include shareholding limit and capital requirements of at least 300 million ringgit (about $74 million) for foreign banks to operate in the country.

Bank Mandiri, Indonesia's largest bank by assets, is the only Indonesian commercial bank with a presence in Malaysia although the lender hasn't been able to operate a full branch in the country.

"With the implementation of the agreement, Bank Negara Malaysia looks forward to the establishment of Indonesian Qualified ASEAN Banks in Malaysia," the central bank said.

Malaysia and Indonesia are both members of the Association of Southeast Asian Nations, or Asean, that has agreed to gradually integrate their financial services under the so-called Asean Financial Integration Framework.

The framework permits banks that meet certain criteria to be classified as one of the Qualified Asean Banks, to operate with greater access and flexibility in the region. That could allow a smaller bank from an Asean country to expand its businesses in other countries within the bloc.

"The increased banking and financial integration will further deepen the potential for mutually reinforcing growth and greater shared prosperity between both countries and within the region," Bank Negara Malaysia said.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends June 30th

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media