No. 19/76/DKom
Bank Indonesia issues Regulation No.19/11/PBI/2017 on Local Currency Settlement through Banks. Local Currency Settlement (LCS) aims to support stability of Rupiah exchange rate by decreasing dependency on the use of USD in settlement of bilateral trade transactions between Indonesia and partner countries. Through this regulation, it is also expected that transaction cost of foreign currencies against Rupiah may be reduced by direct quotation between Rupiah and currencies of several partner countries, allowing development of regional currency market and expansion of access by businesses to make payments in the local currency.
Issuance of this regulation is a follow-up to the signing of Memorandum of Understanding between Bank Indonesia and Bank of Thailand and Bank Negara Malaysia on 23 December 2016, agreeing on LCS cooperation between Indonesia, Malaysia, and Thailand in the settlement of international trade between the three countries by using local currencies (Rupiah, Ringgit, and Baht).
BI Regulation No.19/11/PBI/2017 sets forth among others on the authorities of Bank Indonesia together with the central banks of partner countries to appoint a bank in Indonesia to conduct certain financial transactions and activities for LCS purposes or also known as Appointed Cross Currency Dealer (ACCD). In relation to transactions, Indonesian importers of goods from Malaysia or Thailand may pay by using MYR or THB through the appointed ACCD without having to pay in USD. On the other hand, if an Indonesian exporter wishes to use LCS mechanism, they may also be paid in IDR, MYR, or THB through an ACCD. In this matter, the banking activities and financial transactions must have an underlying ground in the form of goods and services trade activities.
It is expected that this regulation may promote the use of local currency settlement, develop the use of regional currencies in bilateral trade in the region, and expand access of economic actors in each country.
Jakarta, 16 October 2017
Communication Department
Arbonas Hutabarat
Director
