The central bank said that the amended Chiang Mai Initiative Multilateralization (CMIM), which took effect on Thursday, will fortify member countries’ financial safety nets against balance of payments (BOP) and liquidity problems.
CMIM is a multilateral arrangement among the finance ministries and central banks of the Association of Southeast Asian Nations member countries plus China, Japan and Korea (Asean+3), and the Hong Kong Monetary Authority, which provides a single contractual agreement for the purpose of providing financial support by facilitating US dollar-denominated currency swap transactions among them.
The original initiative was signed on December 24, 2009 and entered into force on March 24, 2010. The main amendments to the CMIM were approved during the 15th Asean+3 and Central Bank Governors’ Meeting in Manila on May 3, 2012.
The CMIM is designed to enhance the effectiveness of the CMI by establishing an advanced framework of the CMI as a regional liquidity support arrangement to address BOP and short-term liquidity difficulties that may be encountered. The CMIM is intended to supplement, rather than replace existing international arrangements.
In a statement, the Bangko Sentral ng Pilipinas (BSP) said the amendments will allow effective access of the Asean+3 member countries and Hong Kong to an enhanced CMIM package.
There were three key amendments made to strengthen the original CMIM: Doubling of the fund’s size from $120 billion to $240 billion; Increasing the level of access not linked to an International Monetary Fund program from 20 percent to 30 percent; and the introduction of a crisis prevention facility.
“These amendments are expected to fortify CMIM as the region’s financial safety net in the event of any potential or actual liquidity difficulty,” the BSP noted.