The Bangko Sentral ng Pilipinas (BSP) on Friday said it is signing a letter of intent (LOI) with the central bank of Indonesia, Otoritas Jasa Keuangan (OJK), an initial step to allow qualified commercial banks to operate in each other’s markets.
“The BSP welcomes the signing of a Letter of Intent with OJK of Indonesia. This will be done in Jakarta this weekend,” BSP Governor Amando Tetangco Jr. said in a text message to reporters, after the OJK of Indonesia announced in a statement that the signing will happen on June 4.
Tetangco said the LOI is in line with the Association of Southeast Asian Nations (Asean) Banking Integration initiative.
“It reflects the mutual interest of the BSP and OJK to begin discussions intended to culminate in a formal bilateral agreement on the entry of Qualified Asean Banks (QABs) between the Philippines and Indonesia,” he said.
Qualified banks are well-managed banks majority owned by nationals of the Association of Southeast Asian Nations (Asean). Banks that qualify for QAB status must be endorsed by the home country regulator and may be accepted by a host country regulator based on bilateral agreements.
The BSP also signed a similar letter with the Bank of Thailand (BoT) in April to begin bilateral discussions in line with the Asean Banking Integration Framework (ABIF).
The ABIF enjoins Asean-5 countries to hammer out at least one bilateral agreement with another Asean-5 counterpart by 2018. Asean-5 counts Indonesia, Malaysia, Philippines, Singapore and Thailand as members.
The framework also targets the conclusion or near conclusion of at least one bilateral agreement for each of the 10 Asean members by 2020.
Established 50 years ago, Asean groups Brunei, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam into a single trade block.
Also in April, the BSP and the Bank Negara Malaysia signed the Declaration of Conclusion of Negotiations (DCN) on QABs.
DCN lays down the rules for the QABs between jurisdictions. From then on, an ABIF-related agreement between jurisdictions will eventually be reflected in the respective Schedule of Commitment (SoC) of each country.
The SoC reflects the final offers that each country makes to a specific counterpart and offers that are made available to all member-states.