Thailand and Singapore have inked an agreement to establish a reciprocal cross-border collateral arrangement that will facilitate financial institutions operating in both countries and help maintain financial stability.
Under the arrangement, which was signed on June 23, eligible financial institutions operating in Singapore may obtain Singapore dollar liquidity from Monetary Authority of Singapore (MAS) by pledging Thai baht or Thai government and central bank securities with MAS. Similarly, eligible financial institutions operating in Thailand may obtain baht liquidity from the Bank of Thailand (BOT) by pledging Singapore dollar or Singapore government and central bank securities.
This collaboration reinforces the growing trade, investment and financial relationships between Singapore and Thailand. The arrangement allows the Monetary Authority of Singapore and Bank of Thailand to accept a wider range of collateral in their liquidity provisioning facilities. Financial institutions in both countries can thus have greater flexibility in their liquidity management, the Bank of Thailand said in a statement released today.
“The reciprocal cross-border collateral arrangement highlights the facilitating role of both the MAS and BOT in cross-border banking activities and liquidity management of financial institutions in both countries. At the same time, it strengthens the cooperation between both central banks,” said BOT Governor Prasarn Trairatvorakul.
Ravi Menon, managing director of MAS, said "In times of market stress, cross-border collateral arrangements between central banks can help sustain liquidity and thereby promote financial stability. This new arrangement with BOT recognises the deep inter-linkages between our two economies.”