KUALA LUMPUR, Feb 2 (Bernama)-- Bank Negara Malaysia and the Bank of Thailand signed a memorandum of understanding (MOU) today to enter into a cross-border collateral arrangement.

The agreement is mainly to facilitate a reciprocal operational arrangement aimed at enhancing liquidity facilities to financial institutions in both countries.

In a joint statement Thursday, both central banks said the collaboration would further support them in preserving monetary and financial stability, as well as strengthen the cooperation of Malaysia and Thailand in the area of domestic liquidity management.

Under this arrangement, eligible financial institutions operating in Malaysia may obtain Malaysian Ringgit liquidity from Bank Negara by pledging Thai Baht or Thai government and central bank debt securities with it.

"Similarly, eligible financial institutions operating in Thailand may obtain Thai Baht liquidity from the Bank of Thailand by pledging Malaysian Ringgit or Malaysian government and central bank securities," the statement added.

Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz commented that this initiative would further strengthen cross-border liquidity management in the respective financial systems and reinforce financial and economic ties.

Meanwhile, Bank of Thailand Governor Dr Prasarn Trairatvorakul remarked that the reciprocal cross-border collateral arrangement between both central banks would serve as a basis upon which, further financial and economic collaboration can be established.