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ndonesia'€™s financial regulator plans to use a recent agreement with its Malaysian counterpart as a model for future bilateral ones on the integration of financial services in ASEAN with Singapore and other countries in the region.

In the recent agreement, Malaysia has finally agreed to ease restrictions imposed on Indonesian banks to operate in the neighboring country.

Financial Services Authority (OJK) commissioner on banking supervision Nelson Tampubolon said the agreement with Malaysia was a '€œheads of agreement'€, which could act as a model or an umbrella for future bilateral agreements with other ASEAN countries, including Singapore.

'€œWe will only need a bilateral agreement to sign with Singapore based on the existing heads of agreement with Malaysia. We decided to use the model because it will benefit Indonesia'€™s position, even though Singapore will also propose its own plan,'€ he said on Monday.

The agreement with Malaysia was signed by Bank Indonesia (BI) Governor Agus Martowardojo, OJK chairman Muliaman D. Hadad and Bank Negara Malaysia (BNM) Governor Zeti Akhtar Aziz on Dec. 31, 2014 in Jakarta.

The agreement highlighted equal reciprocity and national treatment among the two countries as Indonesian banks have often complained about restrictions imposed by the Malaysian banking authority to operate in the neighboring nation, despite the call for financial integration in ASEAN.

The agreement is part of a larger ASEAN Banking Integration Framework (ABIF) that has been set for the 10 member countries within ASEAN '€” Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

The ABIF guidelines will make way for the subsequent endorsement of the ASEAN Framework Agreement on Services (AFAS) by each country'€™s finance minister.

Under the ABIF guidelines, banks that have acquired the '€œQualified ASEAN Bank'€ (QAB) status will be able to carry out their operations in neighboring countries and get equal treatment as local banks.

According to the guidelines, only '€œindigenous'€ banks can acquire QAB status, meaning that a bank is required to have been established and based in an ASEAN country, as well as owned by ASEAN citizens. Indonesian banks looking to gain the status may apply with the OJK.

Nelson said the OJK was preparing the detailed document for bilateral agreements with BNM as a follow up to both countries'€™ recent heads of agreement before entering a new one with Singapore this year.

The bilateral agreement with BNM would wait for the ABIF commitment scheduled to be signed by 10 member countries within ASEAN this month, Nelson added.

Nelson said one of the main points required in the bilateral agreement with BNM would be that Indonesia would allow three Malaysian QABs to operate here if Malaysia also allowed at least three Indonesian QABs to enter the neighboring country.

'€œAccording to the heads of agreement, Indonesian QABs are also allowed to pay their minimum capital requirement in five-terms of installment,'€ he added.

A BNM regulation sets the minimum capital funds at 300 million Malaysian ringgit (US$85.6 million) for a licensed bank, which is a locally incorporated foreign bank.

At present, there are three Malaysian-based banks operating in Indonesia, namely CIMB Niaga, BII Maybank and Maybank Syariah Indonesia. All three lenders are locally incorporated.

CIMB Niaga is 96.9 percent owned by CIMB Group Holdings Berhad. Meanwhile, BII Maybank and Maybank Syariah are 79 percent and 99 percent controlled by Malayan Banking Berhad, respectively.

The BNM has granted limited access to Bank Mandiri, the only Indonesian bank to operate in Malaysia till now. However, Mandiri is still unable to operate as a full branch due to large capital requirements imposed by the Malaysian central bank.

In the future, the amount of capital that must be provided may be lower than 300 million ringgit if Mandiri acquires QAB status.