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SEAN'€™s financial and banking authorities have agreed in principle to start the process of banking integration in the region as part of the wider implementation of the ASEAN Economic Community (AEC) by the end of 2015.

The ASEAN Framework Agreement on Services (AFAS) was signed on Saturday in Kuala Lumpur by the finance ministers and central bank governors of ASEAN'€™s 10-member countries as an umbrella agreement for the ASEAN Banking Integration Framework (ABIF).

Bank Indonesia (BI), as one of the member countries'€™ central banks, agreed to join the integration process, which will be followed up by more detailed bilateral agreements, according to BI spokesperson Peter Jacobs.

The AFAS multilateral agreement was the follow-up to an agreement signed by BI, the Malaysian central bank '€” Bank Negara Malaysia (BNM) '€” and the Financial Services Authority (OJK) last year, Peter said.

'€œAfterward, the three parties will also sign a document on terms and conditions,'€ he told The Jakarta Post on Monday.

Peter said the OJK, acting as Indonesia'€™s banking regulator, would partake in the next follow-up bilateral agreement with BNM this year regarding more detailed points in permits, including types of businesses allowed, for qualified banks in both countries.

The OJK and other ASEAN banking regulators will also sign upcoming detailed bilateral deals, in which each country could negotiate their own banks'€™ interests, Peter added.

'€œThe detailed bilateral agreements are the best opportunity to negotiate reciprocity between the countries involved,'€ he said.

In a joint statement published by BNM on Saturday, ASEAN finance ministers and central bank governors said the ABIF guidelines allowed qualified banks in the region to operate freely in each other'€™s countries in a push to greater financial and economic integration.

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

The implementation of the ABIF will be accompanied by the strengthening of home-host regulatory and supervisory cooperation arrangements to support the effective surveillance and supervision of QABs, the statement revealed.

Previously, OJK commissioner on banking supervision Nelson Tampubolon said the OJK planned to use last year'€™s agreement with BNM as a model for future bilateral agreements on the integration of financial services in ASEAN with Singapore and other countries in the region.

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

Malaysia recently agreed to ease restrictions imposed on Indonesian banks to operate in the neighboring country.

The agreement highlighted equal reciprocity and national treatment among the two countries.

Indonesian banks have often complained about the restrictions imposed by the Malaysian banking authorities to operate in the neighboring country, despite the call for financial integration in ASEAN.

A BNM regulation sets minimum capital funds at 300 million ringgit (US$81.7 million) for a licensed bank, which is a locally incorporated foreign bank.

Commenting on Saturday'€™s agreement, Bank Mandiri head of international banking Ferry Robbani said the lender was in the process of an internal review of its expansion plan in Malaysia as well as ongoing discussions with BNM.

'€œWe are directly discussing with BNM because there are some things regarding permits that need clarification. I cannot ensure when we will conclude our review, but we want to make clear before taking further steps,'€ Ferry said.

BNM has granted limited access to Bank Mandiri, the only Indonesian bank to operate in Malaysia. However, Mandiri is still unable to operate as a full branch due to the 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.