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fter years of discussion, Indonesian and Malaysian banking authorities have finally inked an agreement that will supposedly make banking operations easier for each local lender.

On Monday, Indonesia’s Financial Services Authority (OJK) and Bank Negara Malaysia (BNM), Malaysia’s central bank, signed a bilateral agreement enabling both countries to establish banking subsidiaries with domestic privileges.

President Joko “Jokowi” Widodo and Malaysian Prime Minister Najib Abdul Razak witnessed the signing, which took place at the Merdeka Palace. In addition to banking, the leaders also witnessed the signing of a follow-up agreement on the establishment of the Council of Palm Oil Producer Countries.

“Indonesia welcomes the agreements that have been signed, both the host country’s agreement for the secretariat council of palm oil producer countries and the ASEAN Banking Integration Framework [ABIF] agreement between the Financial Services Authority and Bank Negara Malaysia,” Jokowi said in a joint press statement following the bilateral meeting.

Najib concurred and said the two countries were doing well economically at present. “Malaysia is the second largest investor in Indonesia and we want trade between the two countries to reach US$30 billion,” he said.

The banking agreement is the first of its kind among ASEAN countries.

OJK deputy commissioner Mulya Siregar said that liberalization of the banking sector within ASEAN was not running smoothly, even though ASEAN’s financial services were dominated by banking.

“This is a strategic agreement to increase the role of local banks in ASEAN based on what has been arranged in the ABIF,” he said at a press conference.

Indonesian banks have historically had a difficult time penetrating Malaysia’s market due to the latter’s strict regulations regarding foreign banks. However, the new agreement will allow Indonesian banks to enjoy similar domestic privileges already cherished by their Malaysian counterparts.

OJK international and institutional affairs director Triyono said Indonesian banks would enjoy low fees in admission and ATM transactions. For instance, admission fees will hover at 5.2 million ringgit (US$1.3 million), half of what local Malaysian banks are required to pay.

However, Indonesian banks will still be required to meet capital requirements of 300 million ringgit, but negotiations are possible if they cannot fulfill the requirement within five years.

The agreement also stipulates that both countries must allow the same number of banks to operate in their respective territories. At the moment, Malaysia already operates two banks in Indonesia — CIMB Niaga and Maybank Indonesia.

For it to operate a third bank, it must first open the door for Indonesia to establish two lenders there as well.

Banks expanding within ASEAN must fulfill the requirements of a Qualified ASEAN Bank (QAB). To qualify, a majority of a bank’s shares must be owned by an ASEAN native. It must also have strong capital and a good banking history.

Mulya said the OJK was currently working toward negotiating similar agreements with Thailand and Singapore. “It is a little more difficult to enter Singapore, so we will probably conclude negotiations with Thailand first.”