Japan China South Korea ASEAN enhance regional financial safety net

MILAN, Italy – Japan, China, South Korea and the 10 Asean countries have agreed to enhance their regional financial safety net by launching a new lending facility aimed at swiftly responding to crises caused by pandemics and natural disasters.

The finance leaders of the so-called Asean Plus Three group agreed at their meeting in Milan, Italy, on May 4 to establish the new facility under their currency swap arrangement known as the Chiang Mai Initiative Multilateralisation (CMIM).

The CMIM, created after the 1997-1998 Asian financial crisis, is designed to support regional financial stability by allowing members to tap currency swap lines.

The new rapid financing facility will enable members to access emergency financing without conditions in case of financial crises arising from sudden shocks.

“We believe that this new CMIM facility will enhance regional resilience,” the group said in a joint statement.

The CMIM pool currently amounts to US$240 billion (S$309 billion) in foreign exchange reserves, with Japan and China each contributing US$76.8 billion, South Korea US$38.4 billion and the 10 Asean members a combined US$48 billion.

The CMIM’s two existing facilities – a crisis resolution instrument and a precautionary line – have never been utilised as members have turned to other resources with simpler decision-making processes such as bilateral swap lines. REUTERS

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