SUMMARY OF DISCUSSION

CENTRAL BANKING SERVICES DIALOGUE

REDEFINING RESILIENCE: CENTRAL BANK PREPAREDNESS FOR CROSS-BORDER SETTLEMENT DISRUPTIONS

Jakarta, 28 Agustus 2025

INTRODUCTION

The 3rd Central Banking Services Dialogue took place at Ayana Hotel, Jakarta, on August 28, 2025. The dialogue was officially opened by Mr. Herawanto, Executive Director of Bank Indonesia (BI), and facilitated by Mr. Nukman Taufik and Mr. Fatkhurahman from Bank Indonesia for each respective session. The event brought together officials from six central banks and was concluded by Mrs. Lia Sari Oktara, Deputy Director of Bank Indonesia.

1# BUSINESS CONTINUITY ARRANGEMENTS FOR PAYMENT SETTLEMENTS IN CENTRAL BANK

The seamless flow of funds across international borders serves as a fundamental pillar of global economic stability. In an era marked by geopolitical uncertainties, economic volatility, and operational risks, the resilience of cross-border settlement systems has become increasingly critical. Any disruption to these vital systems can have far-reaching consequences, directly impacting international trade, capital flows, and household welfare through migrant worker remittances.

Drawing from experiences across different jurisdictions, the dialogue highlighted that effective resilience in settlement systems must be developed along two essential dimensions: operational preparedness to withstand short-term disruptions and strategic alignment with global standards to ensure long-term interoperability.

Two compelling case studies provided valuable insights into best practices. The Bangko Sentral ng Pilipinas (BSP) emphasized the critical importance of redundancy and adaptability in sustaining cross-border settlements during challenging periods. Meanwhile, the National Bank of Cambodia (NBC) underscored the urgent need for adopting the global ISO 20022 standard, particularly given that SWIFT will discontinue support for the legacy MT format in November 2025.

These experiences demonstrate that building comprehensive resilience in cross-border settlement systems requires a multifaceted approach encompassing three key elements: strengthening infrastructure and human resource preparedness for potential disruptions, ensuring effective coordination with market participants and regulatory authorities, and maintaining alignment with international standards to sustain long-term global interoperability.

The lessons learned from BSP and NBC provide a roadmap for policymakers and market participants to reinforce both preparedness and adaptability in financial systems, ultimately safeguarding not only cross-border settlements but also the livelihoods and economic stability that depend on them.

2# COLLABORATIVE EFFORTS TO SUPPORTS CROSS-BORDER SETTLEMENTS

Mr. Kyoung Ho Park from the Bank of Korea (BoK) brings a comprehensive overview of BoK's pivotal role in supporting international payment settlements and cross-border transactions. The Bank of Korea functions as a crucial intermediary agent, ensuring smooth fund transfers through its sophisticated settlement system, BOK-Wire+, while maintaining connectivity to essential international infrastructures such as the Continuous Linked Settlement (CLS) system.

Within its comprehensive operational framework, BoK manages a diverse portfolio of responsibilities including loans, custody services, securities operations, foreign exchange transactions, reserve management, and payment systems coordination. These functions are seamlessly coordinated across specialized teams to ensure optimal efficiency and reliability.

The presentation detailed various settlement methodologies available through the system. For cash payment transactions, central banks can purchase foreign currency (such as USD against KRW) through three distinct pathways: directly via BOK-Wire+, through a Registered Financial Institution (RFI) Bank with Co Bank Seoul serving as the local KRW settlement agent, or via a correspondent bank arrangement when direct accounts are not available. Similarly, for receiving cash payments when selling USD for KRW, the same three operational pathways apply, providing flexibility and redundancy in transaction processing.

Mrs. Elyana Widyasari from the International Department of Bank Indonesia shared valuable insights on the Local Currency Transaction (LCT) framework, a strategic initiative designed to strengthen financial resilience, reduce dependence on foreign currencies, and bolster cross-border settlement capabilities. The LCT framework aims to  enhance market efficiency, deepen local financial markets, reduce transaction costs, and promote currency diversification in international trade and investment activities.

The discussion outlined the comprehensive features and operational mechanisms of the LCT framework, including enhanced flexibility in foreign exchange administration, robust supervision and monitoring protocols, and the strategic appointment of specific banks (Authorized Cross-Currency Dealers - ACCDs) to facilitate local currency transactions. The framework supports various underlying transactions including trade finance, income transfers, direct investment, and remittance services.

Implementation progress has been remarkable, with Indonesia establishing successful cooperation agreements with multiple partner countries including Malaysia, Thailand, Japan, China, South Korea, and the UAE. Future expansion plans include partnerships with Singapore and India, demonstrating the framework's growing international acceptance and utility.

The dialogue emphasized the broader strategic vision for ASEAN Payment Connectivity, with comprehensive strategies including QR code cross-border fast payments, API standardization initiatives, regulatory framework alignment, and enhanced central bank cooperation. This regional integration approach aims to safeguard national interests while promoting inclusive and sustainable economic growth across the region.

3# FUTURE INNOVATION FOR CROSS-BORDER SETTLEMENTS

Mr. Daniel Eidan from the Bank for International Settlements presented Project Agorá, an innovative and forward-looking experiment designed to revolutionize cross-border payment processes. The project introduces the groundbreaking concept of a unified ledger—a programmable financial infrastructure that seamlessly integrates tokenized central bank money, commercial bank money, and tokenized assets on a single, comprehensive platform.

The core innovation of Project Agorá lies in preserving the established trust and structural integrity of correspondent banking while enhancing these systems with advanced technology that allows rules, compliance requirements, and transaction information to be embedded directly into payment processes. This technological advancement is expected to make cross-border payments significantly faster, more cost-effective, and transparent, while simultaneously reducing risks for both consumers and financial institutions.

Project Agorá is built on a robust collaborative model involving central banks and more than 40 private institutions worldwide, ensuring diverse input, comprehensive testing, and validation of technical feasibility across different operational environments and regulatory frameworks.

Importantly, the project emphasizes preserving central bank access policies and existing legal safeguards while simultaneously unlocking operational efficiencies that traditional payment systems have historically struggled to achieve. This balanced approach ensures regulatory compliance while driving innovation and improvement in cross-border payment infrastructure.

CLOSING REMARKS

The closing session highlighted three fundamental takeaways from the dialogue. First, the critical importance of embracing innovation was emphasized, with discussions showcasing how emerging technologies such as tokenization, unified ledgers, and other advanced solutions can significantly improve efficiency, transparency, and security in cross-border payments while preserving the trusted and essential role of financial intermediaries.

Second, the dialogue underscored the significance of strengthening business continuity through practical, proven mechanisms already in operational use. These include new retail and wholesale payment linkages, local currency settlement systems, and secure financial messaging infrastructure that enhance resilience and reliability in real-world operational environments.

Third, the necessity of collaboration was strongly emphasized, recognizing that no single nation or institution can build comprehensive financial resilience in isolation. Shared international standards, enhanced interoperability, and mutual trust are essential components for creating a robust and resilient global payment ecosystem.

The dialogue concluded with a compelling call to action, urging all participants to carry forward the principles of innovation, operational discipline, and international cooperation to ensure that cross-border payment systems become increasingly inclusive, secure, and resilient against future challenges and uncertainties.

ACKNOWLEDGEMENT

The organizers expressed sincere appreciation to all participating officials and institutions for their active engagement, valuable contributions, and constructive discussions throughout the dialogue. The collaborative spirit demonstrated during the meeting exemplifies the international cooperation necessary to address the complex challenges facing modern cross-border payment systems.