Repo pacts slower than other steps

Repo pacts slower than other steps

TOKYO (Reuter): Bank Indonesia (central bank) governor Soedradjad Djiwandono said yesterday that Asian central banks had not used repurchase (repo) agreements to help the Thai central bank because they were slower than other measures.

He said that he believed that when the Thai government was faced with a currency shock that combined both economic and political factors they had wanted fast measures.

"So that in the end instead of using repo, they asked for a direct swap." he told Reuters Financial Television.

He said that Malaysia, Singapore and Hong Kong in swap activities had bought baht directly to help the Thai central bank when the baht recently came under speculative attack.

Many Asian central banks have established bilateral repo agreements to provide liquidity in times of currency crisis.

The pacts give participants access to cash by selling their holdings of U.S. government securities to the pact's partners with a promise to buy them back later.

Soedradjad said repo agreements were passed over not because the problem was too big but because repo pacts were just one basis for central bank cooperation.

"The repo itself (was) just the impetus to show the world that we are working together," he said.

Asked if a yen-denominated agreement would be more readily used, Soedradjad said there had been some discussion about it but that it was up to the participating countries and the Bank of Japan.

Most central banks in Asia were increasing their holdings of yen, he said, adding that Indonesia had 35 percent of its reserves in yen, partly because the proportion of its government debt denominated in yen was high.

He said a yen-denominated pact was not too difficult technically but that other countries' holdings were not as high as Indonesia's.