SEOUL, May 26 ― South Korea and Malaysia have agreed to utilise their currency swap agreement worth around US$4.7 billion (RM15 billion) to boost the use of the won and ringgit, the Bank of Korea and the finance ministry said in a joint statement today.

Starting next month, central banks in both countries will begin lending the currencies to companies through local banks to settle trade bills.

The lending facility is similar to a step in December 2012 to increase the use of the Chinese yuan and the won through a bilateral currency swap.

South Korea signed a currency swap deal with Malaysia in October last year that lets either country swap 5.0 trillion Korean won for RM15 billion. It was signed amid a flurry of swap deals with other countries, including the United Arab Emirates and Indonesia.

The swap deals were meant to improve South Korea's financial risk management during times of extreme stress in global markets.

The Bank of Korea had said they would expand the use of local currencies in trade settlements in 2012.

A central bank official said demand for the ringgit for trade settlements was expected to be modest at first, adding that the bank plans to hold discussions with firms in Seoul to explain the terms of the new facility.

The Bank of Korea did not confirm the amount that would be lent to local banks, but the loans would be provided with maturities up to six months, the statement said. ― Reuters