Overview of the CMIM

The Chiang Mai Initiative Multilateralisation (CMIM) is a multilateral currency swap arrangement among ASEAN+3 members, which came into effect on 24 March 2010. Its core objectives are (i) to address balance of payment and/or short-term USD liquidity difficulties in the ASEAN+3 region, and (ii) to supplement existing international financial arrangements. The contracting parties to the CMIM Agreement comprise the finance ministries and central banks of ASEAN+3 Countries (Brunei Darussalam, Cambodia, China, Indonesia, Japan, Korea, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam), and Hong Kong Monetary Authority of Hong Kong, China.

In 2000, in the wake of the Asian Financial Crisis, ASEAN+3 financial authorities decided to strengthen their financial cooperation through the establishment of the Chiang Mai Initiative (CMI), comprising a network of bilateral swap agreements among members. In 2010, the CMI was multilateralized into a single contractual agreement called the CMIM Agreement and the total size of the CMIM facility was expanded and established at USD 120 billion. The evolution of the CMI into the CMIM marked an important milestone, exemplifying the members’ strong commitment to continuously improve and promote financial stability in the region. The CMIM was further strengthened in 2014 by doubling the size to USD 240 billion, increasing the CMIM-IMF De-linked Portion to 30%, and extending the maturity and supporting periods. A crisis prevention facility, CMIM Precautionary Line (CMIM-PL), was also introduced, in addition to the existing CMIM Stability Facility (CMIM-SF) for crisis resolution function.

Since then, the CMIM members have repeatedly affirmed their commitment to further strengthen the CMIM as part of the regional financial safety net. The CMIM has been further enhanced through conducting test runs, revising the Operational Guideline, conducting the periodic review, developing the peacetime checklist, and so on.

How the CMIM Works

The total size of the CMIM is USD240,000,000,000 (two hundred forty billion).

View Contribution & Voting Powers
The two countries will be appointed to coordinate the swap activation process when a request for a drawing is made. Two Coordinating Countries shall be the two co-chairs of the ASEAN+3 Finance Ministers and Central Bank Governors Process, one Coordinating Country from ASEAN member countries and the other from China, Japan, and Korea.

Fundamental issues  (such as the total size of the CMIM, contribution of each CMIM party etc.) for the CMIM would be determined by a consensus approval at the Ministerial Level Decision Making Body (MLDMB), which consists of ASEAN+3 Finance Ministers and Central Bank Governors.

Executive level issues (such as initial execution of drawing, renewal of drawing, events of default) would be determined by 2/3 majority effective vote at the Executive Level Decision Making Body (ELDMB), which comprises the deputy-level representatives of ASEAN+3 Finance Ministries and Central Banks and Monetary Authority of Hong Kong, China

In the case of the actual balance of payments and/or short-term liquidity difficulties, any central bank of ASEAN+3 countries as well as Monetary Authority of Hong Kong, China, is entitled to request a swap of their local currencies with the US dollar for an amount up to their contribution multiplied by their respective purchasing multiples under the “CMIM Stability Facility (CMIM-SF).

Drawing Amount and Maturity

IMF-Linked Portion: If a CMIM-SF arrangement is linked to an IMF program, each drawing shall mature one year after the date of drawing with two renewals, totaling up to 3 years in supporting period.

IMF De-linked Portion: If it is not linked to any IMF program, the drawing can be made up to 30 percent of each CMIM party’s swap quota or maximum arrangement amount and the maturity shall be six months with three renewals, totaling up to 2 years in supporting period.

The CMIM Precautionary Line (CMIM-PL) is a simplified crisis prevention facility, which was introduced in 2014.

Qualifications and Conditionality

The ELDMB may flexibly apply the five qualification criteria below, as ex-ante qualifications, and ex-post conditionality after considering the economic reports by the requesting country and analyses by AMRO/ADB/IMF as the basis for the decision.

Five qualification criteria:
(i) External position and market access
(ii) Fiscal policy
(iii) Monetary policy
(iv) Financial sector soundness and supervision
(v) Data adequacy

Duration of access

Duration of access for CMIM-PL arrangements is six months with three renewals, totaling two years in arrangement period.

The total amount that can be drawn by each member country, either for prevention or resolution purposes, should be within the maximum swap amount set aside for that country. Dual-drawing from both the CMIM-SF and the CMIM-PL is restricted. The CMIM-PL can be replaced with the CMIM-SF if any CMIM-PL recipient party is hit by crisis and needs additional support, depending on the decision made by the ELDMB.

The CMIM party that requests the CMIM arrangements needs to meet a set of conditions precedent before the ELDMB members take a vote on whether to approve such request, including completion of review of the economic and financial situation and no events of default, among others. Each CMIM party is requested to comply with covenants such as submission of the periodic surveillance report and participation in the ASEAN+3 Economic Review and Policy Dialogue (ERPD).

The reform of the international financial architecture is now being pushed forward by the G20, with a focus on further strengthening the global financial safety net (GFSN) with the IMF at its center. Stronger cooperation among the different layers of the GFSN is crucial to prevent and contain future crises and safeguard global financial stability. Against this backdrop, the ASEAN+3 members decided to carefully study how the CMIM can be better integrated into the global financial safety net. To this end, joint test runs have been conducted in collaboration with the IMF since 2016. During and after the first Periodic Review, in order to ensure consistency with the IMF, an information-sharing coordination process in the form of Operational Guidelines will be duly established to have a shared view on economic and financial situations, financing needs, and policy recommendations for co-financing.

Support to the CMIM

Supporting the implementation of the CMIM is one of AMRO’s core functions. AMRO’s effort has centered on providing support to members on the following aspects to enhance the CMIM’s operational readiness.

With support from AMRO, the CMIM is now equipped with the Operational Guidelines specifying relevant activation procedures, which will be updated along with test runs and periodic reviews.

Members have regularly conducted test runs under various scenarios since 2013, especially joint test runs with the IMF since 2016.

This was drawn up and has been checked regularly in order to monitor the member authorities’ preparation for CMIM activation in accordance with the CMIM Agreement and Operational Guidelines.

AMRO has supported members to develop and enhance the ERPD Matrix to act as qualification criteria and methodology for the CMIM-PL.

AMRO supported members in the first five-year Periodic Review through identifying and addressing key issues as well as consolidating points raised at the CMIM test runs evaluation sessions. A general agreement on the main contents has been reached among members.

AMRO has also provided intellectual and administrative support to further strengthen the CMIM with the development of the CMIM conditionality framework and the facilitation of CMIM’s collaboration with other international financial institutions.

Updates of the CMIM

Regional Financing Arrangements

Regional Financial Arrangement (RFAs) are mechanisms or agreements through which groups of countries mutually pledge financial support to countries experiencing financial difficulties in their regions. There are eight RFAs across the world and the CMIM/AMRO is the one for the ASEAN+3 region. Together they are the regional line of defense in the global financial safety net, whose other components are national foreign exchange reserves, bilateral swap lines between central banks, and the IMF. RFAs were typically set up in response to different types of crises, ranging from a currency crisis to a sovereign debt crisis, to bank runs. This explains the wide variety in history, size, operating methods and experience of the world’s RFAs.

Cooperation between RFAs – and between RFAs and the IMF – is crucial to limit the worst effects of any next crisis. The G20 has urged such cooperation at several Summits, including in its most recent statement. To that end, the first RFA High-Level Dialogue on the role of RFAs was held in 2016 in Washington, DC. There, participants agreed to hold a Joint RFA Research Seminar on an annual basis. The first seminar jointly organized by AMRO, the European Stability Mechanism (ESM), and the Fondo Latinoamericano de Reservas (FLAR), was held in September 2017 in Singapore. Together with these two annual events, several initiatives and joint research have been put in place to enhance RFAs’ capacities; strengthen cooperation among RFAs themselves and between RFAs and the IMF.