Base deposit premiums on bank risk: Association<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
The government-proposed bank deposit insurance scheme has been
\ncriticized by local and international experts for treating banks
\nunfairly and lacking certainty on when depositors could get their
\nmoney back when a bank becomes insolvent.<\/p>\n
The chairman of Indonesia's general insurance association,
\nFrans Sahusilawane, said premiums banks charged in the insurance
\nscheme should be based on risk, meaning that less healthier banks
\nshould pay higher premiums, to ensure fairness.<\/p>\n
\"Applying a flat rate, in which banks pay an equal amount,
\nwould create injustice, because this scheme basically means that
\nhealthier banks would subsidize other, less healthy banks.<\/p>\n
\"We therefore recommend that the premium be risk-based,\" Frans
\nsaid on Monday during a hearing with House of Representatives
\nCommission IX on financial affairs, which is deliberating the
\nbill on the deposit insurance scheme.<\/p>\n
The deposit insurance scheme will replace the existing
\ngovernment-sponsored blanket guarantee on banks, which covers all
\nobligations of closed down banks, launched in the wake of the
\nlate 1990s financial crisis to help revive confidence in the
\nbanking industry.<\/p>\n
Under the government plan, premiums imposed on banks would be
\nequal in the early stage.<\/p>\n
As stated in the draft law, banks would be required to pay a
\nflat fee of 0.1 percent of third party liability during the first
\ntwo years of the scheme's operation. Afterward, the fee would be
\nbased on each bank's financial condition.<\/p>\n
But Article 15 of the draft states that the margin between the
\nlowest and the highest rate must not exceed 0.5 percent.<\/p>\n
\"There should not be a margin limit at all to ensure fairness
\nfor all banks,\" said Frans.<\/p>\n
Six months after the bill is approved by the House, the
\ngovernment will start phasing out the items to be covered by the
\ninsurance scheme.<\/p>\n
The phasing out process will likely take one year until it
\nonly covers individual deposits of less Rp 100 million (about
\nUS$12,000).<\/p>\n
Also present at the hearing was Paul L. Sachtleben, who worked
\nfor the U.S. Federal Deposit Insurance Corporation for 27 years
\nand who is now a senior advisor for a similar agency in Bulgaria.<\/p>\n
He came here at the commission's invitation.<\/p>\n
Sachtleben said that in principle, most of the issues outlined
\nin the bill were in line with international practices, although
\nsome revisions were necessary.<\/p>\n
Sachtleben, speaking through an interpreter, emphasized the
\nneed to set a time limit by which the deposit agency must pay the
\nclaims of depositors of an insolvent bank.<\/p>\n
The proposed draft does not state a time lime.<\/p>\n
\"The speed of claims payments is crucial to avoid panic among
\ndepositors, and also to promote public confidence in the banking
\nsector,\" Sachtleben told legislators.<\/p>\n
Sachtleben said that under an International Monetary Fund
\ndirective, the payment of claims had to be made within no more
\nthan 30 days after a bank's closure, as compared with the three
\nmonths regulated by the European Union and five days by the U.S.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/base-deposit-premiums-on-bank-risk-association-1447893297",
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"sponsor": "Okusi Associates",
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