Central Bank anounces new banking regulations<\/p>\n
JAKARTA (JP): Bank Indonesia (BI) on Tuesday announced several
\nnew banking laws, designed to limit foreign exchange and lending
\nrisks, and to improve transparency.<\/p>\n
BI director Subarjo Joyosumarto said the central bank had
\nlowered banks' maximum net open foreign exchange to 20 percent of
\ncapital, from the previous 25 percent, to reduce the risks of
\nexposure on foreign exchange.<\/p>\n
\"The changes in the net open position condition are intended
\nto encourage banks to be more careful when taking forex position
\nas an anticipation on possible future losses due to exchange rate
\nfluctuation,\" Subarjo told reporters at a press conference.<\/p>\n
He said that the new ruling was signed by Bank Indonesia
\nGovernor Sjahril Sabirin on Dec. 31, 1998 and was effective since
\nthe announcement.<\/p>\n
He added that banks breaching the new ruling would face
\nstiffer sanctions according to the new 1998 Banking Law.<\/p>\n
The net open position is the difference between a bank's long
\nand short-term foreign exchange position.<\/p>\n
Subarjo said the central bank had also introduced a ruling on
\nthe legal lending limit of banks.<\/p>\n
He said the lending limit to a non-affiliated single party had
\nbeen relaxed to 30 percent of capital, from the former maximum of
\n20 percent, for the period until Dec. 31, 2001.<\/p>\n
He said the new ruling was effective as of this announcement.<\/p>\n
The lending limit would be tightened to 25 percent from Jan.
\n1, 2002 until Dec. 31, 2002, he said, adding that the limit would
\nbe returned to the 20 percent level beginning 2003.<\/p>\n
Certain lending activities, however, were allowed to surpass
\nthe 30 percent limitation, Subarjo said.<\/p>\n
This included extending heavily subsidized government loans in
\nwhich the bank was the executor, and lending to open letters of
\ncredit, he said.<\/p>\n
He added that funds for buying Bank Indonesia promissory notes
\nand government-guaranteed bonds were excluded from any of the new
\nlending limits.<\/p>\n
Subarjo also dismissed worries that the new 30 percent lending
\nlimit requirement could be abused by bank owners to recapitalize
\ntheir ailing banks, saying the central bank's supervision system
\nhad greatly improved.<\/p>\n
He said that according to the new 1998 Bank Law No. 10, banks
\nwere now obliged to issue financial reports every quarter,
\ncompared to only twice a year under the earlier laws.<\/p>\n
He added that the new reporting schedule, which will start in
\nJune, must include records of lending and capital status.<\/p>\n
He said that under this new law, banking secrecy only covered
\nthe liability side, not the asset side.<\/p>\n
Subarjo said that banks breaking the lending limit would be
\nasked to provide an action plan to return the legal lending limit
\nto the allowable level in one month, BI would then give two
\nfurther warnings before sanctioning administrative or criminal
\npenalties for failing to implement the action plan.<\/p>\n
He said, however, that lending in excess of the official limit
\ndue to a drop in the rupiah's value would be given lighter
\npenalties, including a nine-month period for bringing lending
\nback into tolerable levels before being penalized.<\/p>\n
Subarjo said that banks with a negative capital adequacy ratio
\nwere not allowed to lend money, as it would automatically breach
\nthe lending limit requirement.<\/p>\n
He, however, added that state-owned banks and private banks
\nwhich had joined the government bank recapitalization program
\nwere excluded from this requirement. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/central-bank-anounces-new-banking-regulations-1447893297",
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