MOU on BI emergency funds nears completion<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
Bank Indonesia expects the drawing up of a mechanism for the
\ndisbursement of emergency funds for troubled banks in the future
\nto be completed soon, so that it could be endorsed by the House
\nof Representatives sometime next month.<\/p>\n
Bank Indonesia senior deputy governor Anwar Nasution said on
\nWednesday the central bank and the Ministry of Finance were in
\nthe final stages of discussions on the matter, and a memorandum
\nof understanding (MOU) was expected to be signed afterward.<\/p>\n
But he added that the mechanism set under the MOU could still
\nbe revised after being debated at the House.<\/p>\n
\"The House has to give the go-ahead on the MOU in this case,
\nincluding giving suggestions. They have the right to do that as
\nwe're talking about state funds here,\" Anwar told reporters.<\/p>\n
He was quick to add, however, that it should be completed
\nbefore the closure of the Indonesian Bank Restructuring Agency
\n(IBRA) on Feb. 27.<\/p>\n
The disbursement of emergency funds for troubled banks forms a
\nmajor part of Bank Indonesia's role as a last resort lender. This
\nbasically will allow the central bank to give a sort of liquidity
\nsupport facility whenever a bank is in trouble which could lead
\nto a systematic collapse of the overall banking sector.<\/p>\n
The plan has received considerable attention from various
\nparties considering that a huge amount of similar emergency funds
\nhad been abused when disbursed to troubled banks during the 1990s
\nfinancial crisis. At the time, there was no clear criteria or
\nmechanism for the disbursement of the funds as the decision was
\ntaken during a crisis period, analysts have said.<\/p>\n
Critics have said that without clear guidelines and criteria,
\nthe emergency fund facility would be abused by bad bankers.<\/p>\n
The new mechanism is expected to provide detailed procedures
\nand criteria for disbursing the emergency funds, as well as a
\nmechanism to later collect the funds from the recipients.<\/p>\n
Minister of Finance Boediono has said that the new concept was
\naimed at preventing a similar scenario to the 1990s banking
\ncrisis from occurring.<\/p>",
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