Bank Indonesia tightens commercial paper ruling
Bank Indonesia tightens commercial paper ruling
JAKARTA (JP): Bank Indonesia has issued a tighter ruling in
the issuance of commercial papers in the money market to protect
the investing public.
One of the important points in the ruling, issued on Aug. 11,
is the requirement imposed on would-be commercial paper issuers
to receive an investment grade from a registered credit rating
agency.
Other important items in the new ruling are the roles of banks
and securities companies in the issuance of commercial papers and
the restriction imposed on them.
The criteria of a commercial paper, according to the new
ruling, is an unsecured promissory note issued by non-bank
companies. The maturity period of the debt facility should be up
to 270 days.
The issued debt instrument should receive an investment grade
from an independent rating agency such as PT Pfindo, the only
credit rating agency in the country.
The issuing agent of short-term commercial papers or unsecured
promissory notes should be banks or securities companies.
Besides operating as issuing agents, the securities companies,
which are currently involved only in securities trading on the
capital market, are also allowed to act as dealers of the sales
of commercial papers.
However, unlike banks, securities companies are not allowed to
act as paying agents for the issuance of commercial papers.
The ruling also stipulated that banks are not required to have
specific licenses from the central banks to get involved in the
issuance of commercial papers.
As arrangers of the issuance of the short-term promissory
note, banks are, however, required to prepare and disseminate
information on would-be issuing companies such as their latest
annual financial statements and latest quarterly reports.
Their latest annual financial reports should receive a clean
bill of health from the Capital Market Supervisory Agency
(Bapepam).
The new ruling also allow banks to buy commercial papers on
the primary and the secondary markets both for their own or for
other parties.
Banks, however, are barred from acting as arrangers, issuing
agents or paying agents of the commercial papers issued by its
affiliates or companies having doubtful and bad debts. In
addition, a bank is also prohibited from becoming a guarantor in
the issuance of a commercial paper of any companies.
Banks which violate the regulation are subject to an
administrative sanction, according to the central bank's new
ruling. (hen)