BCA responses
We are most grateful to learn that one of our popular products, BCA Dollar account, has lately become the subject of forays in your column. While we acknowledge with gratitude the constructive criticism which our customers took their valuable time to express, we would like to clear up some misunderstandings that prevailed in these representations.
The fundamental misconception is mixing up operating a U.S. dollar account kept on the soil of the United States and one being deposited in a bank residing in a foreign country. The fees that are being levied on cash withdrawals from BCA Dollar account are a reflection of the mechanism how banks all over the world handle foreign currency depository accounts. In fact, if our American customers maintain a foreign currency account with a bank in the States, when they intend to make a cash withdrawal in the foreign currency they would be hit with a much higher fee than what Indonesian banks here are charging.
The following illustration might assist your readers in getting a clear picture of how banks handle foreign currencies.
As the dollar is not circulated as legal tender in Indonesia, when it is purchased by a local bank it is either kept idly in bank vaults, earning no income, until it is purchased by customers, or it is physically shipped back to the States to be deposited with a U.S. depository bank. The reason for the latter is that in order to earn income to pay depositors, the money has to be electronically moved around bank accounts in the United States.
To cover the cost of transportation, insurance premiums and opportunity costs, banks give a lower exchange rate to the purchase of U.S. banknotes than to the purchase of telegraphic transfers (TTs) in dollars. Because TTs represent funds which have been transferred to the US dollar account of the bank concerned, the funds are immediately available for use.
On other side of the coin, a US dollar cash withdrawal to a bank outside of the United States is treated as a sale of banknotes. Since US dollars are not as readily available in a foreign country as they are in the United States, additional costs are involved when the bank purchases or replenishes banknotes to satisfy its customers. That explains why banks always charge a fee for foreign banknote withdrawal. This practice is a standard international banking practice and is carried out by banks all over the world. On the other hand, much lower fees are levied on withdrawals by transferring funds out of a foreign currency account by TT.
We have noted with interest that your readers also reported that other local banks, including a branch of a foreign bank, have increased their cash withdrawal fees substantially in the wake of the currency crisis. These acts are the banks' protective measure to address the volatility of the foreign exchange market. Presently, the extreme difference between the buying and selling rates of dollar/rupiah causes the rate differential between dollar TTs and banknotes to widen erratically. The banks are forced to adjust their fees as dictated by the ever-changing market forces.
We would like to extend our apologies to our valuable customers for any inconvenience caused by the unpleasant situation related to the high volatility of the forex market of recent days. We welcome and cherish any complaint from our customers because we firmly believe their inputs are vital to improve our service and give better value to our customers.
We appreciate very much your kind attention to our company.
INDRA KUNTORO
Chief Manager
Sub Division Corporate Communications
PT Bank Central Asia
Jakarta