BI boosts financial aid to banks amid Y2K fears
BI boosts financial aid to banks amid Y2K fears
JAKARTA (JP): Bank Indonesia is providing an extra financial
assistance to banks facing liquidity problems due to millennium
bug-related deposit runs, according to the central bank's senior
executive.
BI's senior deputy governor Anwar Nasution said on Wednesday
that Bank Indonesia would allow banks to sell back up to 100
percent of their Bank Indonesia certificates (short-term
promissory notes or SBIs) to the central bank if they faced
liquidity problems.
He also said that recapitalized banks could also borrow money
from the central bank using government bonds injected into the
banks as collateral.
"(The extra help) is only effective from December 22 until
January 17, 2000," Anwar told reporters at a press conference on
the readiness of the country's financial sector in dealing with
the year 2000 (Y2K) bug.
Bank Indonesia's technology director, Inding Fajar, said that
banks normally could only sell back 25 percent of the SBI notes
they held before maturity.
After a two-year banking crisis, filled with bank runs and
capital destruction, Indonesian banks now enjoy ample liquidity,
which is mostly invested in SBI notes as they remain cautious in
lending to the still troubled commercial sector.
The government has also recapitalized a dozen of the country's
major private and nationalized banks. The government injected
bonds to finance the recapitalization costs.
Inding said that only a maximum 10 percent of the government's
racapitalization bonds could be put as collateral in the central
bank.
He said that the central bank normally would not accept
government bonds as collateral.
Bank Indonesia's deputy governor, Aulia Pohan, added that for
banks which don't have SBI notes or were not recapitalized, Bank
Indonesia would debit government deposits at the central bank for
every liquidity support lent to the banks.
The Y2K bug is a problem that is predicted to strike many
computer systems in the year 2000. Computer chips that have not
been updated could mistake '00' as 1900. The error could create
various problems including billing errors and missing data in
bank accounts.
Anwar also said that Bank Indonesia would also ease certain
banking requirements.
He said that based on request, banks were allowed to include
cash deposited at the banks as a component in the calculation of
the rupiah minimum reserves requirement.
He added that the central bank would reduce the penalty if the
rupiah reserves requirement fell below the minimum level.
He said that the penalty would only be 100 basis point above
the overnight Jakarta interbank offering rate (Jibor) from the
usual penalty of 125 percent of overnight Jibor.
Anwar said that the country's banking system was already Y2K
compliant including a four-fold backup plan and contingency
measures.
He said that the Y2K threat to the domestic banking industry
was not as serious as in other developed nations because only
about 20 of the country's more than 100 banks used advanced
technology.
"Banking technology in Indonesia is not as sophisticated as in
developed nations like in Singapore," he said.
But nevertheless, Bank Indonesia has been making serious
preparations to prevent computer glitches in the country's
banking system.
He said that Bank Indonesia and commercial banks would remain
open on Dec. 31 because of the traditional year end book close on
that day. (rei)