BI issues four new regulations
BI issues four new regulations
JAKARTA (JP): Bank Indonesia (BI), the central bank, yesterday issued four new regulations in a move to ensure a more healthy and reliable banking sector and to curb unhealthy competition.
The regulations provide: (1) a requirement to set out an annual working program; (2) a definition of persons barred from the banking sector; (3) restrictions on the use of inter-bank information; and (4) the standardization of accounting systems.
Hendrobudiyanto, the central bank's director of supervision, told a press conference yesterday that the regulations, which support the implementation of the new banking law, would encourage banks, not only to develop realistic programs, but also to protect their operations from the involvement of unreliable people.
"In addition, the new ruling is expected to curb unfair competition in the banking industry," he said.
One of the new regulations requires commercial banks to provide the central bank with their annual operational programs, including projections on savings and deposits, lending, fee-based services and product development.
Programs such as network expansion, human resource development and projections on operational incomes and profits must also be reported to the central bank.
Hendrobudiyanto said that credit programs should include detailed information about projects, their financing arrangements and terms of loan repayment.
The information about credits given to affiliated parties, such as shareholders, should be more detailed still, including the value of the collateral, the terms of repayment and the proportion of credits to outstanding loans.
"The new regulation will guide the banks in a more realistic and rational expansion," he said. Hendrobudiyanto denied that the move was against the spirit of deregulation.
Blacklist
According to the second regulation, certain people are prohibited from owning or becoming an executive of a bank.
Blacklisted people include bank shareholders, executives or employees who have been involved in fraud, such as making false transactions or colluding with customers or other parties.
Bank executives, former executives or other affiliated parties who have been responsible for the downfall of their banks during their terms of office are also blacklisted under the new regulation.
Other blacklisted people include shareholders or executives of banks who have defaulted on a loan of a significant sum or have criminal records.
The main intention of this regulation is to free the country's banking industry from unreliable and irresponsible people, Hendrobudiyanto said.
He acknowledged that the criteria are very general and normative but said that the regulation would be sufficient to ensure the credibility of the country's banking industry.
Hendrobudiyanto, who was accompanied by other central bank directors including Paul Sutopo and Heru Soepraptomo, denied that the loose criteria could lead the central bank to act partially when enforcing the ruling.
"The central bank will try to get information from all sources available," he replied when asked about the possibility of partiality.
The third regulation lays down restrictions on the exchange of information between banks concerning the accounts of borrowers or the general performance of banks.
Banks are allowed to exchange information among themselves but only in regard to their active borrowers.
Hendrobudiyanto said that the restrictions on the exchange of information between banks was essential to ensure the confidentiality of bank clients.
The fourth regulation issued by the central bank yesterday provides for the standardization of banks' accounting systems. (hen)