BI revises ruling on bank guarantee scheme
BI revises ruling on bank guarantee scheme
JAKARTA (JP): Bank Indonesia (BI) has revised the formula
devised for calculating the maximum interest rates which make
third party funds eligible for protection under the government
bank guarantee scheme.
Bank Indonesia deputy director for monetary management
Tarmiden Sitorus said that the change was made because the
interest rate was now less volatile compared to previous years.
He said that under the revised ruling, the maximum interest
rate for banks' third party funds eligible for the guarantee
scheme was calculated based on the average time deposit interest
rate of the previous month at selected banks (those contributing
to the Jibor or Jakarta interbank offering rate), plus a 300
basis point margin for rupiah deposits and 100 basis points for
U.S. dollar deposits.
Under the previous ruling, the maximum interest rate was
calculated based on the average interest rate of the previous
week.
Tarmiden also said that under the new ruling, the interest
rate limit would be valid for a one-month guarantee period,
compared to a one-week period previously.
He added that the announcement of the interest rate limit
would now be made two-days prior to the end of each month.
Previously, the announcement was made every Friday.
He said that a new interest rate limit would be announced
Friday (today), which would be valid for the entire month of
April.
The government launched the bank guarantee scheme in early
1998 in a bid to help revive confidence in the country's
embattled banking sector. Under the program run by Bank
Indonesia, the government will guarantee third party funds, both
in rupiah or foreign currencies, deposited in domestic banks in
case the banks are closed down. The government also guarantees
interbank loans.
But the government will not guarantee third party funds
carrying interest rates beyond the tolerable limit set by the
central bank.
Last week, the maximum interest rate for a 1-month rupiah time
deposit was set at 15.39 percent, 3 months at 15.78 percent, 6
months at 15.84 percent, 12 months at 15.9 percent and 24 months
at 16.65 percent.
For a U.S. dollar 1-month deposit the interest rate was set at
6.63 percent, 3 months at 6.71 percent, 6 months and 12 months at
6.77 percent, and 24 months at 6.85 percent.
The interest rate limit for rupiah interbank loans last week
was set at 13.26 percent, and 4.9 percent for dollar loans.
Tarmiden said that under the new ruling, the interest rate
limit on interbank loans was calculated based on the weighted
average of the overnight interbank market rate offered by the
Jibor banks in the previous month.
He said that the interest rate limit of the interbank loans
would also be valid for a one-month period compared to the
previous one-week period.
Meanwhile, another Bank Indonesia senior official, Nelson
Tampubolon, said the central bank and the government were still
in the process of discussing how to end the costly bank guarantee
scheme.
He said that there was a plan to introduce a deposit insurance
scheme to replace the government blanket guarantee scheme.
He said that it was too early to decide when the government
guarantee scheme would be replaced.
"The government guarantee is still needed to maintain
confidence in the domestic banking sector," he said.(rei)