BI says holidays will not affect businesses

BI says holidays will not affect businesses

JAKARTA (JP): Bank Indonesia (BI) gave assurances on Wednesday
the 10-day shutdown of its clearing operations during the
holidays would not have a serious impact on businesses, including
those making overseas transactions.

Bank Indonesia public relations officer Asnar Ashari said the
central bank informed the public of the closure weeks ago and the
business sector had already made the necessary preparations.

"It is normal for businesses anywhere in the world to make
transactions only on business days," he told The Jakarta Post.

He was addressing concerns that businesses attempting to
transfer money overseas, or vice versa, would have difficulties
because the central bank had halted its clearing activities for
the holidays.

Bank Indonesia will begin closing its clearing operations on
Friday and will fully reopen for business on Jan. 2, 2001. Large
transactions will be cleared on Friday.

According to Asnar, most banks will be closed during the
holidays, although based on past experience it can be expected
that several large banks will remain open for business during
some of the 10-day holiday period

"But they will only provide certain services, including
deposits and withdrawals ... there will be no lending or other
transactions," he said.

A number of the larger banks, including Bank Central Asia
(BCA), Citibank and the state-owned Bank Mandiri and Bank Negara
Indonesia, confirmed on Wednesday they would be closed from Dec.
23 to Jan. 1, 2001.

However, Bank Mandiri and BCA did say they would open on Dec.
26 and Dec. 29 to handle tax payments.

The banks said customers would still be able to make cash
withdrawals from their automated teller machines (ATMs) during
the holidays

Asnar said banks had placed large stocks of cash in their ATMs
to anticipate an increased demand during the year-end
festivities.

Separately, the Hongkong and Shanghai Banking Corporation
(HSBC) placed an advertisement in this paper on Wednesday to
announce that several of its Jakarta branches would be open "for
limited hours" during the holidays. However, all branches will be
closed on Dec. 25, Dec. 27, Dec. 28 and Jan. 1.

The Jakarta Stock Exchange will be closed beginning on Dec. 22
and will resume trading on Jan 2.

New facility

Separately, a senior Bank Indonesia official said on Wednesday
that the central bank had introduced a free interest rate
nonovernight liquidity facility for domestic banks in a bid to
prevent a gridlock in the country's newly launched real-time
gross settlement system (RTGS).

Bank Indonesia deputy director for monetary affairs Tarmiden
Sitorus said the new liquidity facility, which was introduced
last week, would help banks suffering from short-term liquidity
mismatch.

"If the short-term liquidity mismatch suffered by a bank or a
couple of banks isn't immediately resolved, it could create a
gridlock in the RTGS which in turn would affect the national
payment system and create instability in the overall financial
system," Tarmiden told a press conference.

He explained that the central bank had to introduce the new
liquidity facility because the domestic interbank money market
had yet to fully develop to be able to accommodate the demands on
short-term liquidity.

Tarmiden said banks that were expected to suffer from
liquidity mismatch could borrow up to twice the estimated size of
their largest outgoing transaction.

But he added that the liquidity facility was an interday
facility which must be repaid at the latest at seven in the
evening of the transaction day.

He said if the bank failed to repay the loan by the deadline,
the facility would automatically become an overnight loan
facility carrying a punitive interest rate of two percentage
points above the rate of the interbank money market.

"For the time being the short-term liquidity facility is free
of charge," he said.

Tarmiden also said the banks must provide their Bank Indonesia
SBI promissory notes or government bank recapitalization bonds as
collateral for the short-term liquidity facility.

Bank Indonesia launched on Nov. 17 the RTGS in a bid to
modernize the country's noncash interbank payment system.

Previously, the interbank payment system was based on a Bank
Indonesia clearing system.

Under the RTGS, participating banks could electronically
process settlements for any individual transaction during the
day. (rei/05)