BI to issue derivatives guidelines
BI to issue derivatives guidelines
JAKARTA (JP): Bank Indonesia, the central bank, will issue guidelines on derivatives transactions to prevent future big losses on the part of local firms.
Paul Soetopo Tjokronegoro, managing director of Bank Indonesia, said over the weekend that the central bank was currently consulting the Forex Club Indonesia and a number of local banks in drafting the guidelines.
With the introduction of the planned guidelines, Paul said, it is expected that foreign exchange (forex) dealers will carry out derivatives transactions more prudently.
"Derivatives are risky products...Therefore, derivatives transactions have to be carried out healthily to reduce the risks," Paul told journalists after closing the 17th Asia Pacific Forex Assembly here on Saturday.
When asked, Paul declined to explain when the guidelines would come into being.
A number of critics have called on the government to restrict local firms from taking part in derivatives trading on overseas markets.
Last year, two publicly-listed Indonesian companies incurred loses of US$66.6 million from derivatives trading. They are PT Indah Kiat Pulp & Paper and PT Tjiwi Kimia, both paper makers under the flag of the Sinar Mas Group.
The vice president of Bank Internasional Indonesia, Okkie A.T. Monterie, said Saturday that local forex dealers have to analyze derivatives products thoroughly before they trade them.
He suggested that derivatives products be used for hedging only, not for speculative purposes. "If you want to speculate, you'd better go to a casino," he said.
Paul said Bank Indonesia's guidelines are expected to create a self-regulatory mechanism in local forex transactions.
"We would lead toward a self regulatory system in the forex dealings...Therefore, we should not create a ruling each time a new derivatives product surfaces," Paul said.
The Forex Club Indonesia is, therefore, expected to issue its own guidelines on derivatives trading for its members, in addition to the existing code of conducts for forex dealers, Paul said.
He also made an appeal to all foreign exchange banks to choose their best dealers and then educate and train them to be professional dealers.
Currently each foreign exchange bank is free to choose their own dealers. However, they are required to submit their names and curriculum vitae to the central bank.
Paul said his party had planned to certify dealers according to their qualifications and experiences in forex dealings. They would be categorized as either junior or senior dealers.
"In this case, we support the efforts of the Forex Club Indonesia and the Institute of Indonesian Bankers to educate local dealers, so that there will be certain standards for them," Paul said.
Therefore, Paul said, it is expected that "those who carry out forex trading in Indonesia will be those who are really professional."
When asked about commission houses which are still operating here and carrying out foreign exchange transactions, Paul said the government had been working on "disciplining" them. (rid)