Financial institutions, banks must report forex deals: BI
JAKARTA (JP): Bank Indonesia senior deputy governor Anwar Nasution said on Thursday that banks and non-bank financial institutions in the country would have to report their foreign exchange transactions to the central bank starting next April.
Anwar, however, reaffirmed that the new ruling was not a form of capital control but was merely a measure designed to provide the central bank with accurate, comprehensive and timely data on foreign exchange transactions to allow Bank Indonesia to design better monetary and banking policies.
"There's a need for an effective monitoring system of forex flows," he told a press conference.
Anwar said that the minimum amount of forex transactions that must be reported would be decided sometime in the middle of this month.
The new ruling, contained in Bank Indonesia regulation No. 1/9/1999 issued on Oct. 28, implements the law on the compulsory reporting of foreign exchange transactions which was enacted last April.
Banks and non-bank financial institutions must report the amount and type of transactions, the purpose of transactions, who ordered the transaction, the name of the counter parties and the countries where the counter parties are located.
Bank and non-bank financial institutions must also report rupiah transactions with non-Indonesian residents.
Anwar said that institutions failing to comply with the ruling would risk a penalty.
According to the ruling, a delay in the reporting is liable to a penalty of Rp 5 million per day for banks and Rp 1 million per day for non-bank financial institutions.
Banks which do not report their forex transactions risk a penalty of Rp 100 million, and Rp 20 million for non-financial institutions, plus a penalty for each day of the delay.
The ruling also stipulates that banks which do not report correctly or completely would be sanctioned with a penalty of Rp 100 million, and Rp 20 million for non-bank financial institutions.
The ruling says that a bank which fails to report its forex transactions for six consecutive periods or a maximum of six months would risk its license being suspended by the central bank.
It also stipulates that if a similar case happens with a non- bank financial institution, Bank Indonesia will recommend the relevant authority to close it.
Meanwhile, Bank Indonesia deputy governor Miranda Goeltom said that the minimum amount of forex transactions that must be reported would be set at a "reasonable" level.
She said that as a comparison, the minimum set in the U.S. is $10,000.
Miranda said that the forex transaction reporting system would not discourage foreign investors to enter the country because it would lessen Indonesia's risk as monetary and banking policy design would be better.
"In the past the risk was higher because investors perceived that we didn't have good data for policy design," she pointed out.
Miranda said that foreign capital had started to flow back to the country following the recent peaceful and democratic presidential election.
"We have detected that money parked overseas has also started to return back," she said, but declined to disclose a figure.
"In the stock market you can already see an indication," she added.
"Foreign investors have also started buying our Yankee bonds," she said, pointing out that this was an indication that foreign investors had started returning back to the country.
Miranda cited the increase in forex transactions in the domestic money market as another sign.
She said that the strengthening of the exchange rate of the rupiah against the U.S. dollar was further evidence of the return of investor confidence.
"There's big tendency for the rupiah to continue to strengthen following several pieces of good news," she said, pointing to the election of a new credible government, publication of the PricewaterhouseCoopers audit on the high profile Bank Bali scandal and improving relations with the International Monetary Fund.
The rupiah closed lower at Rp 6,750 per U.S. dollar on Thursday from Rp 6,730 earlier in the day. (rei)