New rule on papers trading

New rule on papers trading

JAKARTA (JP): Bank Indonesia, the central bank, has forbidden commercial banks to buy or endorse commercial papers issued by multi-finance companies.

The ban was stipulated in central bank letter No. 28/1237/UPB3/AdB3, issued late last month.

According to the letter, raising funds from banks through the issuance of commercial papers or in the forms of other short-term promissory notes is against the business guidelines imposed on multi-finance companies.

Bank Indonesia said that under Minister of Finance Decree No. 1251/KMK.013/1988, issued in follow-up to Presidential Decree No. 61/1988, multi-finance companies are restricted from raising funds from banks through the issuance of commercial papers.

The commercial papers can be used only as additional collateral to support multi-finance companies' credit facilities at banks.

A central bank regulation issued in August allows banks to buy commercial papers in the primary and secondary markets both for their own or for other parties.

The ruling does not specify whether the commercial papers issued by multi-finance companies are excluded. (hen)