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)