Standard Chartered Bank to confirm NISP's L/Cs

Zakki Hakim, The Jakarta Post, Jakarta

Bank NISP signed a trade facility agreement on Tuesday with Standard Chartered Bank (Stanchart) in which the foreign bank pledged to confirm letter of credit (L/C) facilities extended by the former.

But the deal will only cover up to US$125 million worth of L/Cs to be issued by NISP.

The International Finance Corporation (IFC), the investment arm of the World Bank, will also guarantee the trade facility. IFC owns a 15.05 percent stake in the publicly-listed NISP, a medium-sized bank.

Following the late 1990s financial and banking crisis, local banks have been unable to issue L/Cs due to a lack of confidence in the banking sector. The government had to issue a blanket guarantee to help revive confidence. Nevertheless, a confirmation from a leading international bank is still crucial for local banks to be able to issue L/Cs given the country's high risk rating.

Tuesday's agreement was signed by NISP president Pramukti Surjaudaja, IFC Indonesia's country manager German A. Vegarra and Stanchart chief executive officer Stewart Hall.

Pramukti said that the deal would help facilitate international trade activities among NISP customers.

"Indonesia is a big country with an enormous potential. We believe the trade facility guarantee program will open opportunities for international trade development between Indonesia and other countries," Hall said during a press conference.

He added that Stanchart was planning to provide similar L/C guarantee facilities to other banks.

"Last year we extended $1.5 billion (as part of the trade facility program), and this year we are looking to between $1.5 billion and $2 billion," he said.