6 New Rules of BI, foreign capital was controlled

Bank Indonesia (BI) has released a new policy package that consists of six terms, either in the form of the addition of some provisions of the instrument as well as improvements in the money market and foreign currency rupiah.

“This policy package is not an exchange control and remain in the corridor of free foreign exchange system that consistently adopted in Indonesia,” said Acting Governor of BI Nasution in a press statement on Building the BI, Jalan MH Thamrin, Jakarta, Wednesday, June 16, 2010.

Six new provisions BI consists of widening interest rate corridor Interbank Money Market (interbank money market) will diimplemntasikan overnight on June 17, 2010, the application of one-month minimum holding period of securities BI (SBI) (July 7, 2010), the addition of non-monetary instruments securities in the form of term deposits (July 7, 2010).

Three other provisions are perfecting the provisions regarding the net open position (NOP) effective July 1, 2010, issue of SBI of nine and 12 months, and the application of three-party mechanism repurcahse (Repo) Government Securities (SUN), which will begin to implement on-year 2011.

In the explanation of BI mentioned that widening the interbank money market interest rate corridor of O / N filed by adjusting the interest rate instrument to the standing facilities BI’s interest rate (BI Rate).

Repo interest rate O / N (the standing lending facility) is upgraded from the BI rate + 50 basis points (bps) to the BI Rate plus 100 bps and the interest FASBI O / N derived from the BI rate – BI Rate 50 bps – 100 bps.

“This policy was pursued in order to more berkebang interbank money market, so the bank can meet its short-term liquidity kebutuhkan through the first inter-bank transactions,” said Nasution.

On completion of NOP regulations, BI decided to eliminate the provisions limiting balance sheet on a maximum of 20 per cent of total fixed capital and a maximum of 20 NOP percent of the capital.

For the BI requirements regarding ownership of SBI, SBI Darmin explained that the owner shall hold his ownership of SBI at least for one month or 28 days.

During that period, the owner of SBI are not allowed to release its ownership of SBI either outright or repo to another party unless the repo to BI.

BI also plans to issue monetary isntrumen in the form of term deposits as an instrument of control without the underlying liquidity of securities, dpindahtangankan but can not be withdrawn prior to maturity under certain conditions.

To the provisions of the issuance of new SBI, BI plans to do so through an auction mechanism that was first launched on the second Sunday in August 2010 for nine months and SBI tenor September for the second Sunday of SBI tenor of 12 months.

Finally, the implementation mechanism of SBN Repo tripartiy likuidtas management activities by the BI through reverse repo transactions with the underlying asset SBN obtained from the parties stipulated been like Pension Funds and Insurance.

Nasution confirmed that all of the policy is not intended to cover the opportunities of foreign investors obtain investment instruments issued by the BI. “We’re not closing the opportunities of foreign investors, we do not run the capital controls, they calculate that there are more thorough and long,” he said.
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