BI REGULATION ON RUPIAH AND FOREIGN CURRENCY RESERVE REQUIREMENTS
Bank Indonesia issued, on 4 October 2010, Regulation No. 12/19/PBI/2010 regarding Rupiah and Foreign Currency Statutory Reserve Requirements (Giro Wajib Minimum or GWM') for Commercial Banks (“Regulation”).
In the Regulation’s preamble, Bank Indonesia explains its rationale behind the issue of the Regulation, which could be summed up as: (i) inflation pressure and liquidity excess which if not controlled may cause a rise in the inflation; and (ii) the need to maintain monetary stability as well as the financial sector’s stability by effectively managing the liquidity excess.
The required statutory reserve (or GWM as it is best known) may be made in Rupiah and in foreign currencies if the bank is a foreign exchange bank. GWBs in Rupiah comprise Primary Reserves, Secondary Reserves, and Loan to Debt Ratio ('LDR') Reserves.
The primary and secondary reserves are set as 10,5% of the banks’ Third Party Fund whereas foreign currency exchange reserves are set as 1% of the banks’ foreign exchange Third Party Fund. For the LDR Reserves, the Regulation stipulates a separate formula. The stipulated percentages may be changed by Bank Indonesia from time to time. Chapter IV of the Regulations contains technical details regarding GWM calculations.
Commercial banks must maintain the required GWMs on a daily basis, and must submit periodical reports to Bank Indonesia. For the purposes of their GWMs, the banks must open an account with Bank Indonesia. Bank Indonesia will pay interest on a certain proportion of the GWM amount. Chapter VII of the Regulation regulates the sanctions for the banks’ failure in fulfilling the obligations set forth in the Regulation.
The Regulation revokes the earlier regulation on the same subject matter, being Bank Indonesia Regulation No. 10/19/PBI/2008 (as amended), and will come into force on 1 November 2010. (by: Hamud M. Balfas).