Bank Indonesia Syariah Certificates

This Regulation, No. 10/11/PBI/2008, has been issued within the framework of BI's monetary policy and control powers, particularly with a view to reaching and maintaining stability in the value of the Rupiah. This power allows for monetary control to be undertaken using a

variety of instruments including Syariah based instruments such as commercial paper and bonds.

The specific instrument in this Regulation is the Bank Indonesia Syariah Certificate (Sertifikat Bank Indonesia Syariah / SBIS). The SBIS is to be traded on the open market and as such BI has deemed that the regulatory framework in this regard needs to be perfected to ensure compliance is achieved.

SBIS are to utilize Ju 'alah contracts. A Ju 'alah contract is essentially a unilateral contract that covers payments for specific services. The SBIS are to be denominated in Rupiah and each unit is IDR 1 million. The validity period for SBIS ranges from a minimum of 1 month to a maximum of 12 months. The SBIS are scripless and cannot be traded on the secondary

market. The SBIS are to be issued via an auction process.

The entities that may hold SBIS are either General Syariah Banks (Bank Umum Syariah / BUS) or Syariah Business Units (Unit Usaha Syariah / UUS). However, both the BUS and the UUS must satisfy certain conditions before they can validly hold SBIS. This includes having an acceptable Financing to Deposit Ratio (FDR). In order to participate in the SBIS auction and comply with the other prevailing conditions the BUS and UUS must have the relevant accounts in order to settle any SBIS transactions in which they participate.

The Regulation includes sanctions. Where a SBIS transaction is cancelled as a result of the BUS or UUS failing to fulfill their obligations then the cancellation is to be in writing and there is a fine of 1/1000 of the total value of the transaction up to a maximum fine of IDR 1 billion. Where the BUS or UUS has three failures within a six month period there are additional sanctions that are to be imposed including suspending the relevant BUS or UUS from participation in future SBIS auctions.

This Regulation repeals and replaces BI Regulation No. 6/7/PBI/2004 which dealt with the issue of Wadiah Certificates. All Wadiah certificates issued under the previous regulation remain valid until their respective due dates. The Regulation is explicit that all outstanding Wadiah certificates are to be deemed to be SBIS for the purposes of reading the Regulation.

The Regulation has been in force since 31 March 2008.