Bank Indonesia and Foreign Exchange

The ongoing global financial crisis and stock market turmoil is placing increasing pressure on the Rupiah. In order to maintain stability in the value of the Rupiah, Bank Indonesia believes that it can reduce the pressure on the Rupiah by providing certainty of supply of foreign exchange. The Regulation is to target domestic corporations and sets out a list of comprehensive rules that must be followed by banks seeking to enjoy the benefits that derive from a secured or certain supply framework.

The foreign exchange referred to throughout the Regulation is United States Dollars (USD). The access to the enhanced certainty envisages that all requests are based on an underlying need for the Indonesian economy. Underlying need is defined in Article 3(3) of the Regulation. The Regulation also defines what is prohibited in terms of underlying.

The Regulation requires that Banks submit a request to BI with regards to fulfilling their foreign exchange needs for domestic corporations. The Regulation is also explicit that the Banks cannot submit any request for foreign exchange supply where the recipient is going to be a domestic corporation that is associated with the bank making the request.

BI is going to set up a window that is to be open every work day from 15.00 to 15.45. All requests are to be submitted through this window at the proscribed times.

There are sanctions for breaches of the prevailing provisions. These include, among others, written warnings and administrative fines. An administrative fine is set at 10% of the nominal value of the breaching transaction. This fine can be in a maximum of IDR 20 billion in any one month period.

The Regulation has been in force since 15 October 2008.