The reality of the current financial crisis that is afflicting the world economy is that some banks are going to run into serious liquidity problems and these problems have the potential of having a severe negative impact, not only on the banks but on the financial sector as a whole. Therefore, there is a pressing need to ensure that the liquidity of banks is guaranteed within the framework of preventing of any crisis and handling of one if it should arise.
Consequently, Bank Indonesia (BI) has issued Regulation No. 10/31/PBI/2008 that states that BI is to function as a lender of last resort in terms of providing emergency funds to general banks as a means of averting any potential banking crisis.
The Emergency Fund Facility (Fasilitas Pembiayaan Darurat / FPD) is to be provided to any general bank that is suffering a systemic liquidity problem. The FPD is to originate from BI but will be guaranteed by the Government. The funds themselves are to be provided by the Government.
Banks are under an obligation to be diligent and exercise principles of due care in the conduct of their business, particularly with respect to ensuring adequate liquidity. If a general bank does get into liquidity difficulties then it is under an obligation to source funds in order to overcome the liquidity problem. However, if the bank is unable to source sufficient or suitable funds from elsewhere then it is to notify BI and submit an application for FPD support.
The Regulation lists in Articles 7 and 8 how an application for FPD support is to be submitted. For example, the documents that must be attached to an application include: a statement letter for bank executives, documents supporting the amount requested, an asset list of the bank, and Personal Guarantees of the Shareholders, among others.
The Regulation sets out how the FPD is to be repaid.
Once an FPD is granted, BI with the Minister of Finance has 30 calendar days to report the granting of the FPD to the House of Representatives.
The Regulation repeals and replaces Regulation No. 8/1/PBI/2006.
The Regulation has been in force since 18 November 2008.
The reality of the current financial crisis that is afflicting the world economy is that some banks are going to run into serious liquidity problems and these problems have the potential of having a severe negative impact, not only on the banks but on the financial sector as a whole. Therefore, there is a pressing need to ensure that the liquidity of banks is guaranteed within the framework of preventing of any crisis and handling of one if it should arise.
Consequently, Bank Indonesia (BI) has issued Regulation No. 10/31/PBI/2008 that states that BI is to function as a lender of last resort in terms of providing emergency funds to general banks as a means of averting any potential banking crisis.
The Emergency Fund Facility (Fasilitas Pembiayaan Darurat / FPD) is to be provided to any general bank that is suffering a systemic liquidity problem. The FPD is to originate from BI but will be guaranteed by the Government. The funds themselves are to be provided by the Government.
Banks are under an obligation to be diligent and exercise principles of due care in the conduct of their business, particularly with respect to ensuring adequate liquidity. If a general bank does get into liquidity difficulties then it is under an obligation to source funds in order to overcome the liquidity problem. However, if the bank is unable to source sufficient or suitable funds from elsewhere then it is to notify BI and submit an application for FPD support.
The Regulation lists in Articles 7 and 8 how an application for FPD support is to be submitted. For example, the documents that must be attached to an application include: a statement letter for bank executives, documents supporting the amount requested, an asset list of the bank, and Personal Guarantees of the Shareholders, among others.
The Regulation sets out how the FPD is to be repaid.
Once an FPD is granted, BI with the Minister of Finance has 30 calendar days to report the granting of the FPD to the House of Representatives.
The Regulation repeals and replaces Regulation No. 8/1/PBI/2006.
The Regulation has been in force since 18 November 2008.
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