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Ada Pertanyaan? Hubungi Kami Marcell Sihombing, Fathan Qorib/ANT
The OJK’s Executive Chief for Bank Oversight, Mr. Nelson Tampubolon. Photo by: SGP
The Financial Services Authority (OJK) believes that implementing a policy which caps time-deposit interest rates for banks remains essential for the ongoing health of the economy, particularly in relation to Indonesia’s current tax amnesty. According to Nelson Tampubolon, the OJK’s Executive Chief for Bank Oversight, the possibility of a major influx of repatriated assets resulting from the tax amnesty may ultimately lead to unhealthy competition between different banks, which will end up competing with each other to offer more attractive rates. Mr. Tampubolon thus believes that capping time-deposit interest rates is essential in order to maintain a climate of healthy competition between the country’s banks.
“The latest developments as regards the ongoing tax amnesty reveal that a major influx of repatriated assets into Indonesia is currently underway, although we have yet to calculate the exact amounts involved. It is therefore important that banks are prevented from using their interest rates as a way of attracting these repatriated assets, or else a full-scale banking war may result,” Mr. Tampubolon stated in Jakarta on Friday, 19 August 2016.
Indeed, the OJK is already exercising its oversight function in order to set a cap on bank time-deposit interest rates. Specifically, interest rates for deposits amounting more than IDR 2 billion which are deposited in banks categorized as Bank Umum berdasarkan Kegiatan Usaha (“BUKU”) IV have been capped at a maximum of 100 basis points (BPS) above the official Bank Indonesia (“BI”) rate, while BUKU III banks have had their rates capped at a maximum of 75 BPS above the BI rate. Meanwhile, no new cap has yet been set for BUKU I and BUKU II banks, however Mr. Tampubolon asserted that the current cap set for these banks will remain as it is.
“We [the OJK] don't want to make any substantial changes, especially not after the situation starts to settle down, so the cap level will remain the same. The BI Rate is currently set at 6.5% and therefore the cap will be set at 7.25% (for BUKU III banks) and 7.5% (for BUKU IV banks). We intend to maintain the current cap, as the BI Rate is applicable for a full year after all, which is why we will continue to use it as a threshold,” Mr. Tampubolon asserted.
Meanwhile, Muliaman Darmansyah Hadad, the Chair of the OJK’s Board of Commissioners, also ventured an opinion regarding this issue. According to Mr. Hadad, bank liquidity levels have started to show a marked improvement following the influx of repatriated assets which have resulted from the current tax amnesty.
“We [the OJK] are witnessing progress being made every single day, and significant improvements are being made to bank liquidity, savings deposits, loans and third-party funding levels. Moreover, we are seeing reductions in the non-performing loans (NPL) rate,” Mr. Hadad revealed.
Mr. Hadad further emphasized that the lowest point of stagnation within the Indonesian banking sector was reached in May of 2016, when the NPL rate reached 3.1%. The average NPL rate has now fallen back to 3% and, according to Mr. Hadad, the initial increase in the NPL rate was caused by a slowdown in the trading of mining commodities in 2015.
“The slowdown mainly relates to problems within the coal and mining sector which date back to 2015. Indeed, many companies working within the coal industry had to endure the consequences of NPLs due to the slowdown,” Mr. Hadad claimed.
Mr. Hadad lauded the implementation of the current tax amnesty by the government and stated his belief that the policy was making a significant contribution to the improving health of Indonesia’s banking industry. Moreover, a number of other policies recently introduced by the government are also seen as helping to create a more conducive market climate. Mr. Hadad also expressed confidence that the influx of repatriated assets into Indonesian banks as a result of the tax amnesty will ultimately accelerate the development of certain sectors of the economy, including agriculture and housing.
(hs/sp)
Marcell Sihombing, Fathan Qorib/ANT
The OJK’s Executive Chief for Bank Oversight, Mr. Nelson Tampubolon. Photo by: SGP
The Financial Services Authority (OJK) believes that implementing a policy which caps time-deposit interest rates for banks remains essential for the ongoing health of the economy, particularly in relation to Indonesia’s current tax amnesty. According to Nelson Tampubolon, the OJK’s Executive Chief for Bank Oversight, the possibility of a major influx of repatriated assets resulting from the tax amnesty may ultimately lead to unhealthy competition between different banks, which will end up competing with each other to offer more attractive rates. Mr. Tampubolon thus believes that capping time-deposit interest rates is essential in order to maintain a climate of healthy competition between the country’s banks.
“The latest developments as regards the ongoing tax amnesty reveal that a major influx of repatriated assets into Indonesia is currently underway, although we have yet to calculate the exact amounts involved. It is therefore important that banks are prevented from using their interest rates as a way of attracting these repatriated assets, or else a full-scale banking war may result,” Mr. Tampubolon stated in Jakarta on Friday, 19 August 2016.
Indeed, the OJK is already exercising its oversight function in order to set a cap on bank time-deposit interest rates. Specifically, interest rates for deposits amounting more than IDR 2 billion which are deposited in banks categorized as Bank Umum berdasarkan Kegiatan Usaha (“BUKU”) IV have been capped at a maximum of 100 basis points (BPS) above the official Bank Indonesia (“BI”) rate, while BUKU III banks have had their rates capped at a maximum of 75 BPS above the BI rate. Meanwhile, no new cap has yet been set for BUKU I and BUKU II banks, however Mr. Tampubolon asserted that the current cap set for these banks will remain as it is.
“We [the OJK] don't want to make any substantial changes, especially not after the situation starts to settle down, so the cap level will remain the same. The BI Rate is currently set at 6.5% and therefore the cap will be set at 7.25% (for BUKU III banks) and 7.5% (for BUKU IV banks). We intend to maintain the current cap, as the BI Rate is applicable for a full year after all, which is why we will continue to use it as a threshold,” Mr. Tampubolon asserted.
Meanwhile, Muliaman Darmansyah Hadad, the Chair of the OJK’s Board of Commissioners, also ventured an opinion regarding this issue. According to Mr. Hadad, bank liquidity levels have started to show a marked improvement following the influx of repatriated assets which have resulted from the current tax amnesty.
“We [the OJK] are witnessing progress being made every single day, and significant improvements are being made to bank liquidity, savings deposits, loans and third-party funding levels. Moreover, we are seeing reductions in the non-performing loans (NPL) rate,” Mr. Hadad revealed.
Mr. Hadad further emphasized that the lowest point of stagnation within the Indonesian banking sector was reached in May of 2016, when the NPL rate reached 3.1%. The average NPL rate has now fallen back to 3% and, according to Mr. Hadad, the initial increase in the NPL rate was caused by a slowdown in the trading of mining commodities in 2015.
“The slowdown mainly relates to problems within the coal and mining sector which date back to 2015. Indeed, many companies working within the coal industry had to endure the consequences of NPLs due to the slowdown,” Mr. Hadad claimed.
Mr. Hadad lauded the implementation of the current tax amnesty by the government and stated his belief that the policy was making a significant contribution to the improving health of Indonesia’s banking industry. Moreover, a number of other policies recently introduced by the government are also seen as helping to create a more conducive market climate. Mr. Hadad also expressed confidence that the influx of repatriated assets into Indonesian banks as a result of the tax amnesty will ultimately accelerate the development of certain sectors of the economy, including agriculture and housing.
(hs/sp)