GOVT TO PROTECT BANK CUSTOMERS' MONEY AMID FINANCIAL CRISIS

By Andi Abdussalam
     Jakarta, Oct 11 (ANTARA) - The House of Representatives (DPR) and the government have been holding intensive consultations this week to discuss anticipatory measures in the face of the on-going global financial crisis that have forced the Indonesian Stock Exchange (BEI) to close its trading activities since Wednesday.
     Among the issues the DPR and the government had discussed was how to protect bank customers' money and to prevent a rush that could plunge banks into a deep crisis like the one in the 1997 financial meltdown.
     The consultations were made following calls by Bank Indonesia (BI/the central bank) and a political party to provide a security guarantee for about 77 million accounts with a total deposit of about Rp1,350 trillion in the country.
     "The government has submitted a draft regulation in lieu of law (Perpu) to the House of Representatives (DPR) that would make the government, Bank Indonesia and Savings Guarantor Institution (LPS) able to react and respond to problems that may arise in a situation like in the current crisis," Finance Minister Sri Mulyani said.
     On Friday, the minister met with House Speaker Agung Laksono. In the 45-minute closed-door meeting, the minister discussed the issuance of a Perpu on efforts to anticipate a worsening of the global crisis.
     Earlier, the National Mandate Party (PAN) called on the government to provide a security guarantee for about 77 million deposit accounts by raising the upper limit of amount of funds in banks which would receive a security guarantee from Rp100 million to Rp2.5 billion per account.
     "There are about 77 million deposit accounts in the country, including that of the Indonesian Retailers Bond (ORI)," PAN Secretary General, who is also PAN faction chairman in the House of Representatives (DPR), Zulkifli Hasan, said.
     He said that based on PAN studies, about 90 percent of the 77 million accounts belonged to depositors with deposit money less than Rp2.5 billion each.
     He said that account owners who were generally individuals had begun to become anxious because the government had not yet taken a firm step in providing a security guarantee and protection for their money.
     The Savings Guarantor Institution (LPS) has so far provided a security guarantee for a maximum deposit of Rp100 million for each bank customer, while the guarantee interest rate was 9.25 percent.
     Bank Indonesia acknowledged that the upper limit of bank customers' funds that should be guaranteed should be increased in order to provide certainty for bank customers amid the global financial crisis.
     "We are now considering it because several countries have raised their guarantee funds such as Britain from 35,000 pounds sterling to 50,000 pounds sterling for individual customers and up to 100,000 pounds sterling for companies," BI Senior Deputy Governor Miranda Gultom said.
     She said in the current global financial crisis almost all countries had adopted various polices to temporarily ease liquidity restrictions in order to restore the public's confidence.
     "Thus, the public will feel secure about their funds as banks have a guarantee. We have made preparations for raising the amount of guarantee funds," she added.
     On the upper limit of deposits that would be given security guarantee, Finance Minister Mulyani said it would be decided after the issuance of the government regulation in lieu of law on the current financial crisis.
     She said the government along with Bank Indonesia, the LPS and the Forum for Stabilization of Financial Sector (FSKK) and the Capital Market and Financial Institution Supervisory Board (Bapepm-LK) were just evaluating various legislations needing a revision  to adjust with the current crisis.
     The Perpu would contain provisions linked to mechanism for and amount of guarantee on deposits, BI mechanism and criteria as well as requirements for supporting liquidity in the banking sector including the financial sector safety net.
     In order to reduce uncertainty and to prevent panic among the public, the central bank is also cooperating with the Ministry of Finance in maintaining the stability of the country's financial system by relaxing the minimum reserves requirement (GWM) and providing funds for bank reproduction.
     The LPS chief executive, Firdaus Djaelani, meanwhile said that his side could not determine the amount of deposit to be guaranteed as it would be determined by the government.
     "It is not impossible to raise the amount of deposit to be guaranteed by 100 percent in a situation like in the current crisis to maintain public confidence and to avoid a rush, and later lower it in stages after the situation becomes normal again," he said.
     Although no sign of a rush has been seen the LPS has caught the presence of fear for possible shifting of funds from small to big banks.
     "And therefore they have offered high interest rates and better services," he said.
     Worries about savings at banks began rising on Wednesday when trading on the Indonesian Stock Exchange was suspended as the market became irrational causing the main index to plummet more than 10 percent.
     The BEI authority decided to shut share trading because the composite index had tumbled to 168.052 points or 10.38 percent to the level of 1,451,669 or the lowest level since September 2006.
     Thursday through Friday and Saturday trading remained closed after the Dow Jones index at the New York Stock Exchange had dropped 678.91 points to 8,579.19 points, or to the lowest level since 2003.
     The BEI is likely to resume trading activities on Monday (Oct. 13) after the government has prepared the necessary infrastructure, the bourse's chief, Erry Firmansyah, said.
     "We will see (how things develop). God Willing, we will reopen the market on Monday, while the government is preparing all needed infrastructure today (Friday)," he added. (T.A014/A/HAJM/B003)11-10-2008 19:24:09