government surplus / Cabinet Secretariat of the Republic of Indonesia

Cabinet Secretariat of the Republic of Indonesia

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Government Set Surplus, Deficit and Liquidity Level of Deposit Insurance Corporation

Institution-Guarantee-Deposit With consideration in order to optimize the implementation of duties and functions of the Deposit Insurance Agency (LPS) in order to support the maintenance of financial system stability, on December 4, 2017, President Joko Widodo has signed Government Regulation No. 49 of 2017 on Surplus and Liquidity Level The Deposit Insurance Corporation as well as the Government Loan to the Deposit Insurance Corporation (link: PP No. 49 of 2017).

According to this PP, the surplus of LPS represents the excess of the income and expenses of LPS recognized based on the actual method in accordance with Indonesian financial accounting standards, calculated after deducting the income tax.

"The intended surplus shall be obtained from the results of operational activities for 1 (one) year, which are allocated as follows: a. 20% (twenty percent) for the Reserve Destination; and b. 80% (eighty percent) is accumulated as a Guaranteed Reserve, "reads Article 2 paragraph (3) of this PP.

The intended Destination Reserves, pursuant to this Government Regulation, are used to inter alia: a. capital expenditures of LPS in the form of replacement or renewal of fixed assets having a useful life of more than one year; and b. purchase of office supplies.

The Guaranteed Reserve is used to cover the deficits incurred to meet the obligations in the future in order to carry out the duties and authority of LPS.

Mentioned in this PP, in the event that the accumulation of Guaranteed Reserve has exceeded the target level of 2.5% (two point five percent) of total deposits in all Banks, the surplus portion referred to is Non-Tax State Revenue (PNBP).

"LPS shall calculate and deposit PNBP as referred to in the State treasury no later than the end of June of the following year after the fiscal year ends," reads Article 4 paragraph (4) of this PP.

In the event that the IDIC does not perform the obligations as referred to by the LPS is subject to sanctions in accordance with the provisions of the legislation in the field of non-tax revenues.

DeficitIn this regulation, the LPS deficit in 1 (one) year is calculated as a deduction for the accumulation of Guaranteed Reserve. In the event that the Guaranteed Reserve is insufficient to cover the deficit as intended, the Guaranteed Deposit is supplemented with part or all of the accumulated Reserve Reserves not yet used by LPS.

"In the case of Reserve Reserves and Reserve Objectives are insufficient to cover the current deficit, the remaining deficit is calculated as a deduction of LPS capital," reads Article 5 paragraph (4) of this PP.

In the case of LPS capital amount is less than the initial capital as stipulated by law, according to this regulation, LPS shall notify the lack of initial capital to the Government. Furthermore, the Government with the approval of the House of Representatives closes the initial LPS capital shortage as intended.

Liquidity Level

LPSiditas LPS, according to this PP, is the ability of available financial resources to meet the funding needs required by LPS.

The financial resources referred to include: a. cash and cash equivalents; b. cash expected to be obtained from: 1. Acceptance of deposit insurance premiums; 2. Acceptance of investment returns; 3. Investments that are due; 4. Sale of investment by giving back agreement; 5. The disposal of investments in the form of securities issued by Bank Indonesia and / or SBN not yet due to any party other than the government; and 6. Other sources.

While the required funding requirements include: a. payment of guarantee claim; b. settlement or handling of the Bank fails; and c. payment of office operations.

"In the case of the Deposit Insurance Corporation experiencing liquidity difficulties, it can obtain loans from the government," reads Article 10 of this PP.Therefore, according to Article 12 of this Regulation, LPS shall convey the liquidity level information to the Minister periodically or at any time as necessary.

In this regulation, in the event that the Minister approves the loan application of the Deposit Insurance Corporation, the Minister shall allocate the loan as referred to in the APBN Draft according to the prevailing mechanism.

Further provisions concerning procedures for budgeting, disbursement and liability of the Government to the Deposit Insurance Corporation shall be regulated by a Ministerial Regulation.

"This Government Regulation shall come into force on the date of promulgation," read Article 30 of Government Regulation No. 49 of 2017, which has been enacted by Minister of Law and Human Rights Yasonna H. Laoly on December 7, 2017. (Pusdatin / ES)