Indonesian currency bill forces banks to redraft contracts

Author: | Published: 27 Jun 2011
Foreign banks with onshore operations in Indonesia must redraft contracts to include Indonesian rupiah settlement provisions or risk potential criminal liability.

O’Melveny & Myers’ Singapore-based corporate finance partner Joel Hogarth told IFLR many banks were not yet aware of the contractual risks that could be imposed by Indonesia’s House of Representatives’ new bill on currency.

The Currency Law, which was passed on May 31 and is due to come into effect on June 30, formalises the role of the Indonesian rupiah as legal tender for monetary obligations in Indonesia.

More specifically, it mandates the use of rupiah for settlement of payment obligations in Indonesia.

But the legislation’s broad scope and lack of further clarification from Indonesian authorities has left many uncertain as to what exactly the impact of the new rules will be.

"Much like the passage...