|Oene Marseille||Emir Nurmansyah|
In response to Rupiah's rapid decline in value, the central bank of Indonesia, Bank Indonesia (BI), has issued a series of regulations requiring that certain documentation be produced in foreign exchange transactions against Rupiah above a certain threshold.
The documentation must show the underlying transaction necessitating the foreign exchange. Underlying transactions accepted by BI include the trade of goods and services, both domestic and international. BI also accepts investments in the form of direct investment, portfolio investment, loans, capitals, or other investments as qualified underlying transactions necessitating the exchange.
However, BI does not deem placement of funds in banks in the form of savings or time deposits as a qualified underlying transaction. Fund transfer between companies and undrawn credit facilities are not deemed as qualified underlying transactions within the BI rules either.
Initially, the threshold requiring proof of an underlying transaction is set at $100,000 per month per customer for spot transactions where Rupiah is being sold. The threshold for derivative transactions where Rupiah is being sold is also set at $100,000. The threshold for forward or option transactions where the foreign currency is being sold is set at $1,000,000 per customer per month.
The threshold has been adjusted on numerous occasions. Currently, the threshold is set at $25,000 per month per customer for spot transactions for the sale of Rupiah. The threshold for forward transactions where the foreign currency is being sold is set at $5,000,000. The threshold for option transactions where the foreign currency is being sold is set at $1,000,000.
The threshold for derivative transactions where Rupiah is being sold remains at $100,000.
Oene Marseille and Emir Nurmansyah
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