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The DIA and the Blanket Guarantee Scheme

The Indonesian banking system was reformed with the enactment of Law no 3 of 2004, which amended Law no 23 of 1999 concerning the Bank of Indonesia and Law no 10 of 1998 which amended the Law no 7 of 1992 concerning Banking Law. In compliance with Article 37B of the Banking Law which oblige banks to insure public funds and in line with the Bank of Indonesia's function as lender of last resort, and also the government's intention to create an Indonesia financial safety net, the government created a Deposit Insurance Agency (DIA), which took over the task of the Indonesian Bank Restructuring Agency (IBRA) as the executor of the government's blanket guarantee scheme under Presidential Decree no 26 of 1998 as amended by Presidential Decree no 17 of 2004 concerning guarantee on payment obligation of commercial banks and Presidential Decree no 193 of 1998 concerning guarantee on payment obligation of rural banks.

DIA was established pursuant to Law no 24 of 2004 and was effectively operating on September 22 2005. In conducting its functions and authorities, DIA acts as an independent, transparent, and accountable legal entity responsible directly to the President. The highest body of DIA is the Commissioner Board which is also authorized to issue implementing regulation for DIA in the form of DIA Regulation and the DIA Circular Letter.

DIA has two functions, to insure customer's savings and to conduct settlement of failing banks. Its authorities cover:

  1. To stipulate and collect premiums;
  2. To stipulate and collect initial contributions from banks;
  3. To manage its assets and liabilities;
  4. To obtain data and information on the banks and their customers without violating banking secrecy;
  5. To conduct reconciliation, verification, and/or confirmation to such data and information;
  6. To stipulate terms and conditions, and rules for payment of claims;
  7. To appoint, empower, and/or assign other parties to act for and on its behalf;
  8. To promote DIA to banks and the public;
  9. To impose administrative sanctions.

Any and all banks operating in Indonesia, which include commercial banks, rural banks and sharia banks except Village Credit Boards (Badan Kredit Desa) are required to become members of DIA. As DIA members, these banks shall pay an initial contribution and half yearly premiums at an equal rate determined by DIA, submit corporate documents and submit a periodic report. DIA shall impose penalties to banks which fail to pay the premiums and to submit the periodic report.

DIA Regulation no 1 of 2005 as amended by DIA Regulation no 1a of 2005 provide several types of savings that DIA insures as follows:

  1. customers' savings in the form of giro, time deposit, certificate of deposit, savings, and/or any other similar forms.
  2. customers' savings in sharia banks in the form of:
    a. giro in the basis of the wadiah principle;
    b. saving in the basis of the wadiah principle;
    c. saving in the basis of the Mudharabah muthlaqah principle or Mudharabah muqayyadah principle with risks covered by the bank;
    d. time deposit in the basis of the Mudharabah muthlaqah principle or Mudharabah muqayyadah principle with risks covered by the bank; and/or
    e. savings in the basis of other sharia principles.

The amount of savings that DIA insures covers the balance as at the date when the related bank's business license is revoked. The balance of each customer in one bank that DIA insures is Rp100,000,000 ($10,990), however to reach this amount DIA shall insure the following amount, which is lowered gradually:

  1. all balances are insured, from September 22 2005 until March 21 2006;
  2. a balance up to Rp5,000,000,000, from March 22 2006 until September 21 2006;
  3. a balance up to Rp1,000,000,000 from September 22 2006 until March 21 2007; and
  4. a balance up to Rp100,000,000 from March 22 2007.

However such an amount could be amended from time to time subject to consultation with the people's representative council (Dewan Perwakilan Rakyat) in the event that:

  • there has been massive amount of fund withdrawal;
  • there has been massive inflation during the last several years; or
  • the number of customers whose savings entirely insured are less than 90% of number of customers of all banks.

DIA still has many challenges to prove its ability to meet the Government's programme of materializing the Indonesia Financial Safety Net and to better protect depositing customers and the banking system in Indonesia.

Tyana Asri Martianti

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