Banking Policy

Bank Indonesia (BI) outlined eight new initiatives for 2007 in the banking sector:

•Become a catalyst in banking intermediation;
•Reshape the role of state-owned banks by better coordination with government;
•Facilitate bank mergers;
•Guarantee smooth bank intermediation;
•Issue guidelines/policies on the optimal role of foreign banks;
•Develop markets and financial instruments;
•Apply the shari’a banking acceleration program; and
•Carry out a linkage program of the people’s credit banks with rural communities to improve economic participation at the grass-root level and support the management of distortions in the local goods market.

Initiatives for Capital Market Development

In July 2006, the government offered its first retail bonds to encourage wider investor participation and to help finance development. Retail bonds are sold directly to individual investors in lots of IDR5 million (USD551) compared with the previous bond minimum purchase of IDR1 billion (USD110,000). The retail bonds have a 3-year maturity and carry a 12.05% fixed coupon rate. The government plans three retail issuances in 2007, in the first 28 March, with the others in June and September.

In January 2007, Finance Minister Regulation No 147/PMK.07/2006 was issued, outlining procedures for issuing local currency municipal bonds on the domestic capital market. Provincial task forces will prepare the bond issuance.

Starting April 2007, BI will issue about IDR3–4 trillion in 12-month Treasury Bills (T-Bills) each month, to improve liquidity at the short-end of the yield curve. BI plans to issue 6-month and 9-month Sertifikat Bank Indonesia (SBI) after its issuance of the new T-Bills, which replace existing SBIs.

Bank Indonesia also plans to issue its first shari’a T-bonds in the second half of 2007, after the bill on shari’a bonds is approved by parliament.

The Jakarta Stock Exchange (JSX) and Surabaya Stock Exchange (SSX) are scheduled to merge in 2007.