Regulations concerning bond issuances for issuers and public companies are specified in the Capital Market Law.
Government Debt
MOF has the authority to issue government debt securities with prior approval from the People's Legislative Assembly. Bank Indonesia (BI), as the implementing agency, stipulates and administers the regulations regarding the issuance, sale, and purchase of these debt instruments. A copy of the Capital Market Law and issuing and tender procedures for government securities can be found by following the web link provided below.
Corporate Debt
Corporate debt securities must be rated by the Credit Rating Indonesia (PEFINDO) and participants must be registered with the Capital Market and Financial Institution Supervisory Board (BAPEPAM-LK) before the securities can be issued. A bond prospectus also must be submitted to BAPEPAM-LK for registration. Additional requirements are included in the registration document, which is linked below.
The Indonesia Stock Exchange (IDX) has developed a flowchart of the bond issuing process, including listing requirements. The Indonesian Central Securities Depository (KSEI) will register a bond in the Central Depository and Book-Entry Settlement System after the registered company has listed the bond and obtained a bond code from IDX. More information can be found by following the links below to the KSEI and IDX websites.
Asset-Backed Securities
The issuance of asset-backed securities (ABS) requires that the investment manager submit a registration statement to the Capital Market and Financial Institution Supervisory Board (BAPEPAM-LK), including a collective investment contract, legal opinion, proposed final prospectus, and rating documents.
The Capital Market and Financial Institution Supervisory Board (BAPEPAM-LK) oversees licensing and registration of capital market participants and professional service providers. Bank Indonesia (BI), in conjunction with the National Shari’a Board, oversees licensing regulations for shari’a operations. A comprehensive explanation of licensing procedures can be found by following the links provided below.
Accounting Standards
In general, banks and institutional investors are required to market the securities held for trading and available for sale. Securities classified as “held-to-maturity” are presented on balance sheets at their initial cost less amortization. Unrealized gains and losses on the fair-value changes are reflected in financial statements.
Securities that are actively traded on the exchanges—at either fair-market value or mark-to-market value—are generally determined by closing prices on securities exchanges. Fair value that cannot be estimated is presented at initial cost.
Investment Funds
Investment funds use mark-to-market value to calculate their net asset values as stipulated by the Capital Market and Financial Institution Supervisory Board (BAPEPAM-LK). The closing prices from the securities exchange are used to indicate the fair-market value for securities. Other critical provisions, including determination of the fair-market value of asset-backed securities, are included in BAPEPAM-LK Rule No.IV.C.2.
Capital Adequacy Regulations
Financial institutions are subject to a minimum capital requirement to comply with Bank Indonesia (BI) Regulation No. 5/12/PBI/2003. Under this regulation, banks must satisfy risk-based capital requirements that use mark-to-market practices to measure market risk. Capital adequacy regulations issued in Indonesia are moving towards compliance with Basel II standards.
The Center for Government Bond Management at the Ministry of Finance (MOF) regulates the taxation of bonds. The Directorate General of Taxation regulates the tax treatment of asset-backed securities.
MOF has issued Government Regulation No. 6 to set tax schemes for interest and discount on government and corporate bonds that are traded or reported on the Indonesia Stock Exchange (IDX). These taxes are summarized in the following table.