• Regulation of Bank Indonesia Number 20/16/PADG/2018 on Foreign Exchange Transaction against IDR between Bank and Domestic Party
Newsletter:

Regulation of Bank Indonesia Number 20/16/PADG/2018 on Foreign Exchange Transaction against IDR between Bank and Domestic Party

18 September 2018

Improvement of Regulation regarding Foreign Exchange Transaction against IDR between Bank and Domestic Party

The new regulation is an improvement of the implementation rules of Bank Indonesia Regulation No. 18/18/PBI/2016, which is SE BI 18/34/DPPK regarding Foreign Exhange Transaction against IDR between Bank and Domestic Party.

Coverage of the Regulation

The new regulatiuon covers examples of derivative master agreement contracts in Indonesia, call spread transactions, underlying tax amnesty, methods of transaction settlement, details  of the underlying transaction documents, details of supporting documents, time of submission of underlying transaction documents and supporting documents, and procedures for calculating sanctions.

The new regulation is related to the minimum limit of foreign exchange transactions (hedging) that can be done through BI, to reach wider business actors. In this case, BI lowered the minimum transaction value, from the previous USD 10,000,000 to USD 2,000,000. The new lower minimum limit, it is expected that it could deepen the market reach of exporters and other bank customers.

The new regulation is a form of adjustment from the increase in BI's benchmark interest rate, in which the Bank Indonesia Board of Governors' Meeting on August 14-15, 2018 decided to raise Bank Indonesia (BI) 7-day Reverse Repo Rate or the benchmark interest rate by 25 basis points (bps) to 5.50 percent. Bank Indonesia also raised the Deposit Facility interest rate by 25 bps to 4.75 percent and the Lending Facility by 25 bps to 6.25 percent.

The new regulation also stated that the maximum purchase of foreign currency against IDR by the customers to the Bank without underlying transactions is as follows:

  • 25,000 or equivalent per month per customer through Spot Transactions; and
  • or equivalent per month per customer through Foreign Exchange Derivative Transactions against Standard IDR (plain vanilla) through Forward Transaction and options Transaction.

The changes introduced by the new regulation also impact clients who submit intercompany loan documents or cash flow projections as supporting documents and the summary of the changes are:

SE BI 18/34/DPPK

Regulation of BI No. 20/16/PADG/2018

Intercompany loan can be used as supporting document and there is no minimum tenor and repayment period requirement

Intercompany loan agreement can be used as supporting document as long as the loan has a minimum tenor of one month AND a minimum repayment period of one month from the draw-down date

The cash flow projections for the purpose of international trade (export import) can be used as the supporting document. There is no additional supporting document or information required

If the cash flow projection is used, the bank is required to work with clients to collect and/or assess the following:

  1. Additional supporting documents e.g. invoices, contracts, memorandum of understanding, or other document that relevant
  2. Relevant historical data at least from the previous 1 year to support the projections, and
  3. Positive customer track record

 

 

Effective Date

The new regulation’s changes are effective per August 15, 2018.

For more information how BDO in Indonesia can help you in planning and navigate this major change, please contact our technical team at:

corsec.helpdesk@bdo.co.id