BI, OJK, IDX And 8 Official Banks Launch Central Counterparty

JAKARTA - Bank Indonesia (BI), the Financial Services Authority (OJK), the Indonesia Stock Exchange (IDX) and market players consisting of 8 banks namely Mandiri, BRI, BNI, BCA, CIMB Niaga, Danamon, Maybank, and Permata officially launched the Central Counterparty (CCP) on Monday, September 30.

BI Governor Perry Warjiyo said that this CCP is one of the legacy that demonstrates our shared commitment in deepening the domestic money market and foreign derivatives.

"Today, God willing, the Central Counterparty (CCP) will officially operate specifically for the Exchange Value Interest Rate (SBNT) and close out netting. This is a legacy, let's give it to our people," said Perry, at the launch of CCP Pura, Monday, September 30.

Perry said that the launch of CCP was also part of the implementation of the financial market development and deepening strategy that we formulated through the KKSK and as a manifestation of the mandate of the Financial Sector Development and Strengthening Law (UU P2SK) and blue print deepening and strengthening the money market.

According to Perry, with the implementation of CCP, the risk of foreign exchange and money market transactions can be minimized because it becomes centralized.

"Because the risk between parties is centralized by close out netting, of course we can minimize the risk between parties. This is a very high credit risk," he said.

He hopes that as the close out netting is expected to increase in volume margins quickly and this will become a legacy for the money market, the foreign exchange market will continue to grow.

To note, the formation of CCP has been regulated in Bank Indonesia Regulation (PBI) Number 21/11/PBI/2019 concerning the Implementation of Central Counterparty Transactions for Derivative Interest Rates and Exchange Rates for Over the Counter.

The formation of CCP was carried out in a joint consortium including Bank Indonesia together with PT Bursa Efek Indonesia (IDX), PT Kliring Penjaminan Efek Indonesia (KPEI) and 8 banks namely Mandiri, BRI, BNI, BCA, CIMB Niaga, Danamon, Maybank, and Permata.

The CCP will become a Financial Market Infrastructure Agency (IPK) that carries out central clearing functions in money market transactions and foreign exchange markets (PUVA) by at the same time placing itself as a guarantor among the parties who make transactions.

BI previously emphasized the four benefits of CCP attendance in Indonesia for Indonesia.

First, increasing the volume of money market transactions and the foreign exchange market.

Second, reduce credit risk and third, higher price formation or interest rates.

Finally, CCP can reduce government debt costs.

On the same occasion, Chairman of the OJK DK Mahendra Siregar emphasized that his party fully supports the investment in capital carried out by eight banks in Indonesia against PT Kliring Penjaminan Efek Indonesia (KPEI) as CCP.

"With capital participation by Bank Indonesia, the IDX, it is also expected to strengthen CCP development so as to increase market confidence and trust," he said.

Mahendra menyampaikan OJK, telah melakukan koordinasi implementasi CCP dengan BI, BEI dan KPEI untuk memastikan synchronisasinya dengan aturan baku di internasional.

In addition, the OJK has also prepared regulations for changes to POJK regarding public bank capital obligations and issuing several circulars, a.l. margin requirements for foreign exchange transactions that are not screened and the calculation of bank exposure capital for CCP.

"The three OJK rules are to support OTC derivatives reform, including the implementation of transactions through CCP," he said.

Mahendra said that the existence of CCP is expected to have a positive impact on market players, especially the banking sector which will become a member of CCP.

"The formation of CCP is a big step that is expected to bring broad benefits to the Indonesian financial services industry," he explained.

Menurut Mahendra, kehadiran CCP memiliki peran penting untuk mengurangi risiko dan meningkatkan efisiensi transaksi keuangan, CCP akan meningkatkan kepercayaan dan partisipasi pasar, sekaligus mendukung stabilitas sistem keuangan.