OJK Supports Short-Term Foreign Funding Management By Banking RI

Chief Executive of Banking Supervision of the Financial Services Authority (OJK) Dian Ediana Rae. (Photo: Doc. Antara)

JAKARTA - OJK Banking Supervision Chief Executive Dian Ediana Rae said that OJK supports the management of short-term foreign funding by national banks while still prioritizing the principle of prudence or prudential principle.

"The Financial Services Authority supports the management of foreign bank funding in the short term with the precautionary principle so that it can be implemented optimally where the potential risks arising from these activities can be properly mitigated," said Dian in Jakarta, quoted from Antara, Tuesday, July 16.

Dian said that bank foreign debt in foreign currency (foreign currency) is one of the short-term sources of funding for national banking.

In carrying out the intermediation function, Dian views that the short-term source of foreign funding can be used by banks to optimize the financing of various business activities in the midst of high-for-longer global interest rates and expectations of exchange rate depreciation.

Cash inflow abroad, added Dian, is considered to be able to help to support national economic growth in accordance with its capacity.

Previously reported, Bank Indonesia (BI) took steps to improve its macroprudential contradictical policy on the Bank Overseas Funding Ratio (RPLN) to strengthen bank foreign funding management according to the needs of the economy in effect starting August 1, 2024.

This was conveyed by BI Governor Perry Warjiyo in the Announcement of the Results of the BI Board of Governors Meeting in June 2024 in Jakarta on June 20.

The policy includes new arrangements regarding the definition and scope of foreign funding for the calculation of the maximum limit of bank foreign funding or RPLN threshold.

The RPLN policy regulates the maximum short-term foreign funding limit for bank capital (threshold RPLN) of 30 percent with a contradictive parameter of 0 percent or plus minus 5 percent set based on BI forward looking assessments of financial cycles, external risks, and the risk of financial system stability (SSK).

The current RPLN determination is 30 percent with a countercyclical parameter of 0 percent, which will then be reviewed regularly every six months or at any time if necessary.