Tuesday, May 11, 2010

LPS may declining deposit insurance

The Deposit Insurance Corporation (LPS) has studying the option to cut down the maximum deposit into IDR250-300 million as from the current IDR2 billion.
The plan is part of the normalization or exit strategy from the crisis on financial market situation.
CEO of LPS Firdaus Djaelani said the institution has currently studied to normalize the insurance deposit in its bid to lessen the limited insurance cost.
"There is standards and regulations among worldwide LPS association. The developing country normally is 5-6 times of per capita income. If now Indonesia per capita income is about US$3,000, the insurance deposit could range at IDR250-300 million," he said yesterday.
He has not had the right time to have normalization here as it should studies global and regional economy development.
The implementation should be decided by the government upon the Legislative approval.
Now, with IDR2 billion insurance deposit it has covered 61 percent of the amount of third party funds at bank per March 2010 worth IDR2,000.62 trillion. If seen from the account, it has covered 99.8 percent.
"when our economy is back to normal, we plan to cut down the insurance deposit here."
The company will either regulate the insurance deposit rate to maintain stability and competition among banks and LPS balance sheet. National bank is not efficient yet and thus interest rate should have regulation.
So, LPS will tightly calculate the deposit insurance interest rate by including the whole components received by the depositors such as cashback in cash or other precious goods.
"Cashback has broad meaning. It could be fresh money. But what about giving Blackberry? It is the same as giving IDR4 million cash. Similarly, it is the case with prizes. If every month customers get prizes, it is the same as cashback," he said.
So far, LPS keeps studying the cashback prizes regulation given from banks to their customers.
This issue still needs coordination with BI and banks.
Firdaus said some bankers offer rewards to customers who exceed the insurance interest rate requirement through cashback offering.
Based on LPS data, bank customers deposit distribution per March 2010, there are a large amount of funds are out of insurance and this is still dominant.
The customers with DIR2 billion-IDR5 billion deposits make a total of IDR186.12 trillion as from 60,071 accounts.
The expensive funds above DIR5 billion at bank makes DIR753.87 trillion as from only 32,775 account holders.
In 2006-2010, LPS has handled 23 people credit bank (BPR)whose licenses were revoked by Bank Indonesia with a total of insurance claims DIR543.12 billion as from the worthy paid deposit of IDR595.2 billion.
This is very helpful for LPS to calculate and ensure the lower cost matter so as to find out reason for bank for bailout or liquidation.

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