Prayogo Serevin Wisnumurti, M. Agus Yozami
Bank Indonesia. Photo By: SGP
Bank Indonesia (BI) has just issued a new regulation which addresses transactions involving Commercial Papers (Surat Berharga Komersial - CP) within the financial markets. The purpose of such CP arrangements is for non-bank companies to reactivate short-term financing instruments through the financial markets.
In addition, the new regulation is expected to improve the governance of publications and transactions, accelerate the expansion of financial markets and support the effective transmission of monetary policy. These CP provisions are addressed through new Bank Indonesia Regulation (Peraturan Bank Indonesia - PBI) No. 19/9/PBI/2017 concerning Commercial Paper Issuance and Transactions within the Financial Market.
The PBI firstly addresses the issue of requirements for corporations which are allowed to issue CP. Secondly, the new regulation tackles CP issuing criteria. Thirdly, CP issuers are now obliged to register any CP issuance plan with BI.
Fourthly, the regulation addresses principles of information disclosure as regards the various corporations which will be allowed to issue CP, as well as CP structure. Fifthly, the regulation addresses CP principles as regards offers which are made to prospective investors. Sixthly, the principles of CP publishing and administration are also dealt with.
Under the PBI, a corporation/institution is obliged to register with BI. “This is true in terms of preparation for CP issuance, transaction implementation and transaction settlement and administration,” explained Mr. Andiwiana, the Head of BI’s Communication Division, in a press release dated Saturday 29 July obtained by hukumonline.
In addition, the new PBI arrangements are also expected to support the creation of a credible CP market. It has thus been stipulated under the principles of CP transaction implementation and their various related obligations that prudential principles and risk management for CP issuers will have to be applied.
“Arrangements are also being made regarding who can engage in CP trading, as well as the various supporting institutions who are undertaking activities within the CP market,” Mr. Andiwiana explained.
This new regulation comes into force on September 4, 2017, while rules concerning the registration of CP come into force on 2 January 2018. A grace period as regards the enforcement of these new rules will allow time for banks, securities companies and other eligible supporting institutions and professions to register with Bank Indonesia as supporting institutions within the CP market.
The issuance of the PBI is expected to complement existing financial market instruments, so that economic actors who require short-term financing have alternative sources of funding other than bank loans.
Once the CP market has been expanded and sufficient market liquidity has been created, it is expected that business financing will become more efficient and thus provide benefits as regards support for the development of the national economy.