By Stefanno Sulaiman and Gayatri Suroyo
JAKARTA, Aug 3 (Reuters) – A new policy announced recently by the Indonesian central bank is intended to discourage commercial banks from placing excess liquidity in Bank Indonesia’s securities and coax them into increasing lending instead, BI’s acting governor said on Monday.
Destry Damayanti made the comment at a press conference by Indonesia’s Financial System Stability Board, which consists of top officials with the finance ministry, the central bank, the Financial Services Authority and the deposit insurer.
The board gathered on Friday for its first regular quarterly meeting since Perry Warjiyo’s surprise departure as BI governor.
Warjiyo’s resignation, announced on July 27, has triggered a fresh bout of investor anxiety in Indonesia, with confidence waning in the G20 economy amid concerns over fiscal profligacy and the independence of the central bank.
Markets are waiting for President Prabowo Subianto to nominate Warjiyo’s successor. Finance Minister Purbaya Yudhi Sadewa told reporters after the conference that he would not seek nomination.
At its July policy review, a meeting that Warjiyo still chaired, BI announced a 200 basis point reduction in required reserve levels for banks that place less than 19% of their funds in government bonds and BI’s rupiah-denominated securities, known as SRBI, effective September 1.
“We want SRBI to be a liquidity management tool, not an investment instrument (for banks),” Destry said at the press conference, adding that BI wanted to use SRBI to attract foreign capital inflows.
“We want banks to play a more active role as intermediary institutions for lending,” she said.
BI has reduced the level of outstanding SRBI in the market to around 1,050 trillion rupiah ($58.40 billion) as of Friday, down from 1,097 trillion rupiah on July 16, she said.
Before his resignation, Warjiyo had disagreed with Purbaya over liquidity policies, including the high interest rates BI was offering on SRBI, which pushed up government borrowing costs, as well as the government’s placement of funds in state banks, sources told Reuters.
Speaking alongside Destry at the conference, Purbaya said liquidity issues were discussed at the board’s meeting and that there would be no more debate about the issue.
Financial Services Authority chief Friderica Widyasari Dewi said the banking industry currently has adequate liquidity, but regulators at the board agreed to communicate the timing of any withdrawal of government funds from commercial banks to avoid disruption.
Destry reiterated at the conference that BI will stick to a policy mix aimed at maintaining stability in the rupiah exchange rate, keeping inflation within its target range and supporting economic growth.
($1 = 17,980 rupiah)
(Reporting by Gayatri Suroyo and Stefanno Sulaiman; Editing by David Stanway)
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