JAKARTA (TheInsiderStories) - Finance ministry released the new regulation on main dealer of government bond followed the JP Morgan & Chase case several week ago. The ministry revised the Finance Minister Regulation (PMK) No. 134/PMK.08/2016 on main dealer requirement by released the new regulation under PMK No.234/PMK.08/ 2016.
In the new regulation, the ministry add one chapters on governing liability primary dealers and change the number of articles. As quoted from the official website of the ministry, in addition to the obligations referred to in Article 7, the primary dealer is required to maintain a partnership with the Government of the Republic of Indonesia based on the principle of professionalism, integrity, avoidance conflicts of interest, and consider the interests of the Republic of Indonesia.
Finance Minister Sri Mulyani Indrawati has said that in terms of cooperation with all stakeholders is necessary to the principles of professionalism, accountability, responsible, including the quality of the overall work and is expected to be mutually beneficial.
In addition, the PMK also insert a clause governing the securities used in the calculation for the obligations of primary dealers activity on the primary market does not include treasury notes with a tenor of three months. The Ministry also change the Article 5 which regulates the finance minister have an authority to accept or reject an application to become primary dealers based on three considerations.
First, the needs of the number of primary dealers then the track record of the bank or securities company applying as a candidate primary dealers including experience of working with the ministry also the effectiveness of the primary dealer system.
Not only that, the minister also provide conditions of submission of application to become a primary dealer again after his appointment was revoked by Article 31 paragraph 5. Submissions can be made after 12 months since the lifting of the primary dealers.
Previously, Suahasil Nazara, head of fiscal policy office of Finance Ministry has said, government will restricter the foreign securities house report in Indonesia to ensure their assessments of Indonesia are based on facts. Indonesia had 19 such dealers as of November 25.
The ministry has terminate all ties with US’s JP Morgan Chase & Co related to the research has potentially disrupt the stability of domestic financial on Jan. 1, 2017. In November 2016, JP Morgan released a report double downgraded the country to underweight from overweight, after reading a trend that the benchmark US 10-year treasuries offered more attractive yields, which in turn increased risks of fixed-income investment into emerging market countries like Indonesia.
This was the second time in just over a year that Indonesia’s finance ministry was infuriated by a JP Morgan assessment. In first research in August 20, former Finance Ministry Bambang Brodjonegoro has given a sanction to JP Morgan after spreading panic in the country on their report on government securities.
JPMorgan recommended for holding a smaller exposure to the Indonesian government bonds. JPMorgan moved to “underweight” from “overweight” on Indonesian government bonds in a report dated Aug. 20. Some of the reasons it cited were China’s devaluation of its currency and Indonesia’s planned increase in government borrowings.