Chairman of Indonesia Financial Services Authority Wimboh Santoso. (30 Dec. 2018)

JAKARTA (TheInsiderStories) – The Financial Services Authority (FSA) plans to issue a regulation on currency hedging, the intention of which is to extend protection to investors in the stock market against any decline of the Rupiah.

Chairman of the FSA Board of Commissioners Wimboh Santoso said they plan to repeal the 10 per cent margin obligation for hedging transactions. The plan is one of a number of policies to be launched by the FSA in an effort to support infrastructure sector financing this year. He said the Board would issue a related FSA in the near future.

“Soon to come,” said Santoso, as quoted by KONTAN.

Although it will erode the bank’s revenue, the FSA plan has been greeted with relief by bankers.  Director of Bank Mandiri Darmawan Junaidi said the removal of a 10 per cent margin could make the hedging market in Indonesia increasingly competitive.

“Pricing will be more competitive and customers will not need to find a foreign bank for their hedging,” Junaidi said, as quoted by Kontan.

Corporate Secretary of Bank Mandiri Rohan Hafas added that thus far many customers want to hedge but are reluctant to deposit any margin. As a result, they tend to look for alternative hedging services abroad.

Global Treasury SEVP Bank Rakyat Indonesia (BRI)  Hexana Tri Sasongko explained that the 10 per cent margin is only intended by banks to minimize risk, not as a commission. The Bank will still earn its bit from the spread of the hedging transaction.

The Indonesian Stock Exchange was among the best performers in Asia last year. The Stock Exchange Composite Index hit a record high of 6,355 at the close of last year’s trading.

The index rose by 20 percent from 5,296 at the close of trading in 2016.
The Rupiah was also relatively stable during 2017. It ended the year at Rp 13,520 against the US
dollar, a slight decline from Rp 13,400 recorded in early January.