Insider Stories - Indonesia Central (BI) released Bank Indonesia Regulation (PBI) on long-term hedge swap transactions to deepen financial market.

Difi A. Johansyah, Executive Director of BI Communication Department, said the PBI No.15/17/PBI/2013 on Hedge Swap Transaction to BI will be applied on February 3, 2014.

The new rules said, banks can deliver a hedge contract within a year period to three years at the most. Moreover, the due date can be extended to 3 months, 6 months, and 12 months.

The extension can be done by netting. Settlement through netting for extension consists of netting for same nominal value or smaller nominal value. The value must be in accordance to the outstanding on each renewal.

According to him, the transaction requirements are made based on the underlying owned by the banks and the customers. Moreover, the period of the underlying transaction are the same or longer than the bank’s hedge contract tenor to the central bank.

The underlying transaction can come from foreign loans. Meanwhile, the foreign loans can be in the form of credit agreement, debt securities issued by the government, direct investment in Indonesia, foreign exchange export proceeds (DHE), infrastructure investment, and production or investment in other economic activities.

The minimum value of transaction is at US$10 million and the maximum value is the same with the underlying transaction with multiples of US$1 million.

Regarding the transaction documents, he said the banks are required to take responsibility over the completeness of the original documents and the copies of the underlying swap sale transaction between banks and customers.