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Anticipating COVID-19 Impacts, BI and LPS Authorities are Expanded

Jakarta, 02/04/2020 Ministry of Finance - Minister of Finance Sri Mulyani Indrawati as Chairperson of the Financial System Stability Committee (KSSK) in a video conference discussing Government Regulation in Lieu of Law (Perppu) Number 1 of 2020 on State Finance Policy and Financial System Stability, said that in the Perppu extraordinary measures related to policies in the financial sector are also regulated through the expansion of the KSSK's authority, especially for Bank Indonesia (BI), and the Indonesia Deposit Insurance Corporation (LPS).

First, the KSSK can hold non-physical or virtual meetings at any time to formulate and determine financial system stability policies.

Furthermore, BI can buy long-term SUN (sovereign paper) or SBSN (Government Islamic Securities) in the primary market to buy LPS securities Repo if there is any occurance of systemic and non-systemic bank solvency issues, provide short-term liquidity loans or short-term sharia financing to systemic and non-systemic banks.

"In order to help the government to finance Covid in an extraordinary situation and maintain financial stability, BI is given an additional authority to be able to purchase long-term SUN or SBSN in the primary market. BI can also purchase Repo securities of LPS if there is any occurance of systemic bank or non-systemic banks solvency problems. BI also provides short-term liquidity loans or sharia short-term financing to systemic and non-systemic banks," said the Minister of Finance in Jakarta on Wednesday (01/04).

In addition, LPS can conduct early involvement in handling troubled banks with OJK, expansion of guaranteed deposit value, expansion of guaranteed entities, expansion of LPS funding sources with options and various flexibility. Resolution options can also be strategic.

KSSK was also given an expanded authority to conduct forward looking assessments in order to maintain financial sector stability. (nr/aw)