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Indonesia: Major Banks May Face Difficulty to Meet New LDR
Source: thejakartapost.com
Source Date: Thursday, August 26, 2010
Country: Indonesia
Created: Aug 30, 2010

Major Indonesian banks, including Bank Mandiri, Bank Central Asia (BCA), Bank Negara Indonesia (BNI) and Bank Tabungan Negara (BTN), agreed that they will likely face difficulties in meeting central bank’s new loan-to-deposit ratio (LDR) policy.

The regulation, which will be issued next month, stipulates that banks should have a LDR within a range defined by the central bank, or else increase their required minimum reserve with the central bank.

BI has not yet fixed an LDR ratio but said previously the ratio would be within 78 to 102 percent or 75 to 105 percent.

Bank Mandiri and BCA will face difficulties in meeting the LDR regulation due to low deposit positions, while BNI and BTN will not be able to the meet the regulation due to high lending positions.

“We are ready to increase our reserve requirement as the penalty. We don’t think it will have much impact because we have a lot of deposits,” BCA vice president director Jahja Setiaatmadja told The Jakarta Post on Thursday.

He said that the bank would use the majority of its deposits to buy government treasury notes or Bank Indonesia’s promissory notes (SBIs), adding that returns would compensate for increasing reserve funds.

“In order to meet the 78 percent (LDR), we must disburse more than Rp 60 trillion (US$6.66 billion) in loans on the top of our current lending position, which is about Rp 135 trillion. It would not be prudent for the bank,” Jahja told the Post.

BCA’s LDR was 51 percent in the first half of this year. Its deposits increased 16 percent to Rp 255 trillion, while total lending rose 22.6 percent to Rp 132 trillion.
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