Higher premiums for banks with lower
ratings: LPS
A
differential premium system (DPS) imposed by deposit insurance corporations on
banks and other financial institutions encourages beter risk
management, and expert has claimed. According to the deposit
insurance corporation’s (LPS) executive chairman, Kartika “Tiko”
Wirjoatdmodjo, the implementation of a DPS would eventually help ensure
the stability of the country’s financial system.
“Banks that
have a low rating on our soundness scale, due to their high risk of failure and
poor management, will be charged higher premiums compared to those that
score better ratings,” he said on Friday on the sidelines of the Third
International Workshop on Intergrated Protection Scheme held by the
agency in Nusa Dua, Bali.
“That
will motivate them to improve their management systems and their ratings in order to avoid
paying high premiums. It will benefit us as wellbecause it will
enhance our financial stability,” he added.
The LPS
hopes to introduces a DPS this year to replace the current system that imposes an
annual o.2 percent premium equally on all banks on their average thirdparty
funds. Under the new system, the annual rate will be set at
between 0.1 percent and 0.3 percent, depending on each bank’s rating.
It has
prepared five rating levels, which are calculated using three indicators – a bank’s own financial
ratios; a bank soundness assessment evaluated by the Financial Services
Authority’s (OJK); and the bank’s compliance with LPS regulations.
The
annual rate will stand at 0.1 percent for banks with a rating of 1, 0.15
percent for a 2 rating, 0.2 percent for a 3 rating, 0.25 percent for a 4
rating, and 0.3 percent for a rating of 5. According to Tiko there are
about 10 commercial lenders in the country that qualify for a 5 rating.
At the
moment, the LPS only covers saving or deposits up to a maximum of Rp 2 billion
(US$ 176,113) for each Indonesian Depositor. It requires banks to
charge a maximum of 7.5 percent interest rate for deposits in rupiah, 1.5
percent for deposits in foreign currencies and 10 percent for deposits in rural
banks (BPR).
Its
insurance members comprise 109 commercial banks, 11 sharia banks and around 1,700
BPRs. The total of insured deposits in commercial and sharia banks amounted to
Rp 2.11 quadrillion as of December 2013, equal to 147.63 million accounts. No
data is currently available on the BPR’s deposits.
Meanwhile,
Yee Ming Lee, the general manager for policy and International division at the
Perbadanan Insurans Deposit Malaysia (PDIM), which is Malaysia’s
deposit insurance corporation, said that Malaysian lenders had been coming
to the agency, looking for assistance to improve their risk management
system.
The PDIM
has set its annual premium rates from 0.05 percent to 0.4 Percent, established the deposit protection
limit at 250,000 ringgits ($76,233) per depositor, and divides lenders into
four rating levels.
Currently
there are 27 commercial banks and 21 islamic banks operating in the country. Lee
said that banks might need to invest more in information technology and internal control to assist
them with improvments in their risk-management systems.
Formula
Tenses:
1. Other
financial institutions encourages beter risk management
Simple present tense ( S + V1 (s/es) + O )
2.
Expert has claimed
Present perfect tense (S + Have /Has + V3 +O +Adv. Of time)
3. The
implementation of a DPS would eventually help ensure the stability of
the country’s financial
system
Simple present tense ( S + V1 + O)
4. He said on
Friday on the sidelines of the Third International
Simple Past Tense ( S + V2 + O+Adv. Of time)
5.
That will motivate them to improve their management systems
Simple future ( S + Will + V1 + O)
6. It will
benefit us as well
Simple future ( S + Will + V1 + O)
7. It will
enhance our financial stability
Simple future ( S + Will + V1 + O)
8. he added
Simple past tense ( S + V2 + O )
9. The
LPS hopes to introduces a DPS this year
Simple present tense ( S + V1 (s/es) + O )
10. Current
system that imposes an annual o.2 percent premium equally on all
banks on their
average thirdparty funds.
Simple present tense ( S + V1 (s/es) + O )
11. The
annual rate will be set at between 0.1 percent and 0.3 percent
Simple future ( S + Will + V1 + O)
12. It has
prepared five rating levels
Present perfect tense ( S + Have/has + V3 + O)
13. The
annual rate will stand at 0.1 percent for banks
Simple future ( S + Will + V1 + O)
14. It requires banks
to charge a maximum of 7.5 percent interest rate for deposits in rupiah
Simple present tense ( S + V1 (s/es) + O )
15.
Its insurance members comprise 109 commercial banks
Simple present tense ( S + V1 + O )
16. Which
is Malaysia’s deposit insurance
Simple present tense ( S + V1 + O )
17.
Malaysian lenders had been coming to the agency
Past perfect continous tense ( S + Had+ been + Ving + O)
18. The
PDIM has set its annual premium rates from 0.05 percent to 0.4
Percent
Present perfect tense ( S + Have / has + V3 + O)
19.
Currently there are 27 commercial banks and 21 islamic banks operating in
the country
Simple present continous tense ( S + To be
(Is/am/are) + Ving + O )
20. Lee said that
banks might need to invest more in information technology
Simple Past Tense ( S + V2 + O+Adv. Of time)
