Article Economy with Tenses

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)