New Regulation on Statutory Reserves for Conventional Commercial Banks

In a bid to increase the effectiveness of its monetary policies, the Members of the Board of the Bank Indonesia Governor have issued Regulation No. 19/4/PADG/2017 on Statutory Reserves in Rupiah and Foreign Currencies for Conventional Commercial Banks (“Regulation 19/2017”). [1] In essence, Regulation 19/2017 updates provisions which address the calculation of various kinds of statutory reserves (giro wajib minimum – “GWM”) for conventional commercial banks (“Banks”). This move is expected to result in greater flexibility, an increase in bank-liquidity management efficiency and a decrease in interest-rate volatility. [2] Previously, these matters were regulated under Bank Indonesia (“BI”) Circular Letter No. 17/17/DKMP on the Calculation of Statutory Reserves in Rupiah and Foreign Currencies for Conventional Commercial Banks, as amended several times, most recently through the issuance of BI Circular Letter No. 18/38/DKMP (collectively referred to as “Former Regulations”).Due to the broad scope of Regulation 19/2017, this edition of Indonesian Legal Brief will limit its discussions to the following topics: