0 Higher third-party funds help boost LPS revenues

Higher third-party funds (DPK) in the banking industry helped increase the operational revenue of the Indonesia Deposit Insurance Corporation (LPS) in 2012. Annual LPS revenue climbed 21.3 percent to Rp 7.48 trillion (US$772 million). Insurance premiums, which grew 23.1 percent to Rp 6.2 trillion, were the source of 82.9 percent of revenue, with investments accounting for 17.1 percent. LPS is an independent institution which guarantees depositors’ funds. Twice a year, banks are required to pay 0.1 percent of their average third-party funds — which covers savings, time deposits and demand deposits — to the LPS. 

Even with the premium rate remaining at 0.1 percent, the LPS income increased, apparently driven by the growth of third-party funds, LPS finance director Mirza Mochtar said. Data from Bank Indonesia (BI) shows that third-party funds amounted to Rp 3,130 trillion in November 2012, up 18.4 percent from the same period in 2011. At the moment, the LPS only covers savings or deposits amounting to a maximum of Rp 2 billion for each Indonesian depositor. 

To guarantee the depositors’ funds, it requires banks to charge a maximum of 5.5 percent interest rate for deposits in rupiah, 1 percent for deposits in foreign currencies and 8 percent for deposits in rural banks (BPR). As of December 2012, the LPS insurance members comprised 1,945 banks, which consisted of 120 commercial and sharia banks, and 1,825 BPR. The amount of deposits insured stood at Rp 3,277 trillion or equal to 120 million accounts. Meanwhile, last year’s investment income rose modestly by 13.3 percent to Rp 1.27 trillion. 

The LPS is only allowed to invest in BI notes (SBI) and government debt paper (SUN). In 2012, investments stood at Rp 27 trillion, up almost 35 percent from the previous year. Its 2012 unaudited financial report shows that the LPS booked Rp 6.7 trillion in net earnings, 23.4 percent higher than the previous year. LPS claims and bank resolutions director Noor Cahyo said that, since its establishment in 2005, the LPS had liquidated 47 troubled banks. Only one bank, BPR in West Sumatra, was liquidated last year. 

Another bank will be closed in 2013, Noor added without providing details. Overall, the LPS has received a total of Rp 897 billion in depositor claim requests and has paid Rp 664 billion so far. By December 2012, total LPS assets stood at almost Rp 35 trillion, while its equities amounted to less than Rp 24 trillion. About 16.6 percent of the equity was allocated for future asset acquisition and 66.3 percent for insurance. As previously reported, the corporation plans a new risk-based premium system. 

Under the new system, called the differential premium, each bank will be classified by its risk, providing an incentive for banks to improve risk management. According to LPS executive director Mirza Adityaswara, formulation of the new system is ongoing and the LPS will partner the Financial Services Authority (OJK) as the banking industry supervisor.

source : the jakarta post