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Print articleNew Rules on Offshore Loans in Indonesia
November, 2008 -
Bank Indonesia issued Regulation No. 10/7/PBI/2008 on 19 February 2008 regarding Offshore Loans of Non-bank Companies. Offshore loans are one of the key factors which may have positive and negative impacts on balance of payments, monetary stabilization and development continuity. The Regulations applies to the following non-bank companies: (i) State-owned Companies; (ii) Regional Government-owned Companies; and (iii) private companies including public companies, publicly listed companies, foreign investment (PMA) companies and other private companies with total assets or gross sales in one year of not less than IDR 100 billion (approx. US$10 million). This regulation is guidance for non-bank companies to prioritize the implementation of macro and micro prudential aspects in obtaining offshore loans and is also intended to minimize the negative impact of offshore loan arrangements. Opportunities for local companies to access offshore loans will remain open.
Even though Non-bank Companies are still not required to apply for permission to and obtain approval from Bank Indonesia for obtaining offshore loans, they must submit periodic reports to Bank Indonesia regarding their financial ratios and financial statements before and after obtaining offshore loans. Further, before obtaining a long-term offshore loan, they must submit an additional periodic report to Bank Indonesia regarding their credit rating and an offshore loan proposal report for one year as well as a risk management analysis. Please note that this regulation is an extension of report coverage through the SIUL (Offshore Loan Information System) system under the current Bank Indonesia regulations (as amended). The form of the statutory report to Bank Indonesia will be regulated further in an external circular of Bank Indonesia, which will be issued in the near future.
Before obtaining a short or long-term offshore loan, Non-bank Companies must implement Risk Management (i.e. Market, Credit and Liquidity Risks). Further, before obtaining a long-term offshore loan, they must earn a credit rating from national or international credit rating agencies. This does not apply to a private company obtaining an offshore loan from its shareholders or to State-owned Companies or Regional Government State-owned Companies with total assets or gross sales in one year of less than IDR 100 billion.
Administrative sanctions for non-compliance with this regulation will be effective as of 1 January 2010. Therefore, up to 31 December 2009, Bank Indonesia will not impose any sanctions on Non-bank Companies, but may record any abuse in its database.
Even though Non-bank Companies are still not required to apply for permission to and obtain approval from Bank Indonesia for obtaining offshore loans, they must submit periodic reports to Bank Indonesia regarding their financial ratios and financial statements before and after obtaining offshore loans. Further, before obtaining a long-term offshore loan, they must submit an additional periodic report to Bank Indonesia regarding their credit rating and an offshore loan proposal report for one year as well as a risk management analysis. Please note that this regulation is an extension of report coverage through the SIUL (Offshore Loan Information System) system under the current Bank Indonesia regulations (as amended). The form of the statutory report to Bank Indonesia will be regulated further in an external circular of Bank Indonesia, which will be issued in the near future.
Before obtaining a short or long-term offshore loan, Non-bank Companies must implement Risk Management (i.e. Market, Credit and Liquidity Risks). Further, before obtaining a long-term offshore loan, they must earn a credit rating from national or international credit rating agencies. This does not apply to a private company obtaining an offshore loan from its shareholders or to State-owned Companies or Regional Government State-owned Companies with total assets or gross sales in one year of less than IDR 100 billion.
Administrative sanctions for non-compliance with this regulation will be effective as of 1 January 2010. Therefore, up to 31 December 2009, Bank Indonesia will not impose any sanctions on Non-bank Companies, but may record any abuse in its database.
