The government will soon announce a new scheme where it can place fund at selected state-owned banks appointed as Anchor Banks. It claims the scheme will help with loan restructuring process and restore bank’s confidence in providing working capital loans to entrepreneurs, notably micro, small and medium enterprises (UMKM) hit by COVID-19.

Under Government Regulation (PP) No. 23/2020 on the national economic recovery program, Financial Services Authority (OJK) will carry out an assessment of several state-owned banks to be qualified as provider banks in accordance with specified requirements. Prospective client banks that are either seeking to provide loan restructuring or in insufficient liquidity will have to submit their proposal to the provider (anchor) banks.

Regarding the matter, Member of Commission XI—overseeing banking affairs—Andreas Eddy Susetyo said that his institution had warned the government, the Ministry of Finance, that the scheme should not impose burdens on the systemic banks appointed as provider banks, voicing concern about the lack of mechanism for leveraging the said anchor banks as provider banks.

“We actually warned the government about this matter (anchor bank) in the Commission XI meeting. First of all, we suggested that provision of funds for banks with liquidity problems due to COVID-19 should not be burdened to anchor banks given that those banks largely consist of systemic banks,” Susetyo told Parlementaria by telephone on Tuesday (19/5/2020).

The Indonesian Democratic Party of Struggle (PDIP) politician considered the fund transfer through anchor banks as a business-to-business (B2B) scheme. In a football match, it would be like someone playing both as a player and a referee. In this case, an anchor bank, who is a player, would also be required to perform due diligence on a client bank according to the proposed credit assessment.

"Now the question is, why should it be responsibility of the anchor banks? It does not make sense when a player also acts as a referee. These anchor banks are football players, and yet they are expected to be referees and verify the client banks’ eligibility. And if the sheme is B-to-B, why should it be regulated through a government regulation? A government regulation would require banks to follow due diligence, and this is going to take time, and we are in the middle of Large-Scale Social Restrictions (PSBB) period and most of us have to work from home," Susetyo said.

Referring to the Law on Prevention and Resolution of Financial System Crisis (PPKSK) and the Government Regulation in Lieu of Law (Perppu) on COVID-19 Mitigation, Susetyo stressed that the mechanism to provide liquidity assistance was actually quite concise and clear. In the case of liquidity needs, banks can borrow from the Interbank Money Market (PUAB) scheme, repurchase Sovereign Bond (SBN), or apply for a Short-Term Liquidity Loan (PLJP).

“Short-term Liquidity Loan (STLL) is more effective, for banks can use their credit assets as collateral, which is certainly based on the recommendation or assessment of the Financial Services Authority (OJK). It is basically the same scheme, isn’t it? Since applying banks apply would be referred by Ministry of Finance to OJK. However, when these client banks need funding, they need it fast,” the East Java Constituency legislator appealed.

Susetyo also explained that in banking mechanism, The Central Bank of Indonesia (BI) serves as the lender of the last resource or the final source of liquidity, but the establishment of anchor bank would enable client banks to have a repo agreement of their assets with the anchor banks instead of with BI. If we compare this practice with the USA, for instance, the Fed as the Central Bank remains the main liquidity provider.

“This is what I think needs clarification because, on the one hand, STLL would still be available as per the government regulation (Perppu), but on the other hand, the government should be responsible for the funding. If the scheme follow the liquidity assistance model, then why can’t the government disburse the fund through its own SPV (Special Purpose Vehicle) instead of burdening anchor banks?” Susetyo explained. (alw/sf)