Bank Indonesia Circular Letter No. 10/2/DPM - Repurchase Agreement Transactions with Bank Indonesia in Secondary Market - Bank Sentral Republik Indonesia
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September 29, 2020
Summary Bank Indonesia Laws

Regulation : Bank Indonesia Circular Letter No. 10/2/DPM dated January 31, 2008, concerning Repurchase Agreement Transactions with Bank Indonesia in Secondary Market
Effective date : February 1, 2008

Summary :

  1. In order to extend types of securities tradable under Repurchase Agreement (Repo) Bank Indonesia issued Bank Indonesia Circular Letter No. 10/2/DPM dated January 31, 2008, concerning Repurchase Agreement Transactions with Bank Indonesia in Secondary Market as implementation provisions of Bank Indonesia Regulation concerning Open Market Operations.
  2. General Provisions
    1. Repo Transaction with Bank Indonesia is assigned for Commercial Banks conducting business on conventional basis.
    2. Securities tradable under Repo are Securities issued by Bank Indonesia, the Government, and/or other institutions, administered in the Bank Indonesia - Scripless Securities Settlement System.
    3. Securities Transaction under Repo is a Securities selling transaction by Bank to Bank Indonesia under obligation to repurchase at an agreed price and term.
    4. Bank Indonesia applies Hair Cut as a subtracting factor for Securities price.
  3. General Requirements
    1. Repo term is 1 (one) day.
    2. Repo transaction shall be conducted under sell and buy back principle.
    3. Repo transaction interest rate (Repo rate) amounts to the BI-Rate prevailing on the date of transaction added with 300 (three hundred) basis points.
  4. Securities requirements and value
    1. Securities tradable under Repo are Securities in the form of SBI and/or SUN held by Banks as registered in Trading Account with the BI-SSSS.
    2. Securities tradable under Repo shall hold a remaining days to maturity of at least 2 working days for SBI and SPN or at least 10 working days for ON including ORI and ZCB as of Repo transaction maturity date.
    3. Securities tradable under Repo by Bank shall amount to the maximum nominal value of Securities held by the Bank on 1 (one) working day prior to the transaction date.
    4. Bank Indonesia shall stipulate Securities trade value based on nominal value and price as registered in the BI-SSSS.
    5. To determine Repo selling settlement value Bank Indonesia shall stipulate a Hair Cut rate of each type of Securities.
    6. Securities price applied in the first leg transaction shall be the same with the Securities price applied in the calculation of the second leg transaction.
  5. Application for Repo Securities Transaction
    1. Repo transaction window time is from 4.00 p.m. up to 5.00 p.m. (western Indonesian time) every working day.
    2. If a Repo transaction is conducted on 1 working day prior to a holiday, the Repo transaction maturity date shall be the following working day.
    3. Number of days in the calculation of Repo rate to be paid by Bank shall be counted by calendar day.
  6. Settlement
    1. Repo transaction settlement through the BI-SSSS shall be conducted under transaction by transaction (gross to gross) settlement mechanism.
    2. The first leg settlement value shall be calculated as follows.
      • For SBI, SPN, and ZCB : Nominal Value of Securities under Repo x (Price – Hair Cut)
      • For ON including ORI : {Nominal Value of Securities under Repo x (Price – Hair Cut)} + Accrued Interest Value of ON under Repo.
    3. The second leg settlement value shall be calculated by : First Leg Settlement Value + Repo Transaction Interest Value
    4. SBI Repo settlement comprises SBI selling settlement (first leg) and repurchasing settlement (second leg). Any Bank is required to hold an adequate balance of SBI on the first leg transaction and an adequate balance in Demand Deposit Account on the second leg transaction date.
    5. If a Bank fails to fulfill its liabilities as referred to in letter d, the Bank shall be imposed OMO sanctions.
    6. If a Bank fails to fulfill its liabilities on the second leg transaction date, the Securities under Repo shall be settled by :
      • early redemption on SBI series automatically through the BI-SSSS; and/or
      • treatment on SUN series failing to be repurchased by the Bank as outright selling automatically through the BI-SSSS.
  7. Any Bank failing to fulfill the liabilities as referred to in point 6.d shall be liable to OMO sanctions in the form of :
    1. Written warning, and
    2. Financial penalty of 10/00 (one per thousand) of the nominal value of transaction declared cancelled with a maximum amount of Rp1,000,000,000.00 (one billion rupiah); and/or
    3. Temporary termination to participate in the OMO for 5 (five) working days if the Bank is imposed sanction of written warning due to cancellation of OMO transaction for the third time within 6 (six) months.
  8. By the enactment of this Circular Letter, prevailing provisions concerning Secondary Market Trading of Bank Indonesia Certificate under Repo with Bank Indonesia shall be revoked and declared no longer valid.
  9. Provisions in this Circular Letter shall come into force as of February 1, 2008.
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